5 Reasons Why Group Term Life Insurance at Work May Not Be Enough

When life insurance is offered as part of a benefits package through your employer, you may assume you’re covered. According to a 2024 survey by LIMRA, about 65% of employed Americans rely on employer-provided life insurance to keep their family covered. Especially if you don’t have a mortgage or kids, group term life insurance may feel like enough, but that may not be the case. Here are five reasons you might consider purchasing an individual life insurance policy as well.

1. Group Term Life Insurance May Not Offer Enough Coverage

A general rule of thumb: Your term life insurance coverage should be about ten times your current salary. So, if you bring home $50,000, this would mean at least $500,000. If you make $100,000, it’d imply a $1 million policy. This rule of thumb is intended to help you offer financial support to loved ones who might survive you. That can include the breathing room to settle debts, stay current with rent or a mortgage, pay bills and figure out a new income stream. Meanwhile, group term life insurance policies at small- and mid-sized companies are often capped at $50,000 because that’s how much employers get as a tax exclusion as of 2024. Based on this 10x rule of thumb, $50,000 doesn’t come close to covering many people’s needs. Making sure you have additional coverage can help ensure that your loved ones will be all right financially if the worst were to happen.

2. You Can’t Take Your Group Term Life Insurance Policy With You

For the most part, when you leave your job, you’ll forfeit the life insurance that came as a benefit through that job. On your way out, you might have an option to convert your group policy to an individual policy. Still, your monthly premium payments may very well go up when you do — possibly by a lot.

3. Waiting Before Getting Your Own Policy Might Hurt You

Considering a term life insurance policy when you’re young can be a smart move. The younger and healthier you are, the lower your premiums will be. Buying as early as makes sense can help ensure your premiums are as low as possible for the term of the policy. Following that logic, let’s say you relied solely on your employer's group term life insurance, and then you left that job. Now you don’t have any coverage. By the time you switch roles, you’ll likely be older than you are today. That means you may well encounter higher life insurance premiums if you were to buy your own personal policy.

4. Your Employer May Not Offer the Best Policy for Your Needs

It’s important to read the fine print and make sure you know what is and isn’t covered. Because life insurance policies through work are group policies, you may not be able to choose the options that work best for you. For example, the policy offered by your employer may only cover you for a specific term. Or, it may only cover accidental death (meaning you’d be covered against death caused by an accident, but not by an illness). While accidental death insurance can be right for some people, it's not for everyone.

Your group life insurance policy through work may give you the option to buy a supplemental policy for increased coverage. If you do so, your premium payments will be deducted from your payroll. To ensure that your coverage is the best fit for your unique needs, you might want to consider getting your own, individual life insurance policy. That way, you'll be at the helm. Ideally, purchasing an individual policy will help allow you flexibility and peace of mind. That's particularly true if you leave your job, move to another company or end up between positions for a while.

5. Your Life Insurance Policy Should Change as You Change

If and when your needs change—for example, you get married, buy a house or have kids—it’s a good idea to reassess your needs and your coverage. This is true whether you’ve got a group term life insurance policy through work, or your own individual plan. That may entail increasing your coverage amounts or getting a personal policy, updating your beneficiary and more. All in all, a work life insurance policy is a great benefit. Nonetheless, considering an individual policy might help you achieve the most benefit for your wallet and may help improve your sense of long-term security.

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