Affordable Life Insurance Protection for Your Family

Should I Buy Life Insurance from Work?

Why Should You Get Life Insurance through Your Employer?

When it comes to protecting your family, owning an adequate amount of life insurance coverage is very important.

Many of us may choose to accept the basic coverage provided by our employer’s benefit plan, and purchase supplemental coverage from the employer’s plan for a number of different reasons. 

The basic amount of life insurance provided by your employer may not be enough for your needs. Many times, the maximum coverage amount from basic coverage through your employer provided benefits plan is limited to one times your annual salary.

If your family’s needs are greater, you may want to get additional/supplemental group life insurance through your employer-provided program at work.

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Reasons to Purchase Supplemental Coverage 

through Your Employer


  • It’s Easy – You can get covered by requesting coverage through your employer and filling out an application.
  • It’s Cheap – Usually, the basic amount of life insurance provided by your employer’s benefits plan is paid for by your employer. Rates for additional/supplemental coverage may be affordable. 
  • Makes Sense for Pre-Existing Conditions – If you have a pre-existing health condition, you may find it difficult to get insured on your own outside of work, or it may be unaffordable. But employer provided plans usually accept all employees and the basic coverage is usually paid for by your employer.
  • Employer Provided Group Basic Life Insurance is Not Enough – If the basic amount of life insurance available through your employer provided group life insurance plan does not meet your family’s needs. 
  • Major Life Event – The death of a loved one, getting engaged or married, buying a new home, getting a job promotion or financial planning for the future.
  • Increased Responsibility – When you take on a new financial responsibility such as buying a home, a new car, taking out a student loan or other financial obligation.
  • Lose Your Job – If you lose your job you may lose your employer provided life insurance coverage and need to purchase your own individual policy.
  • Move to a Different Company – Upon taking a new job you may have the option of getting supplemental coverage through your new employer’s benefits program.
  • Company Goes Out of Business – If your employer goes out of business you would lose your employer provided group life insurance and may need your own individual policy.
  • Quit Your Job – If you quit your employment your employer provided life insurance may not be portable, meaning you may not be able to take the policy with you.


Reviewing Your Need for Supplemental Life Insurance

through Your Employer


The fact is, if you have a need for additional life insurance coverage, you may want to purchase supplemental life insurance to add to your current financial plan to provide your loved ones with an adequate amount of protection.

The traditional form of supplemental coverage is offered through your Employer’s Benefit Program which may include group term life insurance that provides coverage for all employees.

Usually, with group life insurance the employee (you) have Basic life insurance that may provide coverage at limits up to 1 to 2 times your annual salary.

In addition, you may choose to add Supplemental Coverage (more).

Also, your spouse usually gets a Basic Amount of life insurance coverage, maybe $25,000 or less. Then, you may choose to add Supplemental Coverage (more coverage) on your spouse, which is optional and you have to pay for this additional coverage.

Sometimes, your employer pays for the Basic Life Insurance Coverage, but you have to pay for the Supplemental (additional) Life Insurance, whether it’s on you and/or your spouse.

You’ll want to consider how much money you would need if your spouse dies, and use that to decide if you need Supplemental (Additional) Insurance on your spouse.

Group term insurance is the cheapest life insurance there is, so if it isn’t expensive and you need additional income if your spouse passes away, get as much group term life as you can afford to buy.


When Should You Get Employer-Provided Supplemental Life Insurance? 

If the amount of life insurance provided by your employer is not enough to fully protect your family, for instance, if you have a large family or large financial responsibilities. In those situations, supplementary life insurance coverage can bridge the shortfall in your life insurance financial plan and provide added protection for your loved ones. 


Term Life is Not Enough 

Most consumers purchase one or two types of life insurance coverage options – term life insurance or whole life insurance.

With term insurance the insured employee receives insurance coverage for a specific period of time, which is known as the "term" (duration) of the insurance policy.

