5 Reasons Why Your Company’s Life Insurance Isn’t Enough
Many companies offer their employees life insurance plans, but are these sponsored plans enough? And what can you do about it?
If you are one of the lucky employees working at a corporation that offers decent benefits, it’s likely you may have been offered some kind of employer-sponsored life insurance. These plans seem like a no-brainer at first - many companies even auto-enroll their employees into some kind of “basic” life insurance package. While a nice and appreciated perk, the reality is that employer-backed life insurance plans often may not meet all of our needs.
Even some of the pricier packages offered through your workplace may have issues. Of course, these plans are valuable and attractive for their convenience. For example, it’s common practice for your premiums to be deducted via payroll, quite convenient for most buyers. Another convenient aspect of group coverage is that individuals with serious medical conditions may still qualify for group life insurance coverage regardless of their health. Nevertheless, convenience should not be the top criteria when choosing your life insurance plan.
Every life is personal and unique, so the best life insurance is personalized life insurance. When you rely exclusively on group coverage through work, you might miss the opportunity to buy insurance coverage that can take care of your specific needs.
Here are 5 reasons why your generic company-sponsored life insurance may not be enough:
Insufficient Coverage. Many corporations offer only 1x-2x annual salary for employees. At a software engineering’s salary, that’s only about $120,000-$150,000 total which is not enough to cover housing, childcare, family costs. We generally recommend $1 million for most families with children and a home.
Career Moves. In 2018, the Bureau of Labor Statistics reported that the average tenure at a company for men was 4.3 years and for women was 4.0 years. People are changing jobs more quickly than ever before. If your job situation changes, whether because of positive or negative circumstances, you may potentially not be able to maintain the same coverage. If you get laid off, move from full-time to part-time, or leave your current company for greener pastures, you may not be able to retain the life insurance policy you’ve been paying for.
Age & Retirement Clauses. Your employer’s life insurance may end when you retire or reach a specific age. Many people lose their insurance coverage when they continue working past a specified age or when they retire. Losing your insurance when you need it most is not ideal.
Not Guaranteed. Your employer’s life insurance is a benefit and not a guarantee. Your employer can change or stop offering life insurance coverage without your consent, since the contract is between your employer and the insurer. If your company experiences tough times and goes into cost-cutting mode, employee benefits might unfortunately be among the first things on the chopping block.
Limited & Generic Options. Your life insurance options are limited and generic. Insurance coverage through your employer is not tailored to your specific financial needs. Your employer may not offer you the option to purchase extra coverage as life circumstances change. You should be able to add coverage throughout your life, but unfortunately many employer plans simply don’t give you options.
If your employer offers life insurance, in most cases you should probably take advantage, but remember that these employer policies may not be the best option for protecting your peace of mind and the wellbeing of your family. A good rule of thumb for judging life insurance policies is whether or not they can replace your income during your working years. Additional coverage on top of work plan may be the right decision for many people to cover debts and liabilities, provide a cash cushion for college, and to leave behind a nest egg for your family.
Our team would love to talk with you and offer our help in thinking through the best fit life insurance for your family and life situation. Remember every life is personal and special. Your life insurance should be too. Get more information: