5 Reasons You Shouldn’t Rely Solely on Your Employer’s Life Insurance Coverage

These days, fewer employers are offering life insurance to workers as an employee benefit. In 2016, only 48% of employers offered life insurance as an employee perk, reflecting a steady decline of 23% compared to 2006 levels, according to the Life Insurance Marketing and Research Association (LIMRA).

The decline is curious, given that most employees rank employer-paid life insurance as an “important” or “very important” part of their benefits package.

Americans are underinsured.

Americans are dangerously underprotected when it comes to life insurance. Three in four American households without life insurance report they would have immediate or near-immediate trouble paying for basic living expenses in the event of the death of a primary wage earner.

Unfortunately, relying solely on group life insurance coverage from your employer may not be sufficient. Tax laws limit the deductibility of employer-paid life insurance premiums to those required to provide a death benefit of $50,000, when many American working families need several times that amount of protection. Even among those who have group life insurance from their employers, 50% still report they would have immediate or near-immediate hardship in the event of a breadwinner’s unexpected death, according to LIMRA figures.


Own your own coverage

Even if employers weren’t cutting back on life insurance as an employee benefit, plenty of reasons to contact an insurance agent and start your own life insurance policy:

Reason 1: It goes where you go. If you leave your place of employment, you might lose your coverage. If you have a history of health issues, it might be difficult or impossible to get life insurance at that time. By owning your own policy, you won’t have to worry about losing your life insurance when you leave the company.
 
 Reason 2: More coverage. While employers often limit what they’ll pay for to a death benefit of $50,000, or one to two times your salary, this is often not nearly enough. Experts often recommend owning at least 10 to 20 years’ worth of your current income in life insurance protection — particularly for younger families who are early in their careers.
 
 Reason 3: More features. While most workplace life insurance policies are one-size-fits-all, buying your coverage from an agent in the open market means you can customize your insurance policy. For example, you can choose whole life or universal life insurance for permanent life insurance that accumulates cash value.

You can also obtain coverage for your spouse or domestic partner, regardless of whether they are working. You can also choose to layer affordable term insurance with permanent coverage and convert your term insurance to more valuable permanent coverage over time, as your income increases.
 
 Reason 4: Broader protection. As you go through your insurance needs analysis, you might discover a need for other forms of insurance protection not provided by your employer. Since 2006, employers have become less likely to offer important insurance benefits like long-term care insurance, critical illness or cancer insurance, and long-term disability coverage.
 
 Reason 5: You control the policy. If you get all your life insurance from your employer, they could shut their doors, lay you off, go bankrupt, or simply cancel the benefit tomorrow. Again, if you have a medical history, it could be difficult or impossible to line up replacement coverage. By owning your own policy and not relying on your employer, you guarantee that no one can terminate the policy except you.