Is Your Employer-Provided Life Insurance Enough?

09.26.2018 | Category: Costs and Calculators

life insurance

Do you have life insurance through work? Having life insurance through an employer is a great security blanket. It’s a type of protection that ensures that, in the event of your death, your family is left with some financial support. Costs like your funeral would be less of a financial burden, and there could even be some money to pay that next car payment.

It’s important to know that, yes – these policies offer great protection. And sometimes employers will even offer some coverage at no cost to you. But they often aren’t enough to cover much more than a few months of bills and your funeral expenses. Though there is no minimum or maximum amount of coverage an employer can offer, the typical amount is between $25,000-$50,000 of coverage, or up to one year’s salary.¹ Many times, you’ll also have the option to apply for more coverage through your employer-sponsored plan. If you do decide to get additional coverage, you can opt in to have the payment for your monthly premium taken from your paycheck each month. This is a solid start, but most people need more life insurance coverage.² So, especially if you only have life insurance coverage through work, ask yourself: “In the event of my death, is my employer-provided life insurance enough?”

Understanding how stable your coverage is should also be key as you make life insurance decisions. Consider this:

What happens if you lose your job? Life insurance coverage from your employer only lasts as long as you work for them (unlike your 401(k), which can follow you wherever you go).
What happens if you take a job elsewhere? Not all companies offer life insurance. Will you be covered if you can’t get life insurance through your new employer?
What happens if you wait to choose your coverage? Policies are often more expensive the older you are. So waiting to get coverage outside of your employer could mean higher costs.

How Much Life Insurance Coverage Do You Need?

How much life insurance you need depends on a variety of factors. How much of your income does your family rely on each year? What expenses are you looking to protect? You can use a calculator to figure out how much life insurance you need.

How to Get Additional Life Insurance Coverage

First, consider your needs.

Raising children? Daycare fees, footing the grocery bill during a growth spurt, and extracurricular activities add up quickly. An additional 20-year term life insurance policy could ensure that in the event of your death, your child is still cared for.
Have a child getting ready for college? The price of tuition is rising faster than inflation, so it’s never too early to start planning for college expenses. In the event of your death, the payment from your additional life insurance policy could provide the money they’ll need to pay for college.
Want your spouse to live comfortably after your death? The payment from an additional whole life insurance policy could be used to help pay off the mortgage or pay down your outstanding debts.

You should consider your current financial needs, too. If your life insurance through work isn’t free, it might make sense to waive coverage and get your own individual life insurance policy that meets your current financial situation.

Then, shop for a life insurance policy.

There are multiple policy types to fit different circumstances. There’s term life insurance, which provides coverage for a period of time. Or, there’s permanent life insurance that covers you for the rest of your life. You can always get help choosing the right policy with the help of an agent/producer.

Get a life insurance quote to see if additional life insurance coverage could give your loved ones some of the financial security they need.

Sources:
1, 2 NerdWallet. (2017, October 07). Web page” Pros and Cons of Group Life Insurance Through Work. Retrieved June 26, 2018, from https://www.nerdwallet.com/blog/insurance/pros-and-cons-of-life-insurance-through-work/

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