Is My Life Insurance Through Work Enough Coverage?

While employer sponsored life insurance coverage is an excellent company benefit, it is likely not enough coverage to rely on entirely.

Most companies only offer life insurance benefits that are a multiple of your salary. It is common to see a 1x salary included along with your other benefits, or at least provided at subsidized rates. Other options might include 2x, 3x or even 4x your salary with increased premium amounts.

The most concerning part of solely relying on your coverage through work to protect your family is that you’re likely underinsured. You can head on over to our Life Needs Calculator to determine the perfect amount of insurance for you and your family, but keep in mind that a general rule of thumb is that you should have a life insurance benefit that is typically around 10x your annual salary.

The other concern of having all of your life insurance maintained through your current employer is in the instance that you change jobs down the road. Most life insurance policies that are purchased through work are not portable or cost a small fortune if you want to take the coverage with you. It is advisable to have a policy outside of work in this case so that you don’t lose 100% of your life insurance protection should you change employers or retire.

Let’s use a common example:

A married 45 year old male who is a $75,000 earner, has two children at home and a $400,000 outstanding mortgage. If something were to happen to him, he would want to make sure his family received his income for at least 3 years to make ends meet. Just replacing his income for 3 years would mean his total life insurance need is already at $225,000. When coupled with paying off the mortgage, getting his children through college, paying for a funeral and other outstanding debts, we’re well over this amount and likely near that 10x rule of thumb, or $750,000 of coverage. If his policy at work is providing 2x his salary as an included benefit, he could purchase another $600,000 policy on the individual market to make up the difference.

However, the part that is often overlooked is that a policy providing the same coverage amount outside of employment can be the exact same price, if not a little cheaper. Most people overestimate how much a life insurance policy costs on the individual market costs, which is why it is common to not ever look at supplementing work coverage with an individual plan. However, look at how affordable a $600,000 policy would be using our example above:

45 Year Old Male Client – Non Smoker	Life Insurance Benefit Amount – $600,000
10 year term	Company A – $31.99 monthly
	Company B – $32.14 monthly
	Company C – $32.51 monthly

Remember that life insurance premiums are determined by your age and current health. By waiting and not getting coverage outside of work, you risk being uninsurable should a health condition surface down the road, or paying much higher rates by waiting and getting older.

Click here to see how affordable a life insurance policy can be outside of work!