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Why Life Insurance From Your Employer Isn’t Enough

By February 28, 2023No Comments

As a working professional, you may have had the opportunity to secure life insurance through your employer. Maybe it started as an automatic decision during your first job, or maybe you still have this coverage because the benefits are convenient. While this can be a good starting point for your financial planning, selecting employer-provided life insurance may actually not offer the level of protection that you and your loved ones truly require. 

In general, life insurance is a great way to provide that security and peace of mind. But employer-based life insurance may end up being more expensive over time compared to obtaining an individual policy. Additionally, an individual policy belongs to you, not your employer, and there are three key distinctions you should be aware of. It’s important to understand the differences between these options, and why it may be beneficial for you to purchase your own policy.

Why Individual Life Insurance is Better Than Employer-Provided Coverage

Employer-provided life insurance, also known as group life insurance, is a benefit provided by some employers to their employees. This type of insurance typically covers a set amount of money, known as the death benefit, in the event of an employee’s death. The death benefit is usually a multiple of the employee’s salary, such as one or two times their annual income. The premium for this type of insurance is usually paid for by the employer, and the coverage is often a term policy that lasts only as long as the employee is employed by the company.

While employer-provided life insurance can certainly be valuable, there are several reasons why it may not be enough.

Coverage May Not Be Sufficient

As stated above, the death benefit from employer-provided life insurance is usually a multiple of the employee’s salary. However, this amount may not be sufficient to cover all the expenses your loved ones may face in the event of your untimely demise. For example, if you have a mortgage, children’s education expenses, or other outstanding debts, the death benefit may not be enough to cover all these expenses. Investing in individual life insurance coverage can ensure that your loved ones have enough financial support to cover these expenses and maintain their standard of living.

Coverage May Not Be Portable

Employer-provided life insurance is usually a term policy that lasts only as long as you are employed by the company. If you leave your job or retire, you may lose life insurance coverage. This means that you may have to reapply for coverage, which could be difficult if you have developed health issues or are older. Investing in your own life insurance policy can provide you with a portable coverage that you can take with you even if you leave your job.

Limited Options

With employer-provided life insurance, you may have limited options to choose from. The coverage amount and the type of policy may be pre-determined by the employer, and you may not have the flexibility to choose the coverage that meets your unique needs. By investing in your own life insurance policy, you can have more options and flexibility to choose the coverage amount and type of policy that best meets your needs.

Dependents May Not Be Covered

In many cases, employer-provided life insurance will only cover the employee. If you have dependents, such as a spouse or children, they may not be covered under the policy. Investing in your own life insurance policy can ensure that your dependents are covered and have financial security in the event of your untimely death.

Investing in further life insurance coverage for your dependents is an important step in securing their financial future. If you have dependents, they may rely on your income to maintain their standard of living. In the event of your death, they may face financial difficulties if there is no other source of income. Such life insurance can provide your dependents with financial support to cover expenses such as mortgage payments, bills, and other living expenses.

Choosing Individual Life Insurance Coverage

While employer-provided life insurance is a good starting point, it may not offer sufficient coverage to meet all of your financial needs. By investing in an individual life insurance policy, you can customize your coverage to fit your unique circumstances and ensure that your loved ones are protected. Individual policies provide more flexibility, greater control, and the option to take your coverage with you, regardless of your employment status. If you’re interested in learning more about individual life insurance options in your area, contact YMI today! Our friendly team members are dedicated to helping you.

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