Why Life Insurance from Work Falls Short

Many people think they’re covered and protected, simply because they have life insurance through their employer. While employer-provided life insurance is a great benefit, it often falls short of providing the full financial protection your family may need. As we dive deeper into Life Insurance Awareness Month, it’s important to understand why relying solely on work-provided life insurance might not be enough.

What Is Work-Provided Life Insurance?

Employer-provided life insurance, also known as group life insurance, is a type of coverage offered to employees as part of their benefits package. Typically, it’s either free or low-cost, and coverage is automatic—meaning there’s no need for a medical exam. For many employees, this is the only life insurance they have. In fact, according to the 2024 BEAT Study: Benefits and Employee Attitude Tracker, almost 6 in 10 workers (58%) with children under 18 count on their workplace life insurance coverage to protect their loved ones.

But here’s the catch: while workplace life insurance is a great starting point, it’s rarely enough. Let’s explore why relying only on work-provided life insurance can leave families vulnerable.

1. Limited Coverage Amount

One of the biggest drawbacks of employer-provided life insurance is that it often provides only a small amount of coverage—typically just 1 to 2 times your annual salary. While this may sound like a decent amount, it’s rarely enough to cover all of your family’s financial needs. Consider the costs your family might face in your absence:

• Mortgage payments
• Day-to-day living expenses
• Children’s education
• Outstanding debts like car loans or credit cards

Financial experts recommend having life insurance coverage that equals at least 10 times your annual salary to ensure your family can maintain their current standard of living. Unfortunately, relying solely on work-provided life insurance could leave a significant gap.

2. You Can Lose Coverage When You Leave Your Job

Employer-provided life insurance is tied to your job. That means if you change jobs, are laid off, or retire, your coverage usually ends. This can be especially risky if you leave your job at a time when it becomes more expensive or difficult to get private coverage, such as after a health issue.

Unlike individual policies, which stay with you no matter where you work, employer-provided policies typically don’t follow you. If you’re between jobs, you and your family could be left without any life insurance at all.

3. Limited Flexibility and Customization

With work-provided life insurance, you typically don’t get to choose the specifics of your policy. The amount of coverage, policy length, and other key factors are determined by your employer. This lack of flexibility may not meet your family’s unique financial needs.

An individual policy allows you to customize your coverage to fit your situation, ensuring that you have enough coverage for things like a mortgage, children’s future education, and final expenses.

4. Group Policies May Not Provide Enough for Long-Term Needs

While employer-provided life insurance may provide some immediate coverage, it’s often not enough for long-term financial security. Your family may need years—or even decades—of financial support, and a payout from a small group policy may only last a few months or cover a fraction of necessary expenses.

With an individual policy, you can plan for both immediate and long-term financial needs, ensuring that your loved ones are fully protected.

5. Limited or No Coverage for Spouses and Children

Work-provided life insurance typically covers the employee but may not provide enough coverage—or any coverage at all—for spouses and children. If your family relies on dual incomes or has other financial dependents, it’s important to ensure they’re also protected.

What You Can Do

While work-provided life insurance is a great benefit, it’s essential to consider it as just one piece of your overall financial plan. Here’s how you can make sure your family is fully protected:

1. Assess Your Coverage Needs: Calculate your family’s financial needs, including income replacement, debt coverage, and future expenses like college tuition or retirement.
2. Supplement with Individual Coverage: Consider purchasing an individual life insurance policy to complement your employer-provided coverage. This ensures that no matter what happens with your job, you’ll have reliable, long-term coverage.
3. Explore Your Options: Connect with a financial professional to get quotes for life insurance coverage that fits your budget and provides the right level of protection for your family.

Final Thoughts

Relying solely on work-provided life insurance can leave gaps in your family’s financial safety net. While almost 6 in 10 workers with children rely on workplace life insurance to protect their families, this coverage is often not enough. Take the time this Life Insurance Awareness Month to assess your needs and consider adding an individual life insurance policy for full protection. Your family’s future depends on it.