Sign In
Get Started
Get the App
Life Insurance 101

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

By Anna Davies Jan 10, 2019

In this article

1. Group Term Life Insurance May Not Offer Enough Coverage

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

3. Waiting Before Getting Your Own Policy Might Hurt You

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

5. Your Life Insurance Policy Should Change as You Change

When life insurance is offered as part of a benefits package through your employer, you may assume you’re 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, says Paul Felson, president of Felsen Insurance Services in Denville, NJ.

For one, life insurance is no longer a guaranteed part of a benefits package for many full-time employees. “One thing we’ve seen is that more small and mid-size companies may not have the means to offer coverage,” says Felsen.

Even if your company does offer it as an employee benefit, here are five reasons you might consider purchasing an individual life insurance policy.

1. Group Term Life Insurance May Not Offer Enough Coverage

A general rule of thumb: Your term life insurance coverage should be at least five times your current salary. So, if you bring home $50,000, this would mean at least $250,000. If you make $100,000, it’d imply a $500,000 policy. (Here's more on how much life insurance coverage you need.)

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 a rent or 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. Based on this 5x rule of thumb, $50,000 doesn’t come close to covering many people’s needs. Typically, this amount tends to cover funeral expenses, probate fees and not a ton more.

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 will more than likely go up when you do so. And probably by a lot.

As a result, it’s important to stay on top of your own coverage situation. Remember that you’re ultimately responsible for your own financial wellbeing. After all, relying on your company to do all the work might not be in your best interest.

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.

That’s because, in general, premiums tend to be less if you’re younger and in good health, says Felsen. 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 gigs, 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. (Here's how much more life insurance could cost if you wait.)

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).

Your group life insurance policy through work may give you the option to buy a supplemental policy. If you do so, your premium payments will be deducted from your payroll.

This can be useful in some cases, as these supplemental policies are usually purchased in multiples of your salary, says Felsen. You might also have the option of covering a spouse or dependents. But, again, if you leave your job, the insurance is unlikely to follow you.

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 allow you flexibility and peace of mind. That's particularly true if you leave your job, move to another company or end up in-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, long-term security and peace of mind.

Fabric exists to help young families master their money. Our articles abide by strict editorial standards.

Fabric Insurance Agency, LLC offers a mobile experience for people on the go who want an easy and fast way to purchase life insurance.

Subscribe to our newsletter

Written by

Anna Davies

Related Posts

Life Insurance 101

Variable Life Insurance: What You Should Know

Variable life insurance exposes people to market conditions, which can mean a higher upside but also a potentially worse downside.

By Chonce Maddox
Life Insurance 101

Life Insurance in California: Fabric’s Got You Covered

Residents of California have something new to get excited about. For the first time, they’re eligible to apply for life insurance through Fabric.

By Fabric
Life Insurance 101

Life Insurance and Wills: If You Have One, Do You Need the Other?

As a company that sells term life insurance, we get one question a lot: What’s the deal with life insurance and wills?

By Angie Chatman

Fabric Picks

Life Insurance 101

What Is Permanent Life Insurance?

Whole life insurance provides coverage throughout your life. That’s different from term life insurance, which only covers you for a specific period of time.

By Sarah Li Cain
Life Insurance 101

Life Insurance Regulations: Who Oversees Life Insurance Companies?

Life insurance is supposed to provide you with peace of mind, but who’s making sure the insurance company can deliver on their promises?

By Jessica Sillers
Modern Family Finances

What You Should Know About Your Emergency Fund During COVID

The pandemic and economic challenges mean some families have exhausted their emergency cash. Here’s how to prepare for (and deal with) the worst.

By Jessica Sillers

About Fabric




Subscribe to our newsletter

© 2021 Fabric Insurance Agency, LLC

Accidental Death Insurance policies (Form VL-ADH1 with state variations where applicable) and Term Life Insurance policies (Form ICC16-VLT, ICC19-VLT2, and CMP 0501 with state variations where applicable) are issued by Vantis Life Insurance Company (Vantis Life), Windsor, CT (all states except NY), and by The Penn Insurance and Annuity Company of New York (NY only). Coverage may not be available in all states. Issuance of coverage for Term Life Insurance is subject to underwriting review and approval. Please see a copy of the policy for the full terms, conditions and exclusions. Policy obligations are the sole responsibility of Vantis Life.

Fabric Insurance Agency, LLC (FIA) is an insurance agency licensed to sell life and accident insurance products. FIA will receive compensation from Vantis Life for such sales. The NAIC Company Code for Vantis Life is 68632. See the Terms of Use for additional information regarding FIA.

Plan like a parent. is a trademark of Fabric Technologies, Inc.