Is Your Employer-Provided Life Insurance Coverage Enough?

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There are many people out there who assume that just because they get employer-provided life insurance, they are completely safe. However, this could not be further from the truth.  

In reality, it’s more than likely that employer-provided insurance just isn’t going to be enough. 

Sure, employer-provided insurance is certainly a very nice benefit to receive, but it’s important to understand its limitations. 

In this article, we will discuss all the factors you need to know about employer-provided life insurance and all the reasons why it may not be able to provide the cover that you need.  

Only A Fraction Of Coverage Compared To The Norm 

Compared to the usual 12 – 15% of annual earnings that is usually recommended for life insurance, employer-provided insurance only usually provides 3 – 5%.  

In most cases, this won’t be satisfactory for the majority of people. 

Whether or not you should get your life insurance through work will completely vary from person to person. For example, if you are single and have no close family, employer-provided insurance may be enough to cover all of your expenses. On the other hand, if you happen to have a lot of debt or a very large family, then it would be vital to get more than just employer-provided insurance in the hopes of not passing any debt on to them.  

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    Alternatively, you could do a mixture of both by opting to get term insurance. According to The Insurance Bulletin, term insurance is a type of insurance that only covers you for a certain amount of time. So, by knowing this, you could go with employer-provided insurance, and then whenever you are ready or are facing unfortunate circumstances, you could opt to go with term insurance.  

    If you do opt to only go with employer-provided insurance and something did happen, your family could potentially be put in an extremely tough situation. 

    Not only could they struggle to pay for the funeral costs and following events, but they may find themselves in the midst of a terrible financial struggle. However, due to the serious consequences that can come with not having enough insurance, it’s always better to be safe than sorry. 

    Although, it’s worth noting that if you have an extremely wealthy family, it may not be as essential for you to get insurance outside of your employer-provided insurance as they may be able to cope financially. But even if that is the case, it’s more than likely that getting life insurance will be the most responsible thing to do and make things easier for your family. 

    Do You Have A Family?  

    One of the biggest factors that will affect whether or not employer-provided insurance is enough for you is if you have a family. If you do, then the answer is a resounding no.  

    Like we mentioned previously in this article, employer-provided insurance usually only covers only a fraction of what regular insurance would be able to offer. Because of this, the coverage they will be able to provide your family is likely going to be nowhere near enough.  

    Of course, there are always exceptions. For example, suppose your children are grown and completely dependent. In that case, it may not be as vital to get life insurance alongside employer-provided insurance. However, even in this case, it may still be a good idea to help lessen the burden on your family members. 

    How Much Life Insurance Is Actually Needed?

    Unsurprisingly, it is hard to determine exactly how much life insurance a particular individual needs.

    There are ways you can estimate how much life insurance you need, but as a good rule of thumb, more is always better. 

    Considering the jump between having an insurance policy that can cover 1/10th of your funeral costs and one which can cover all costs involved and more is only a matter of a couple of dollars a month, it’s best to simply go for the most expensive coverage you can afford. 

    Even groups that haven’t even had the chance to consider life insurance, such as Millenials or Gen Z’ers, can get a lot of use out of life insurance due to the extremely affordable costs and the astronomical benefits. So although most people in those age groups will be trying to keep every penny they can get, it may be okay to go for less coverage since the likelihood of them using it is much lower. 

    Whether or not you decide to purchase additional insurance outside of your employer’s plan is entirely dependent on you and your specific situation.  

    Suppose you have a family or loved ones dependent on you and would struggle severely from your loss. In that case, you may find that employer-provided insurance just isn’t enough to provide security to your family.  

    Although, if you have no close family, then you may find that employer-provided insurance will suit your needs just fine.  

    When it comes down to the reality of the situation, most people will go ahead and stick with their employer-provided insurance, no matter if it is enough to cover them or not. The reasoning behind this is simple; it’s just much easier and less troublesome. 

    With employer-provided insurance, you don’t have to go out of your way to look into buying additional life insurance, which is something many people want to avoid doing if possible. Of course, there are also the increased costs of opting to go for external life insurance, which is another factor contributing to why the vast number of people just stick with employer-provided insurance. 

    However, life insurance is not a topic that should be taken lightly, with little to no thought. Sure, looking into getting additional insurance alongside your employer-provided insurance may mean going out of your way and perhaps take a few hours out of your day, but the alternative of not having enough life insurance to cover you and your family is a much worse option.