6 reasons not to rely on life insurance through work

Many employers do their best to offer benefits over and beyond their staff’s regular pay, like life insurance through work.

If you’re working for a company that provides these added benefits, that is great news! And while we agree you should take advantage of these perks, we also want you to be fully aware of limitations around employer-provided life insurance.

If your employer provides you with a life insurance policy at no cost to you – definitely take advantage of it! But it should not be your only source of life insurance.

Why is that, you ask?

Take a look at these six reasons why life insurance through work is not enough.

1. Your employer-provided life insurance policy ends when your job ends or you retire

Employer-provided life insurance policy ends when your job ends

Employer-provided life insurance is not usually something you can take with you if your job ends or you retire.

Unfortunately, in our current economy we all know the chances of being laid off are real. Job loss can effect anyone, blue collar or white collar, at any phase in their career.

A U.S. Bureau of Labor Statistics report showed the national employment level in January 2020 was over 150,000. But as a result of COVID-19, it soon tanked near 2010 levels of about 130,000. This alone demonstrates that no job is ever guaranteed.

And while the job market is turning back around, keep in mind life insurance policies through an employer will not transfer to your next place of employment. Plus, there’s no guarantee your next job will offer an equivalent benefit, or any death benefit for that matter.

2. Personal health can change

Personal health can change leaving you uninsurable

If you are like most Americans, you’ll notice your overall health gradually declining as you age. It’s a natural part of getting older!

On the other hand, illness can come out of nowhere and you could see major declines in your personal health within a few weeks or less! You could even be hit with the worst case scenario – you could become completely uninsurable due to significant drops in your medical condition.

If you already have a life insurance policy in place, it won’t be affected by changes in your health . Can you imagine the sense of security you would have if something medically did go south, but you’re already properly insured?

Something else to keep in mind is life insurance premiums do increase with every birthday you have, even if your health stays the same. So the sooner you can sign up for an individual life insurance policy, the less impact it will have on your bank account.

3. Life insurance through work is often not enough to meet your needs

Like a low battery, life insurance through work is not enough to meet your needs

According to a Life Happens and LIMRA study, more than one third of households would feel the financial impact within one month if the primary wage earner died.

The benefits your loved ones will receive from an employer-provided life insurance policy are typically only one- or two-times your annual salary. This means your family will have the same level of income for the next one or two years … is that enough?

What if you have young children, or children expecting your help with college tuition, or a spouse who stays home to take care of your kids? Will they be able to replace your income after one or two years?

Just like having a low phone battery before lunch won’t allow you to use your phone through the end of the day, a small policy can run out before your loved ones are prepared or ready to fully provide for themselves.

4. Additional coverage may be overpriced

Additional coverage may be over-priced

Many employer-provided life insurance policies do offer additional coverage if you’re willing to contribute some of your own money. This sounds great in theory.

What you may not know is that these policies are priced on a guarantee-issue basis. This means everyone in your organization is covered regardless of their health condition. What this translates to is an overall higher rate for increased coverage or additional options.

So even though you may take care of yourself and be in good health, you’re paying the same rate as your colleague who has high cholesterol, is overweight and smokes a pack a day. Wouldn’t you rather pay a reduced rate for more coverage based on your good health?

5. Permanent options are not offered

Permanent options are not offered

Employer-provided policies usually do not provide options that will stay with you no matter where you work or if you work. Like the hour glass, they run out of time and you’re left with nothing to show for it.

If you’re going to contribute to a life insurance policy and don’t have a lot saved up for retirement, it’s often better to contribute to a plan that does not have an expiration date.

A couple examples are whole life insurance policies and universal life insurance policies. While there are some differences between these policy types, both do offer guaranteed premiums and death benefits for the life of the insured. This means your premium won’t change and the death benefit will be available no matter where you work or if you are working.

6. There are no living cash benefits with an employer-provided life insurance policy

There are no living cash benefits with an employer-provided life insurance policy

Most life insurance policies offered through work are bare-minimum term policies that only provide benefits at the time of death. Whole life policies can offer cash benefits even while you’re still alive.

How do you get cash benefits while you’re alive?

A whole life policy can act similar to a savings account with great savings potential. As you put money into your policy via your monthly or yearly premium, it will begin to build cash value over time. In fact, the benefit amount can actually increase over the life of the policy, providing you with increased capital at a very low risk.

As you accrue cash value, these funds can be withdrawn and used for things like paying off debt or putting a down payment on a house.

Insure your loved ones for the long run

Remember, life insurance is not for you – it’s for the ones you leave behind. It’s time to take action and make sure your family will be sufficiently provided for no matter what happens with your current employment status.

Contact us today to learn more about life insurance options at any age or stage of life.

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