What if I already have life insurance through work?
According to the American Council of Life Insurers, group life insurance — the kind employers typically provide their employees as part of benefits packages — represented nearly half (46 percent) the life insurance policies in force in 2016.1
But what coverage do those group policies actually provide? Will they provide adequate benefits to your loved ones in the event of your death? And do you need additional life insurance beyond what group life covers? Dive in below for the answers.
What does a group life insurance policy cover?
Many employers offer life insurance as part of their employee benefits package. This coverage is called “basic group life.”
For most employees, their group life policies are worth anywhere from one to three times their salary — so if you’re making $45,000 per year, your policy may be worth up to $135,000. If your employer offers life insurance as a benefit, it never hurts to opt in!
Are there drawbacks to employer-provided insurance?
Is group life enough to provide for your beneficiaries if you die? Here are a few things to consider:
- You may be offered a group life policy as a benefit, but benefits are never guaranteed. If your employer decides not to include a life insurance policy in the future, you will no longer be covered.
- If you leave your job (voluntarily or not), chances are you won’t be able to take your insurance coverage with you — the policy stays with the group.
Ask plenty of questions to help you understand your company’s group life insurance coverage — and make sure you have enough for your needs.
What is supplemental life insurance?
If you need more coverage than the low- or no-cost group life policy offered by your employer, consider purchasing supplemental life insurance to ensure your beneficiaries will be taken care of.
Depending on your situation, a group life policy that pays out up to three times your salary simply may not be enough. (One rule of thumb says your life insurance policy should pay out 10 times your salary, and some individual policies are worth as much as $1 million.)
This type of insurance is exactly what it sounds like: additional coverage on top of what your group policy provides. There are two ways to obtain supplemental life insurance: through the insurance provider your company uses, or on your own.
Your employer may offer supplemental policies such as:
- Accidental death and dismemberment (AD&D): Accidental death and dismemberment insurance is a limited supplement that pays death benefits to your beneficiaries if you die because of an covered accident. AD&D coverage typically does not pay a benefit when death is caused by natural causes.
- Burial insurance: This supplement pays a small benefit to cover the expenses of burial, cremation, or funeral services.
The potential drawbacks mentioned above apply to supplemental coverage from your employer: Benefits through your employer are not guaranteed, and most supplemental policies are non-portable, meaning you can’t take the coverage with you if you leave your job.
What are the benefits of purchasing your own insurance?
If you want control over having coverage in the event of your death, purchasing your own supplemental life insurance policy is your best bet. Independently purchasing a policy means you’re in the driver’s seat in terms of how much coverage you have, for as long as you keep up with your payments.
Many life insurance providers offer AD&D and burial insurance as supplements or riders to their life insurance policies, just as your employer’s group life insurer might.
If you believe you need more coverage, supplemental term life insurance plans can provide additional term coverage on top of the one to three times your salary that a group life policy offers. As you consider whether to purchase supplemental life insurance, remember to take into account the total value of your life insurance — group life as well as supplemental life insurance.
How much life insurance do I need?
The amount of life insurance coverage you really need depends on many factors, from your age and general health to your family situation.
Most life insurance companies offer calculators to help you determine how much life insurance you need.