If your workplace offers life insurance at a low cost (or no cost) to you, you might assume it provides sufficient coverage for your family and not bother to give the subject a second thought.
According to the 2021 Insurance Barometer study, 57% of U.S. workers rely on their workplace for life insurance. But you owe it to yourself, and to your family, to make a careful assessment. You might find that the coverage offered by your employer, welcome as it is, won’t cover your family’s future needs.
Here’s how to figure out whether your employer offers adequate coverage for you:
First, find out how much coverage is offered.
Your workplace’s group life insurance might be included in your benefits package, and you might be automatically enrolled, which makes it very convenient. However, it’s worthwhile to do a careful review of the coverage.
The amount your employer offers might start at $25,000 and range up to your annual salary. And it probably will not take care of your life insurance needs.
Second, assess your family’s long-term needs.
Once you get married — or if you have dependents — you probably will want to increase your coverage. So, that $25,000 policy might not seem like much once you sit down to do the math and figure out your needs five, 10 or 20 years down the line. You’ll probably want to make sure there’s enough coverage to pay off a mortgage, send your kids to college or help your spouse comfortably retire. (It often is recommended that insurance coverage be five to 10 times your annual salary.)
Even if you’re single, the group policy through your workplace might not be enough after you consider the potential total of your final expenses. Furthermore, if you have a co-signer for a mortgage, car loan or student loans, remember that the burden probably will rest with your co-signer should something happen to you.
What happens if you change jobs?
Long gone are the days when people expected to stay at the same job for 30 years. A study from IBM’s Institute for Business Value found that one in five employees voluntarily changed employers in 2020.
If you job hop, you’ll lose your workplace insurance when you leave the company. And while you might be able to convert the group life insurance policy from your old employer into an individual policy, the cost of that coverage could go up significantly.
Look into options to supplement your coverage. If you find your employer’s group life to be insufficient, you might want to add supplemental coverage.
Concerned that you can’t afford it? According to LIMRA, more than half of Americans estimate that life insurance will cost three times as much as it actually does. You’ll need to balance your family’s needs with the cost of insurance. But if you look into your options for a supplemental policy, you might find that life insurance is more affordable than you think.
Claire Damgaard is an agent with New York Life Insurance Company in Dubuque.