Learn and Plan | Is life insurance through my employer enough?
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Is life insurance through my employer enough?

Jun 26, 2023, 6:02:25 PM | Reading Time: 5 minutes

Many employers offer life insurance as one of their employee benefits and if you choose to sign up, the process is often very straightforward. There is typically no medical exam, just a simple application where you name a beneficiary. While having life insurance through your work can be a valuable way to get coverage for little to no cost, the benefit amount may not be enough to cover your family’s needs. Here’s a closer look at employer-provided life insurance, its benefits, and its limitations, and why consider buying an additional or an individual life insurance policy to help close any gap.

Benefits of life insurance through work

There are many benefits that come with life insurance through your job, including:


Coverage provided from an employer is typically free or available at a low cost.

Ease of application

Getting coverage can be quite easy. Oftentimes, paperwork is simple and a Human Resources person is available to help explain the intricacies of a policy.

Coverage acceptance

Typically, there is no medical exam necessary for workplace coverage. This may mean that people with serious medical conditions can qualify. Having life insurance through work is a good way to get coverage for a minimal cost. Is this benefit amount enough to cover your family’s need?

Limitations of employer-provided life insurance

Life insurance offered by an employer is often included as part of their overall benefits package. If life insurance is offered through your employer, you may want to determine if the coverage is enough for you and your family’s needs. Here is a closer look at employer-provided life insurance:

Insufficient coverage

Life insurance provided through work may be low-cost however, is this coverage enough? According to the 2021 U.S. Bureau of Labor Statistics, the average life insurance benefit amount for flat-dollar plans is $25,000. If you’re married, have children, own a home, or are planning for any of these things, will that amount of coverage be enough? How much life insurance should you have? It depends on your own financial and family situation. Many experts recommend purchasing several times your annual income in coverage. It’s also important to remember that the amount of life insurance you need may change throughout your life as your family grows, your lifestyle changes or you add new financial goals.

Limited options

Employer-provided life insurance is also called group life insurance and is commonly a type of term policy. As an employee, you generally have no control over the coverage or policy details and cannot customize coverage to fit your needs. Some employer benefit plans may allow you to purchase coverage for your spouse and children. Is the benefit amount enough for your individual needs?

Tied to your employment

Coverage is provided through your employer who is the policyholder. They can change or drop the policy at any time. If you decide to leave your job for any reason, you may lose your coverage. If your policy is portable, the coverage may cost more once you leave your employer.

Why consider an individual life insurance policy?

While financially protecting their loved ones is an important goal for many families, several Americans are either without life insurance or are underinsured. Forty-four percent of households say it would take less than six months to feel financial hardship following the loss of a primary wage earner. Employer life insurance can be a great starting point, but you may also want to consider getting your own policy. Among the people surveyed, 78% of the individuals with life insurance both through their workplace and through individual coverage felt the most financially secure. Here are some considerations of individual life insurance:

Coverage amount to meet your needs

If you have a family, business, or other people who depend on you, life insurance can offer a financial safety net in the event you’re no longer here. Without your income, it may be challenging for those left behind to pay final expenses, keep up with the rent or mortgage, afford child care, and cover other day-to-day expenses. By purchasing your own policy, you can select a coverage amount that can provide a death benefit that aligns with your needs. Depending on the type of life insurance you choose, you can select how long you would like to have coverage, whether it’s for a specified period like term insurance or permanent life insurance.

Affordable options

Many people feel that they can’t afford to buy additional life insurance, but eight out of 10 consumers overestimate the expense of getting a life insurance policy, according to a 2022 study by LIMRA and Life Happens. In actuality, many individual policies are often affordable and fit into most budgets. For example, certain term life insurance policies can cost as little as $170 per year.

Why an individual life insurance policy might not be the right fit

While there are many benefits of an individual life insurance policy, it may not be the best option for some. Before seeking coverage, consider the following:

  • Premium costs — certain policies, like Whole Life Insurance, can be expensive.
  • Surrender charges — for some policies, a surrender charge may be charged if you wish to cancel a policy
  • Health history and age — various health conditions or a history of tobacco use can make your premium cost increase. Your age could also mean lead to a more expensive monthly premium.

What are the different types of individual life insurance?

Purchasing individual life insurance can go a long way in helping provide financial stability for your loved ones and filling any coverage gaps. There are a variety of choices that can fit your needs and budget. Here are two options:

Term life insurance

Term life insurance provides death benefit protection for a set time. This type of coverage generally provides a death benefit in the form of a lump sum that is paid out to your beneficiary if you die during the term period. You must also remember to pay your premium to keep the policy active. Your beneficiary can use this benefit to help with funeral costs, the mortgage, debt payments, or other living expenses. Additionally, term policies may offer the option to convert your policy to permanent coverage before the term ends. After the term period expires, the policy generally will either terminate or automatically renew annually at a higher premium cost.

Permanent life insurance

Unlike term life insurance, permanent life insurance can provide coverage for your entire life, as long as you continue to pay your premiums on time. The premium is used to maintain the policy’s death benefit and may also allow the policy to build cash value.

To take a closer look at term and permanent life insurance, watch this short video that explores these two types of policies.

Talk to a financial professional

If you’re considering life insurance coverage beyond what your employer offers, it’s a good idea to review your current policy and talk through options with a financial professional. Together you can discuss your family’s needs, the type and amount of coverage that can match those goals, and help ensure you have the financial protection in place that can help protect your loved ones’ financial future.

The term financial professional is not intended to imply engagement in an advisory business in which compensation is not related to sales. Financial professionals that are insurance licensed will be paid a commission on the sale of an insurance product.

Life insurance policies have terms under which the policy may be continued in effect or discontinued. Permanent life insurance requires monthly deductions to pay the policy’s charges and expenses, some of which will increase as the insured gets older. These deductions may reduce the cash value of the policy. Current cost of insurance rates and current interest rates are not guaranteed. Therefore, the planned periodic premium may not be sufficient to carry the contract to maturity. For costs and complete details, refer to the policy or call or write Midland National Life Insurance One Sammons Plaza, Sioux Falls, SD 57193. Telephone 800-923-3223