Is the life insurance coverage provided enough?

December 27, 2021

Is the life insurance coverage provided by your employer enough?

You may need to supplement it with an additional policy

As part of your employee benefit package, your employer may offer life insurance at little or no cost to you. This is a great perk, especially if you do not have any other life insurance in place.

But is it enough?

According to the 2021 Insurance Barometer study by LIMRA, 57% of US workers have life insurance through their employer. 76% have children under the age 18 and count on their employer-provided life insurance to provide for their children. With more than half of US households relying on multiple incomes¹, the coverage provided by your employer may not be enough to replace your salary. For many, losing one income would be devastating.

While there are conveniences to having an employer-provided life insurance plan [ie: minimal or no additional cost to you; no medical exam required], there are some drawbacks:

Workforce Changes- LIMRA estimates in the next 5 years, fewer than 50% of workers will be traditional workers. What this means is that employers will hire more freelancers, contract workers, and part-time employees. Some of these positions may not be eligible for benefits.

Coverage is tied to your employment- You might not be able to take the policy with you when you leave. Sometimes, you can convert it to take it with you, but that may cause the cost to significantly increase. You can also purchase it with your next company; however, the costs will continue to increase as you age and if you develop any medical issues. Also, some employers may drop life insurance as a benefit, leaving you with no coverage at all.

Limited choices- Your employer may only work with one company to provide life insurance so you may not have the best option for your situation.

Low coverage amounts- You may need more coverage depending upon your financial situation, including your mortgage, childcare costs, college tuition, daily living expenses, debt coverage, etc. The median insurance coverage offered at the workplace is either a flat sum of $20,000 or one years’ salary².

Spousal coverage- Some employers may not offer coverage for spouses or dependents. Having coverage for your spouse is essential, even if they are not the bread winner. One may suddenly find themselves trying to manage their career as well as all the household duties and childcare responsibilities.

Relying solely on your employer for life insurance coverage may not be enough to take care of your loved ones, and you may need to secure additional coverage with a separate life insurance policy.

Determining how much protection you need is a good first step to finding proper coverage. Use our life insurance needs calculator to assess how much life insurance you need to meet immediate financial obligations and to ensure your loved ones will be financially protected.

1: Consumer Expenditure Survey, ibid 2: US Bureau of Labor Statistics, 2020