Both employers and private insurance carriers offer term insurance. Since the coverage only applies during a set period of time, term life usually costs less than whole life, which covers an individual for his or her entire lifetime.

One main problem with term life is that most policyholders rely on their employer for this insurance, and as a result, they don’t have enough coverage to meet their actual insurance needs. 

A 2015 study by the Life Insurance and Market Research Association (LIMRA) found that 65% of employees with employer sponsored group life insurance believe they need more insurance than the employer-sponsored group life insurance believe that they need more insurance than the employer provides.

A typical employer group term life plan provides coverage equal to one to two times the employee’s annual salary.

For example, an employee making $50,000 annually may receive a $100,000 policy at no cost. For a single employee or an employee with no dependents, this may be an adequate amount of life insurance. 

However, an employee with a larger family may require several times that amount of insurance coverage to take care of a spouse or children if he or she unexpectedly dies. 

Supplemental insurance can fill the gaps of an employer-sponsored group life insurance plan. 


Whole Life Insurance is More Expensive 

Whole-life policies present similar coverage shortfall problems.

Most whole life policies cover individuals for their entire lifetime and build up some cash value inside the policy over time, which allows the insured to cash out the policy if needed.

However, since whole-life offers more complete coverage, it costs much more than term insurance.

For an individual with a large family, obtaining the right amount of whole life insurance may be too costly. Generally, purchasing supplemental term insurance through your employer sponsored group plan offers a more cost-effective solution to meet your needs.


Employer Provided Supplemental Insurance Has Limitations

Consumers often purchase supplemental insurance through their employers.

One advantage of doing so is that the employee bypasses the medical examination requirements that a private life insurer would require if you were to buy your own individual life insurance policy direct from an insurance carrier. 

However, employer-sponsored supplemental coverage may have limitations, so it is important to research the group plan carefully.

First, the coverage may be a form of accidental death and dismemberment (AD&D) insurance, which only pays the beneficiaries if the employee dies from an accident or loses a limb, hearing or sight as a result of an accident.

Second, the employer-sponsored coverage may be a form of a burial insurance policy. In this case, the insurance only covers the funeral and burial costs of the employee and may have a limit of between $5,000 and $10,000.

Finally, and perhaps most importantly, most employer-sponsored supplemental plans are not portable. Therefore, if the employee leaves his or her job voluntarily or is terminated, the coverage is terminated, and that person would have to apply for coverage at a new job, or through a private insurance company.


Private Individual Supplemental Life Insurance Provides an Option

Some employers offer their employees the option to buy supplemental insurance that increases coverage and does not have stipulations, such as AD&D or burial insurance.

This option for added life insurance may be ideal for employees with big families, though such insurance usually lacks the portability of private life insurance plans.

Since the average employee remains with an employer for less than 5 years, purchasing supplemental insurance through a private life insurance carrier may be a much better option.

Employees can determine how much life insurance they need above the employer-provided amount of coverage and purchase the right amount of insurance protection.

If employees leave their company, they would keep the supplemental coverage.

Also, if life events occur and situations change for employees, then they can adjust their amount of insurance coverage to meet their specific needs in the future. 

Many companies now offer life insurance as part of an employee benefits package. However, the amount of coverage provided by your employer may not be enough. That’s why you may need to look into supplemental life insurance to help fill in the financial gaps.

According to a 2010 study by LIMRA, a life insurance and financial services research and consulting association, 1 in 4 U.S. families rely on group life insurance to provide fiscal stability in case a wage earner dies.

However, while employer-sponsored group plans are often free or substantially cheaper than individual life insurance policies, experts say group plans rarely provide enough coverage and could potentially leave you high and dry if you lose your job or move to a different company.


How Employer-Sponsored Life Insurance Group Plans Work  

If you’re lucky enough to have some free life insurance offered through your company or your spouse’s company, make sure you accept the coverage.

Usually, employers offer their employees a term insurance policy which is provided through a Group term life insurance plan.

The key advantage is that you don’t have to show proof of insurability to get this coverage.  There’s no health examination required to qualify for the employer-provided life insurance.

