Is My Work's Group Life Insurance Enough?

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Article Contents
Picture of By <span>Matthew Roberts</span>
By Matthew Roberts

Updated on November 20, 2024

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Picture of By <span>Matthew Roberts</span>
By Matthew Roberts

Updated November 20, 2024

Visit author page

4 minute read

Article Contents

Life insurance provides a safety net to your loved ones when you pass away, helping them pay daily expenses and cover debts without financial strain. Many employers understand the importance of having this safety net and offer group life insurance as an employee benefit. However, your work-sponsored life insurance may not be enough for your family’s needs.

Employer-Sponsored Group Insurance at a Glance

  • Learn more about different types of life insurance and riders to increase your coverage against certain risks like critical illnesses. Understanding your options will help you determine if your group coverage is sufficient or if you should look into getting an individual permanent or term life insurance policy.
  • Unlike most group policies, individual permanent life insurance has cash value accumulation which you borrow against for emergencies or invest to increase your savings.
  • Group coverage is easier to qualify for and has a streamlined enrollment process, with simple sign-ups for coverage where any premiums (if any are charged at all) will be deducted directly from paychecks. This is a convenient way to get and provide insurance for both employees and employers.

Should you get an individual policy for more coverage on top of your group insurance? Learn what the key features of workplace-sponsored life policies are and what to consider before spending on another policy.

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What is Employer-Sponsored Group Life Insurance?

Employer-sponsored group life insurance is a type of life insurance policy that covers a group of employees in a workplace. This coverage is provided by the employer at little to no cost for employees, improving their living conditions and providing much-needed support that boosts their workplace satisfaction.

Here are some of the typical key features of group life insurance:

Basic coverage:

Most employers provide a basic level of life insurance for free or at a partial subsidy, with coverage typically equivalent to your salary for a year or a flat dollar amount.

Group policy:

The employer owns the group policy, and this covers all eligible employees. Group policies typically allow for lower premiums because the risk of insurance is spread out across a larger group of people.

Temporary coverage:

Group life insurance is typically a term policy that lasts only for the duration of your employment. If you leave your job, your coverage may end. Note that some employers may allow you to convert your group policy to an individual life policy with the same provider, so you can keep your insurance coverage even when you switch jobs.

Limited customization:

Employees usually don’t get to customize the terms of their group coverage. Terms such as coverage amounts, beneficiaries, and benefits are frequently predetermined by the employer.

Guaranteed coverage:

Many group life insurance policies don’t require medical exams, making it easier for employees who have pre-existing conditions to get coverage – especially for those who would’ve otherwise been deemed too high-risk for a traditional policy.

Reasons Why You May Want to Get Your Own Policy

Group life insurance is a valuable workplace benefit, but there are several reasons why you may want to get an individual policy on top of it. Here’s a quick explanation of the most common ones:

Buying life insurance while you’re still young can help you lock in lower premiums. Because rates tend to go up with age, you’ll save money in the long run.

Depending on your lifestyle and health, you may find that an individual life policy offers better coverage for its rates compared to your existing group policy. This is especially true for younger, healthier applicants who can secure lower premiums.

Individual policies are portable, meaning they cover you regardless of your current employment. Your coverage won’t be affected when you quit or change jobs, which may offer you peace of mind.

With an individual policy, you can customize your coverage amount, which risks are covered, and the policy type to suit your personal needs and budget. You can even talk to a provider about the investment options in some kinds of life insurance if you’re concerned about protecting your estate for future generations.

Why You Should Get Your Own Life Insurance Policy

What Factors Should You Consider While Getting Additional Coverage?

Not sure if you need additional coverage through an individual policy? Here are some considerations to take into account to ensure you make an informed decision:

Existing coverage:

Review the details of your group policy, such as the coverage amount and limits. See how well it aligns with your future plans and present needs. If the coverage isn’t enough, it’s time to supplement it with an individual policy.

Health status:

If you’re in good health and don’t have a family history of certain medical conditions like cancer or heart disease, you may qualify for low rates on an individual policy. However, if you have existing health conditions, relying on group insurance may be one of your most affordable ways to get covered, as it doesn’t usually require medical underwriting.

Budget:

Examine your budget to see how much you can spend on life insurance premiums. Individual policies may cost more than simply relying on a group policy, but they tend to provide better protection and value down the line.

Upcoming life changes:

Consider future events that may impact your coverage needs, such as starting a family or buying a home. These life changes tend to increase your financial responsibilities, making additional insurance essential.

Key Advice From MyChoice

  • Evaluate your current and future financial responsibilities, which include living expenses, dependents, and debts like student loans and credit cards. Carefully calculating costs you need to pay off over time will help you determine how much coverage you’ll need to reduce your dependents’ financial burdens.
  • Group life insurance policies can be customized for specific employee groups. For example, your employer can choose to offer different coverage amounts based on seniority or workplace roles. Employers should establish a process for regularly reviewing and updating group plans to keep them relevant to employee needs.
  • If you need more coverage than your group policy provides but have health conditions that make it harder to qualify, consider getting simplified or guaranteed life insurance. Simplified life insurance has no medical exam, only a health-related questionnaire, while guaranteed life insurance provides coverage regardless of the applicant’s health status.

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