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Is Life Insurance Through Work Enough Coverage?

By September 30, 2019April 9th, 2021Personal Insurance

A scary number of Americans don’t have life insurance, and their excuses are terrible. About 12% simply don’t know how much coverage they need. Do you fall into these categories?

Or maybe you’re one of the 11% who thinks the process is too confusing. Then there are the 17% who believe that they don’t need to buy their own policy.

For many Americans, their employer offers a group life insurance policy. However, life insurance through work may not be enough.

Keep reading to find out how much life insurance you really need and why your work policy may not be enough.

Why You Need Life Insurance

Do you have people who depend on you to support them?

If so, then you need life insurance. This is an insurance policy that pays a specific amount of money to your chosen beneficiary upon your death.

Even if you don’t have a family to support, life insurance can pay for your funeral or any outstanding debt that you may have.

This will ensure your creditors are paid off, so they don’t seek reimbursement from your estate.

Life Insurance Through Work: Is It Enough?

The first thing you need to do is figure out how much life insurance you should have.

Most financial experts will tell you that you need ten to twelve times your annual income. This can fluctuate based on your financial situation, though.

Use this formula to figure out how much you need: Resources (liquid assets + income) – Financial obligations (expenses + debt) = Recommended life insurance benefit payout.

Now compare the life insurance benefit offered by your employer. Whatever the difference, that’s what you need to purchase in a supplemental life insurance policy.

Cons of Depending Solely on Employment Life Insurance

Most people don’t take a second look at their employer life insurance benefits.

Over the years, this benefit total can change, or your financial situation can change. You may find that while it was an acceptable amount when you were hired, it’s no longer enough.

Typically, the life insurance offered by an employer is only two or three times the employee’s salary. It could also be a small flat total, like $20,000-$40,000. This is not nearly enough to pay off the typical mortgage or send your kids to college.

Then there’s the fact that this coverage only lasts for as long as you work for the company — so coverage ends when the job ends.

Get the Insurance You Need

Now that we’ve established that you need to purchase supplemental life insurance, how do you go about it?

There are a few things you need to do to make sure you get the right coverage at the right price.

Decide What You Need

Whatever total benefit you choose, your life insurance benefit needs to take care of the major expenses. This means covering your funeral, paying off your mortgage, and/or paying for your children to attend college.

This’ll ensure that your family is protected and taken care of long after you’re gone.

Choose a Type of Life Insurance

There are two different types of insurance that you can choose from: term and permanent.

Term insurance is going to provide you with life insurance for a specified number of years — usually 10, 20, or 30. Permanent life insurance will last for your entire life.

For most people, term life insurance is a smart and affordable option. If you have young children, choose a term length that’ll cover you throughout the years of raising your children.

The idea is that by the time the life insurance ends, your children are adults and supporting themselves. You should also have a decent amount of savings by then. At this point, life insurance is no longer necessary.

Compare Your Options

When it comes to getting a quote and buying, you can do so through a broker or agent, or you can purchase directly from an insurance company.

Working with an independent insurance agency means you can work with experts to create a customized insurance solution that fully protects you and your family.

Another option is to apply to insurance companies directly online. But this will require you to fill out an application with each company. This can be tedious and require you to keep track of multiple applications and quotes.

Buying Insurance Through Your Employer

Some employers offer the option of purchasing additional life insurance through their policy.

Initially, this could be seen as a streamlined process since the employer has already done the hard work of vetting companies and finding the best rate. If you have a particular health condition, you may find it easier to qualify for additional life insurance with this method.

However, there are some drawbacks to going this route.

It may not be the best option if you are young and healthy. If you fall into this category, you’re likely to find more affordable health insurance elsewhere.

You may also find that you have to pay for this additional health insurance through payroll deduction. This puts a restriction on how and when you pay.

Supplement Your Work-Supplied Life Insurance

When it comes to having enough life insurance, your employer-supplied benefit may not be enough.

You need to sit down and figure out how much you and your family would need to be taken care of both now and into the future.

Then you can determine if you need to supplement your life insurance through work with a second policy. If you find that you need additional life insurance, working with an agent can help make the process smoother and easier.

Contact our team today and let us help you find the best solution for your insurance needs.