Unlike individual life insurance plans that require policyholders to undergo a medical evaluation to obtain life insurance, employer-sponsored group policies offer coverage to all employees for the same rate, even those who may be rejected from individual life insurance plans.


Drawbacks of Employer Provided Plans

mployer-sponsored plans present a few problems, because they’re created to cover a group, company life insurance policies are generally designed with a one-size-fits-all mentality and may not include certain riders, such as long-term care or accelerated death benefits, that supplemental life insurance can provide.

There’s also the issue of whether you’ll lose the coverage if you leave the company or get laid off. You could be out of luck if your policy is not transferable.  

The major problem with employer-sponsored life insurance is most insurance carriers don’t offer enough coverage.

Employers who offer life insurance benefits typically pay for coverage equivalent to one to two times the employee’s salary. For a young, single employee who’s renting an apartment and has very few debts or financial obligations, that’s probably enough.

For employees with two or more dependents, company-sponsored coverage may not be enough. Most group sponsored plans allow employees to buy a certain amount of additional life insurance coverage, but even that might not meet their needs. 

Employees may have to undergo medical underwriting to qualify for the supplemental life insurance, and it could be more expensive than purchasing a separate, individual life insurance policy.


Supplementing Your Company Group Life Insurance Plan  

If your company policy doesn’t meet your specific insurance needs, you can purchase additional coverage through your company, buy supplemental life insurance, or both.

The first step to making that choice is figuring out how much life insurance you really need.

Use a life insurance needs calculator to help you determine your specific life insurance needs – how much coverage you really need. Many people may find they need 5 to 10 times their current annual salary in life insurance. 

A thorough needs analysis should consider the total amount of your current debts including your home mortgage loan, car payments, student loans, and credit card debt, as well as, your share of future household expenses such as the cost of your children’s future college tuition.

Once you understand your life insurance needs, you’ll have to decide if it’s better to purchase additional insurance through your employer’s plan OR buy a separate supplemental life insurance policy.

Employees considering whether to apply for additional coverage through their company’s group term life insurance plan need to first evaluate how long they plan to stay with their current employer, since it might not be wise to purchase supplemental insurance through a company plan if you see a layoff or job change in your future.

It’s always good to know the insurance company, how long they’ve been in business and what their financial strength ratings are.

Policyholders will also need to examine whether additional term insurance they purchase through an employer-sponsored plan can be converted down the road.

While some term insurance policies can be converted to cash value policies after a certain number of years, some term insurance plans cost too much to convert or simply can’t be converted at all. 

Employees thinking about purchasing additional insurance through a company plan should do some comparison shopping before making the decision of which life insurance plan to go with. 

Premiums for an individual life policy over a long period of time, 10 years or more, can be less than purchasing through your employer-provided group insurance plan.

Regardless of whether you purchase supplemental life insurance or additional employer provided insurance, make sure to take any free life insurance your employer is willing to offer you.


Supplemental Life Insurance Through Your Workplace


What is Supplemental Life Insurance? 

As part of your employee benefits package, your employers may offer a variety of ancillary or supplemental insurance coverages and can include dental and vision, disability, as well as life insurance.

In fact, a consumer study conducted by the Life Insurance and Market Research Association (LIMRA) during Life Insurance Awareness Month 2015, found that half of U.S. workers have additional or supplemental life insurance benefits available to them through their employer, yet only about 50 percent choose to participate.

That’s a big number, especially when these types of benefits are typically offered to employees at little or no charge.


So Why Aren’t More People Taking Advantage of Their Supplementary Life Insurance?

The fact is, as many as 14 percent of full-time employees aren’t even aware that these types of free life insurance group benefits are being made available to them.

Supplementary insurance can be a good way to take advantage of some additional protection for your family. However, before you rely exclusively on what you have through work, there are a few things you need to know about how it works. 


