Your Work May Not Cover All of Your Life Insurance

Anna Davies

Three Reasons Why It Matters—And What You Can Do About It.

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. But that may not be the case, says Paul Felson, president of Felsen Insurance Services in Denville, NJ.

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

Basic group life insurance policies tend to max out at $50,000 and the coverage ends when your employment ends

In addition, basic group life insurance policies tend to max out at $50,000 and the coverage ends when your employment ends.

The option to convert your group policy to an individual policy may be available, but the premium payments will more than likely go up. And probably by a lot.

You may also have the option to buy a supplemental policy, which you’ll pay for with premium payments that are deducted from your payroll.

These policies are usually purchased in multiples of your salary, says Felsen, and may have the option of covering a spouse or dependents. But, again, if you do leave your job, the insurance is unlikely to follow you.

Here are a few reasons why you should consider purchasing an individual life insurance policy even if you have a group policy through work.

Life Insurance Through Work May Not Offer Enough Coverage

A general rule of thumb is that the amount of life insurance coverage you purchase should be at least five times your current salary. This would offer financial support that can help give loved ones some breathing room to settle debts, stay current with a rent or mortgage, pay bills, and figure out a new income stream.

But since group policies offered through work are generally capped at $50,000, the amount is unlikely to cover much beyond funeral expenses and probate fees, say experts.

Making sure you have additional coverage even if you don’t have dependents or assets, can help ensure that your loved ones are covered if the worst were to happen.

Life Insurance Tends to Be Less Expensive When You’re Younger

While Felsen says that people may not “need” life insurance if they’re single, without dependents, and renting instead of owning, considering purchasing a policy when you’re younger 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. Depending on the type of policy you decide to go with, purchasing one when you’re younger can help ensure your premiums are as low as possible, at least for the term of the policy.

Your Employer May Not Offer the Best Policy for You

It’s important to read the fine print and make sure you know what is and is not covered.

Because life insurance policies through work are group policies, you may not be able to choose the option that works best for you. For example, the policy offered by your employer may only be for a specific term, or may only cover accidental death.

To ensure that you’re covered for every eventuality, an individual life insurance policy may be a smart addition. This is especially true since life insurance policies through work tend to conclude immediately upon leaving the company, and not all businesses offer life insurance.

Purchasing an individual policy allows you flexibility and peace of mind if you leave your job, move to another company, or end up in-between positions for an extended period of time.

Individual policies vary in rates depending on coverage. For example, Fabric Instant, which starts at $6 a month1, covers accidental death. Fabric Premium is a 20-year term life insurance policy that covers accidental death, as well as death by illness.

See what’s covered to find out which one may be best for your needs. By purchasing an individual policy, you know you’re covered no matter what happens in your or your spouse’s career.

And if your needs change—for example, you get married, you buy a house, or you have kids—you can then reassess your needs and your coverage.

Bottom line: While a work policy is a great benefit to have, it may be most beneficial for your peace of mind to have an individual policy as well.

1prices may vary by state

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Anna Davies is a writer specializing in personal finance who’s written for Refinery29, Cosmo, Elle, Glamour, the New York Post, Conde Nast Traveler and others. When she’s not working, she loves going on adventures and traveling with her 2-year-old daughter.

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

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Fabric Instant is an Accidental Death Insurance Policy (Form VL-ADH1 with state variations where applicable) and Fabric Premium is a Term Life Insurance Policy (Form ICC16-VLT and CMP 0501 with state variations where applicable). Policies are issued by Vantis Life Insurance Company. (Vantis Life), Windsor, CT (all states except NY), and by Vantis Life Insurance Company of New York, Brewster, NY (NY only). Coverage may not be available in all states. Issuance of coverage for Fabric Premium 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.

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