Plan for Tomorrow | Do I need life insurance if I’m covered through work?
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Do I need life insurance if I’m covered through work?

May 30, 2023, 5:16:47 PM | Reading Time: 6 minutes

Many employers offer life insurance as part of their employee benefits package, which can provide an easy and affordable way for you to get coverage. Here’s a closer look at employer-provided life insurance, its benefits, its potential limitations, and why you may need additional coverage through your own individual life insurance policy to ensure you’re loved ones are adequately protected.

Benefits of life insurance through work

There are many benefits that come with life insurance through your job, including:


Coverage provided from an employer is typically free or available at a low cost.

Ease of application

Getting coverage can be quiet easy. Oftentimes, paperwork is simple and a Human Resources person is available to help explain intricacies of a policy.

Coverage acceptance

Typically, there is no medical exam necessary for workplace coverage. This may mean that people with serious medical conditions can qualify. Having life insurance through work is a good way to get coverage for a minimal cost. Is this benefit amount enough to cover your family’s need?

Limitations of workplace life insurance

Life insurance through your employer is a great starting point. There are a few limitations to keep in mind regarding employer-provided life insurance.

Not enough coverage

Depending on your current needs and situation, the life insurance coverage through your employer may be sufficient, but if you have people who depend on you financially, it may fall short. According to the 2021 U.S. Bureau of Labor Statistics, the average life insurance benefit amount for flat-dollar plans is $25,000. If you’re married, have children, own a home, or are planning for any of these things, will that amount of coverage be enough? How much life insurance should you have? It depends on your own financial and family situation. Many experts recommend purchasing several times your annual income in coverage. It’s also important to remember that the amount of life insurance you need may change throughout your life as your family grows, your lifestyle changes, or you add new financial goals.

Options are limited

Known as group life insurance, coverage through your employer is commonly a type of term policy. As an employee, you generally have no control over the coverage or policy details and cannot customize coverage to fit your needs. Some employer benefit plans may allow you to purchase coverage for your spouse and children. Is the benefit amount enough for your individual needs?

Linked to your employment status

An important limitation to keep in mind is that coverage is tied to your employment. The employer is the policyholder and can change or drop the policy at any time, and if you leave your job for any reason, you may lose your coverage. If your coverage is portable, the coverage may cost more once you leave your employer.

Why consider an individual life insurance policy?

While many families wish to financially protect their loved ones, several Americans are either without life insurance or are underinsured. Forty-four percent of households say it would take less than six months to feel financial hardship following the loss of a primary wage earner. Employer life insurance can offer a good foundation, but you may want to consider getting your own policy to acquire a sufficient amount of protection. Among the people surveyed, 78% of the individuals with life insurance both through their workplace and through individual coverage felt the most financially secure. Here are some considerations of individual life insurance:

Choose the type and amount of coverage

Your paycheck is a valuable contribution to your family, and without it, your loved ones may struggle to pay for final expenses, keep up with the rent or mortgage, and cover child care or other day-to-day expenses. Life insurance can offer financial safety net in the event you’re no longer here. By purchasing your own policy, you can select a coverage amount that can provide a death benefit that aligns with your needs. Depending on the type of life insurance you choose, you can select how long you would like to have coverage, whether it’s for a specified period of time like term insurance or permanent life insurance.

Options to fit your budget

If you’re holding off on buying life insurance because of the cost, you’re not alone. Many people feel that they can’t afford to buy additional life insurance, but a majority of consumers overestimate the expense of getting a life insurance policy, according to a study by LIMRA and Life Happens. In actuality, many individual policies are often affordable and fit into most budgets. For example, certain term life insurance policies can cost as little as $170 per year.

Why individual an individual life insurance policy might not be the right fit

While there are many benefits of an individual life insurance policy, it may not be the best option for some. Before seeking coverage, consider the following:

  • Premium costs – certain policies, like Whole Life Insurance, can be expensive.
  • Surrender charges —for some policies, a surrender charge may be charged if you wish to cancel a policy 
  • Health history and age—various health conditions or a history of tobacco use can make your premium cost increase. Your age could also mean lead to a more expensive monthly premium.

What are the different types of individual life insurance?

As you look to help create financial security and offer peace of mind for your loved ones, purchasing individual life insurance can help build upon your workplace coverage and bridge any gaps that may exist. There are a variety of choices that can fit your needs and budget. Here are two options:

Term life insurance

For affordable coverage that offers death benefit protection for a specific time, term life insurance can be a good option. This type of coverage generally provides a death benefit in the form of a lump sum that is paid out to your beneficiary if you die during the term period. To receive this benefit, you must pay a premium on the policy. Lack of premium payment could lead to your policy lapsing.

Your beneficiary can use this benefit to help with funeral costs, the mortgage, debt payments, or other living expenses. Additionally, term policies may offer the option to convert your policy to permanent coverage before the term ends. After the term period expires, the policy generally will either terminate or automatically renew annually at a higher premium cost.

Permanent life insurance

If you’re interested in having coverage for the rest of your life, then permanent life insurance may be a suitable fit for your needs. The premium is used to maintain the policy’s death benefit and may also allow the policy to build cash value.

To take a closer look at term and permanent life insurance, watch this short video that explores these two types of policies.

Talk to a financial professional

If you need help deciding how much coverage you need and which type of life insurance is a good fit for your family, the guidance of a financial professional can be very valuable. They can discuss your individual financial needs and where life insurance can provide the additional coverage your family needs to help protect their financial future.

The term financial professional is not intended to imply engagement in an advisory business in which compensation is not related to sales. Financial professionals that are insurance licensed will be paid a commission on the sale of an insurance product.

Life insurance policies have terms under which the policy may be continued in effect or discontinued. Permanent life insurance requires monthly deductions to pay the policy’s charges and expenses, some of which will increase as the insured gets older. These deductions may reduce the cash value of the policy. Current cost of insurance rates and current interest rates are not guaranteed. Therefore, the planned periodic premium may not be sufficient to carry the contract to maturity. For costs and complete details, refer to the policy or call or write North American Company for Life and Health Insurance One Sammons Plaza, Sioux Falls, SD 57193 Telephone 877-872-0757.