What about life insurance provided through work?

Sometimes, when you take a new job, you are offered life insurance through your employer as part of an employee benefits package. If you’re given this chance, it’s often a good idea to accept that coverage. But here are some things to keep in mind.

Advantages of life insurance through your employer

The life insurance your employer offers is part of a group life insurance plan, which means the employer purchases a single policy that covers all employees. Some employers may pay the entire cost of the group policy, so you get life insurance at no charge. Other employers ask you to pay a portion of the cost. Even then, the amount you pay for life insurance can be less than if you buy it on your own. And since your employer will usually deduct your payment (or premium) automatically from your paycheck, it can be a relatively hassle-free way to get life insurance.

Remember, though, that although a life insurance policy through work can be very valuable, it’s not necessarily the answer to all your life insurance needs.

What life insurance through your employer won’t do

It won’t keep covering you if you leave your job: One drawback to employer-sponsored life insurance is that it isn't portable. In other words, you can’t take it with you if you leave or lose your job. When your employment ends, so does the coverage. (Although group life coverage generally continues for 31 days after your last day of work.) If your work policy is the only life policy you have, that means you go from having some life insurance coverage to having none.

But you may be able to convert it to an individual policy: Some employers allow you to convert the group coverage they provided to you as an employee into an individual policy that will keep covering you once you no long work for them. In most of these cases, you can apply for any kind of individual life insurance policy your company’s group life insurance provider offers. You generally have 31 days from the day you leave your employer to submit your application. If you decide to convert your work policy to a permanent life insurance policy, the premium will be based on your current age and the same amount of insurance that your group policy provided. Generally, a medical exam is not required. That may be especially important if you are not in good health.

The bottom line on life insurance through your workplace

Because of its relatively low cost (and the fact that in some cases you pay nothing at all) as well as its convenience, life insurance through an employer is often a good choice. To be certain you are getting a good deal, compare the price and amount of coverage you are being offered at work with what the same amount of coverage would cost you if you bought an individual policy on your own. Because this kind of life insurance coverage ends when you leave your job, and because the total amount of money your work policy would pay your loved ones is often much less than the total they would need in the event of your death, you may want to consider both life insurance through work and a separate, individual policy. A term life insurance or whole life insurance policy can help you provide added protection for your family. 

How to learn more about life insurance

Life insurance may seem complicated, but it’s not that hard once you know the basics. Of course, we are happy to help. You can also use the TruStage Life Insurance Calculator to compare different types of insurance and learn more about your options.


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