Many people do not think twice about the amount of life insurance they have. They often believe what they receive from their employer is sufficient. Unfortunately, this isn’t always the case and everyone should take a closer look at what they’re getting.
Life insurance is a common benefit of employers. In smaller companies, it’s a set amount. At larger employers, it’s a multiple of an individual’s salary. Typically this is around 3 times your current salary.
Taking a Closer Look at Life Insurance
The major benefit is that employer-provided life insurance costs you either absolutely nothing or only a few dollars a month. It’s considered a fringe benefit. Some younger employees might not even know they get it for free. It’s one less expense you have and every little bit helps.
You’re also automatically covered. Often with life insurance, there’s a medical exam and some people with certain conditions are excluded. However, with an employer plan you don’t need an exam.
Additionally, there’s no hassle. Not only is there no medical exam, but there are also no long phone calls or excessive paperwork. You just fill out a form, designate a beneficiary and you’re good to go. It’s very straightforward and simple.
The largest drawback by far is that the money won’t be enough if the unthinkable happens. Most employer benefits offer 3 times salary. Will that be enough to help your spouse? What about taking care of your dependents? Do you have outstanding debts that your loved ones will need to cover?
Experts often recommend that professionals have enough life insurance for 10-15 times their annual income. The vast majority of employers don’t offer that much.
In some cases, you could buy supplemental insurance from your employer’s provider. However, this is often more expensive than just buying on your own. Your options will be more limited and there will be less flexibility.
Lastly, having life insurance tied to your employer leaves a vulnerability. Your employer is in charge and could stop it at any time. In today’s marketplace, fewer companies are offering life insurance.
It’s also linked to the status of your employment. If you retire, are laid off, or switch jobs you won’t have it anymore.
Consider contacting an insurance advisor or agent that can look at your needs and suggest a coverage amount. Get quotes and compare them.
It’s great that many employers provide life insurance benefits. However, they’re often insufficient. It’s vital for workers to understand their coverage and ensure they have sufficient coverage.
Article originally published on Medium