Is Life Insurance Through Work Enough?

If your job offers life insurance as a benefit, that’s great. Free money is free money. But if you’re counting on that policy as your only coverage, you might want to think again. Here’s why employer-provided life insurance usually isn’t the whole answer.

What You Probably Have

Most employers offer a basic group life insurance policy as part of your benefits package. It’s usually one to two times your annual salary, and it’s often free or close to it. Some companies let you buy additional coverage through payroll deductions. Sounds decent, right? On the surface, sure. But let’s look at the numbers.

Why It’s Usually Not Enough

Say you earn $70,000 a year and your employer gives you 2x salary coverage. That’s $140,000. Sounds like a lot until you start doing the math. Got a mortgage? That could eat up most of it right there. Now add a few years of living expenses for your family, childcare costs, maybe some outstanding debt. That $140,000 disappears fast. Most financial experts recommend coverage of 10 to 15 times your income. So if you make $70,000, you probably need somewhere between $700,000 and $1,000,000 in coverage. Your work policy is a nice start, but it’s not even close.

The Big Problem: Portability

Here’s where it gets tricky. Your employer life insurance is tied to your job. When you leave, whether you quit, get laid off, or retire, that coverage typically goes away. Some policies offer a “conversion” option, but the rates are usually terrible. And here’s the real risk: what if you leave your job at 45 after developing a health condition? Now you’re trying to get a new individual policy with a pre-existing condition, and it’s either way more expensive or you can’t qualify at all. That’s a scary position to be in, especially if your family is counting on you.

What to Do About It

The smart move is simple: get your own individual policy as your foundation. It stays with you no matter where you work. Your rates are locked in. And it’s yours and no employer can take it away. Then treat your work coverage as a bonus on top. Think of it like this: your employer policy is the appetizer. Your individual policy is the main course. You want both, but you definitely don’t want to show up to dinner with just the appetizer. A 20- or 30-year term policy with enough coverage to actually protect your family is surprisingly affordable, and it takes the guesswork out of the equation entirely.