What You Need to Know About Supplementary Life Insurance 

If you have an employer sponsored group life insurance policy, it’s important to find out exactly what type of policy you have, the limits of coverage, as well as how your death benefit is determined.


It May Not Be Enough Life Insurance Coverage

The 2015 LIMRA study also revealed that sixty-five percent of employees who have group life insurance coverage believe they need more life insurance beyond what their employer provides. 

Why? Because many life insurance policies that are offered through employer sponsored group plans are typically only one or two times your annual salary.

For example, if you earn $70,000 per year, your employer may offer you up to $140,000 of life insurance at no cost.

However, if you have a young family, you may require something closer to $250,000 or more to get the coverage that you actually need. For many Americans, this limit of insurance may not be nearly enough to meet the financial needs of their loved ones if they were to unexpectedly die.


It’s a Limited Accidental Death and Dismemberment (AD&D) Insurance Policy

In many instances, the supplemental insurance that your employer offers is really an AD&D insurance policy, and shouldn’t be confused with a standard life insurance policy.

While an AD&D insurance policy provides benefits to your beneficiaries when you die, your death must be caused by an accident. Although AD&D benefits will vary among life insurers, most will also payout benefits if you were to lose a limb, your eyesight or hearing, as a direct result of a covered accident. 


It’s a Burial Life Insurance Policy 

You may find that your workplace group supplemental life insurance is a type of burial insurance policy. Typically, these policies have a very low benefit associated with them and could be anywhere between $5,000 up to $10,000 – depending on what your employer offers. 

The purpose of these insurance policies is to provide your family with enough money to cover the cost of your final expenses, including burial and funeral costs when you die.


It’s Probably Not Portable – Can’t Take the Life Insurance with You 

Do You Plan on Staying with the Same Employer for the Rest of Your Life?

While that may be your preference, it may not be realistic. According to the U.S. Bureau of Labor Statistics, a person in 2014 stayed with their employer an average of only 4.6 years.

Whether you are let go or you leave your job voluntarily, the supplementary life insurance that you have may terminate.

That means you may need to re-apply for new coverage (either at your new job or independently from a life insurance company or broker) based on your current age and health status.

This may not seem like a major problem; however, some health issues could make it very difficult to find an affordable policy, or even make it impossible to qualify for coverage. 

Generally speaking, most employer-sponsored supplemental life policies are not portable – meaning that you won’t be able to take the life insurance with you when you leave your job.

If you do have coverage through work, find out if you have the option to pay an additional premium to port some or all of your life insurance benefits.

If you don’t, you may want to consider buying an individual life insurance policy on your own outside what you have at work. 


Getting the Right Life Insurance Coverage 

Any life insurance protection is better than none at all.

So, if the supplementary life insurance offered through your employer sponsored group life plan is affordable, then it may be worth the low price.

However, it’s important that you take the time to evaluate whether or not what you are being offered is going to be enough coverage, and more importantly, that it’s the type if insurance coverage that is going to meet your particular needs – now, and in the future.

If you’re lucky, some supplementary insurance policies will allow you to purchase additional coverage above your basic policy amount for an additional premium, so be sure and check with your company human resources department or benefits specialist to determine what your options are.

In many ways, relying on supplemental life insurance alone isn’t ideal. A better option might be to purchase a life insurance policy independent of what your employer offers.


Reasons Why Buying Your Own Individual Life Insurance Policy May be Right for You:

  • You get a life insurance policy that you can take with you no matter where you go.
  • If you select a permanent insurance policy you’ll have your policy for as long as you live (as long as required premium payments are made on time).
  • You select the death benefit amount – NOT your employer.
  • You can choose from a variety of life insurance policy types so that you’re only paying for coverage that meets your individual needs.
  • You may have the option to enhance or expand your insurance coverage with a variety of policy riders.

Securing additional life insurance outside of supplemental life insurance that your employer offers may not be as hard as you think. You can get a free online quote with no obligation to buy.

Learn how an individual term life insurance policy works and why it may be right for you.

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