- Employer life insurance can be a valuable, low-cost starting point, but coverage is often limited.
- It may not be enough if you need to replace income, cover debts or support loved ones long term.
- An individual policy can offer more flexible coverage and usually stays with you if you leave your job.
- Reviewing your needs early and after life changes can help you keep the right protection in place.
Company Life Insurance Coverage: Is It Enough?
If your employer offers life insurance as a benefit, it can be a valuable starting point — especially if you have no other coverage. Group life insurance for employees can make it easier to get some protection through work, often at little or no cost for basic coverage. But when deciding whether that benefit is enough on its own, there are several important factors to consider, including:
Key Takeaways
- Do other people rely on you financially now, or will they in the future?
- How much income must be replaced in the event of your death?
- Would someone else have to pay your funeral expenses or outstanding debts?
- What are your long-term financial goals?
Make sure you have the information and numbers you need to make the best decisions for you and your loved ones.
Quick takeaway: Employer life insurance coverage can be a helpful benefit, but workplace plans often have lower benefits and often do not stay with you if you leave your job. An individual policy may offer added flexibility and longer-term protection.
What is employer-provided life insurance?
Employer-provided insurance is coverage that may be offered through your workplace. Basic group life insurance for employees usually has preset options and limits, and the employer often pays some or all of the premium. Some employers also offer supplemental life insurance you can purchase for additional protection above the basic policy.1
In many cases, employer life insurance coverage is tied to your salary or a flat dollar amount. That can make it a convenient benefit, but it may not fully reflect your personal financial responsibilities.
Benefits of employer-provided life insurance
- It’s easy to get. In a competitive employment field, more and more companies are offering group life insurance for employees as a benefit.
- Basic coverage may be paid for entirely by your employer.
- There’s generally no medical exam and/or underwriting process to obtain coverage.
Limitations of employer-provided life insurance
- You typically can’t take group life insurance with you when you leave a job, which could leave you unprotected.
- These plans tend to be one-size-fits-all, and they typically cover only one to three times your salary.2 While this amount is enough for some, for many, it isn’t.
Here are key factors to consider when calculating your coverage needs:
| Coverage type | What it may offer | What to keep in mind |
|---|---|---|
| Group life insurance through work | Convenient enrollment, possible employer-paid premium, no medical exam in many cases | Coverage may be limited and may not follow you if you leave your job |
| Individual life insurance | Coverage you choose based on your goals and needs | You usually apply separately, but the policy stays with you regardless of employment changes |
Do I need life insurance if I have it through work?
Possibly. It depends on how much employer life insurance coverage you have and whether it would realistically support the people who depend on you.
If your workplace plan would only cover a small portion of your income, final expenses or long-term family needs, an individual policy may help close the gap. That can be especially important if you have children, a mortgage, shared debt or a partner who depends on your earnings.
Need more life insurance guidance? Explore how much you might need or if you need it right now.
How much life insurance do I need?
The amount of life insurance you should have depends on the income you'd want to replace and the expenses you'd like to cover for those who depend on you financially. Look at ongoing expenses like day care, tuition, rent or a mortgage, plus medical bills, burial costs, estate taxes and other immediate needs. There are also long-term financial goals to consider, such as saving for college education and retirement.
Most insurance professionals recommend having a policy that pays a benefit equal to seven to 10 times your annual income.3 Use our needs calculator to figure out how much life insurance is right for you.
| Need to consider | Why it matters |
|---|---|
| Income replacement | Helps support the people who rely on you financially |
| Household management | Can help to pay someone to assist with cleaning, yard work or other household tasks |
| Mortgage or rent | Can help loved ones stay in the home after a loss |
| Debt and final expenses | Can reduce financial pressure during an already difficult time |
| Future goals | May help fund college, child care or other long-term plans |
What types of individual life insurance are available?
There are two main types of individual life insurance: term life and whole life. Both offer a lump-sum payment to your beneficiaries in the event of your passing.
- Term life insurance protects you for a set number of years. Benefits are paid for a set number of years, and pays a benefit if you die during that time period. It can be a good option for someone needing coverage only for a period of time, such as while there are dependent children or a mortgage.
- Whole life insurance lasts your entire life. In addition, your premiums never increase, even as you age or face health issues. Whole life policies also build cash value, which you can borrow against for emergencies. Whatever you borrow is subtracted from the death benefit. Whole life can help with funeral expenses, remaining hospital or nursing home bills, charitable giving, passing money on to beneficiaries upon death, or other end-of-life expenses.
Having multiple life insurance policies can help you tailor your coverage to your family’s evolving needs. It helps ensure that anyone who relies on your income is supported financially, while also providing lifetime coverage to benefit your loved ones in later years.
Want more info? Explore term life, whole life and multiple policies for more detail about your life insurance needs.
When should I buy my own life insurance?
Your rates are usually the lowest the younger and healthier you are. And remember, once you lock in a premium, it won’t change for the term of the policy.
How long you plan to stay in a job is another important consideration when all you have is employer-sponsored life insurance. Say you were 25 years old when you started and you’ve been there 15 years. You’ve gotten married in that time, or had children, and your insurance needs have changed. If you leave now, all of a sudden you may have no coverage. And you’re older, making it more expensive to buy your own policy. It makes sense to take advantage of the life insurance your employer provides while also looking for your own individual insurance policy that will be there regardless of your employment status.
A key advantage of life insurance is that the benefit is guaranteed not to change as long as you pay your premiums. While this offers some security, you should check your coverage as your personal circumstances evolve. And life changes aren’t always as obvious as a marriage or a new child. Sometimes, a simple shift in income can cause you to reevaluate your protection. Review your policy whenever you experience a major milestone in your life to make sure you’re always properly covered.
Do I need life insurance at all?
Life insurance may not seem necessary if no one depends on you financially, you have no major debts, and you don’t expect your status to change. But you may have more to protect than you realize. For example, if you have a private student loan that someone cosigned, a mortgage or a credit card balance, those you leave behind could be burdened with your debt if you were to suddenly pass away. Life insurance can help your beneficiary(ies) pay off these amounts.
And remember, the younger you are, the more affordable life insurance can be. Will you need coverage five years from now? Locking your premium in while you’re younger and (usually) healthier can save you money over time.
Does my employer life insurance policy follow me if I leave my job?
Not necessarily. In most cases, your policy terminates when your employment ends.
Some plans may offer conversion options, but workplace coverage is often tied directly to your employment. That’s one reason many people choose to add an individual policy that is not dependent on their job.
Get a life insurance quote today
FAQs about employer life insurance coverage
Maybe. Employer life insurance coverage may be enough for some people, but workplace plans often have lower benefits. If you have dependents, debt or long-term financial obligations, you may want to consider an individual policy too.
This is life insurance offered through an employer. It often comes with basic coverage limits and may be paid in part or in full by the employer.
Usually, no. In many cases, employer-provided coverage ends when your employment ends, although some plans may offer options to convert coverage.
It depends on the amount of coverage and your household’s financial needs. If your work policy only covers a small multiple of your salary, it may not be enough to replace income, pay debt and support future expenses for your family.
Employer coverage is tied to your job and usually comes with preset limits. An individual policy is something you buy directly, so you can choose the amount and type of coverage based on your needs.
2022 Employee Benefits Survey, Society for Human Resource Management.
Why Relying on Life Insurance From Your Employer Can Be a Bad Idea, Monster, 2017.
What You Should Know About Buying Life Insurance, American Council of Life Insurers, 2022.
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ALIC08725 Mar-27