If your job comes with life insurance, that’s a definite win. But before you mentally check the “life insurance” box on your adult-ing checklist and move on, it’s worth digging into the details. There’s a big difference between having some coverage and having enough.
A lot of people assume that the life insurance provided by their employer is all they need. Unfortunately, that’s not usually true. Employer life insurance plans can be a solid starting point, but they rarely cover everything your family would need if the unexpected happened.
Think of what your employer provides as a solid foundation. That base is a vital part of any building, but it’s not enough to keep you safe and warm.
Let’s walk through what’s usually included, where the gaps are hiding, and how you can build a stronger plan for yourself and your family on the foundation your employer provides.
Employer Life Insurance Basics
Most workplace life insurance plans are basic term policies, which means they only last while you’re employed. The payout is usually one to two times your salary.
So if you make $60,000 a year, your beneficiary might get $60,000 to $120,000 if something were to happen to you while you’re still employed there. That coverage is often automatic and doesn’t require a health checkup or a bunch of forms, which is a huge plus.
That payout might sound like a lot, until you start thinking in real-life terms. If your family relies on your income and you, like most people, spend most of that money every year, one year’s salary won’t get them very far before they have to make some difficult sacrifices.
What That Payout Really Covers
Imagine your family trying to manage without your income. Here’s just a short list of what they might be facing:
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- Funeral and final expenses (often $10,000 or more)
- Healthcare costs associated with whatever led to your death
- Monthly bills like rent or a mortgage, groceries, and utilities
- Childcare, school tuition, or college savings
- Credit card debt or car payments
Now multiply that list by 12 months. Then 24. Then 36.
Suddenly, a $70,000 payout doesn’t go very far, especially if your family depends on you financially for the long haul.
Financial experts often suggest having life insurance worth seven to 10 times your income. That gives your loved ones breathing room instead of financial panic.
So if your employer covers just one or two times your salary, there’s a pretty big gap left to fill.
No More Job, No More Insurance
Here’s where the fine print really matters. Most employer life insurance policies don’t follow you when you leave. If you quit, retire, or get laid off, the coverage usually ends right then and there. If you get hit by a bus the day after you quit, your family gets nothing.
Some companies let you “convert” your group policy into an individual one, but it’s often more expensive and comes with strings attached. If your health has changed or you’re older, those new premiums might be far higher than they were.
Think of it like leasing a car. You’re covered while the lease lasts, but once you return the keys, you’re on your own. You have to figure out how to get to the grocery store or pick up your kids from school, without the vehicle you’ve relied on. The car you built your transportation plans around is gone, which means everything changes.
If you’ve built your entire safety plan around a life insurance benefit that disappears when you change jobs, that’s a risky move.
Things Employer Life Insurance Does Well
Employer-sponsored plans do have their perks:
No Medical Exams
You’re covered, regardless of your current health, even with pre-existing conditions. While something like a diagnosis of diabetes or a history of cancer might make you uninsurable if you tried to get insurance on your own, employer plans can’t decline you based on a health diagnosis.
Free or Low-Cost Coverage
Costs are subsidized or fully paid by your employer. If your boss told you they were going to pay for all or even most of your rent, you’d be thrilled. And if they tell you they are going to pay for all or most of a life insurance premium, you should be just as happy.
Quick and Easy Setup
No confusing paperwork or sales pitches. Because they aren’t digging into your health history and other details, there’s much less red tape than with plans you get outside your employer.
Your employer’s life insurance is a great foundation. But just like you wouldn’t set up a tent on a slab of concrete and call it home, your insurance plan probably needs more support.
The goal is to combine employer coverage with personal policies that better align with your life stage, family structure, and long-term plans.
What Supplemental Coverage Does and Doesn’t Do
Some employers let you buy additional life insurance through the company plan. This is called supplemental life insurance. You can usually bump your coverage up to 3x, 5x, or even 10x your salary, often without medical screening. That can get you up to a number that will cover your family’s needs while they adjust to life without you, and without your paycheck.
It’s a smart short-term solution, especially if you want extra coverage quickly and easily. But just like the basic plan, supplemental insurance is usually tied to your job. So if you leave, you’ll likely lose that, too.
If you’re thinking about the long run—say, protecting your family until your kids are grown or your mortgage is paid off—then it’s probably time to consider an individual policy.
Life Insurance Beyond the Workplace
Once you’ve squeezed all the juice out of your employer coverage, it’s time to look at personal life insurance. The most common (and budget-friendly) type is term life insurance. It gives you coverage for a set number of years—10, 20, 30—and tends to have much lower premiums than permanent policies do.
If you’re in good health, shopping for your own policy now can lock in a great rate and give your family real protection, no matter where your career takes you.
Key Questions to Ask Right Now
To get clarity on what you have and what you may need, start by asking your HR department or benefits broker:
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- How much coverage does my employer provide automatically?
- Can I increase that coverage, and if so, how much does it cost?
- What happens to my policy if I leave the company or retire?
- How much would my family actually need to stay financially secure without my income?
It also makes sense to look at your personal situation.
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- Do you have a partner who makes a salary close to or more than yours?
- Do you spend all your income or save some of it?
- What costs would increase in the event of your death? (Think about things like childcare, help around the house, or even moving expenses to be closer to family support.)
Having answers to these questions gives you the information you need to protect your loved ones and plan wisely.
Life Insurance Isn’t a Check-the-Box Benefit.
It’s a strategy.
It’s easy to gloss over life insurance during open enrollment. It doesn’t come with a shiny app, it doesn’t impact your daily routine, and it’s tied to a scenario you hope never happens. It doesn’t get as much attention as the health insurance plan or paycheck protection insurance.
But when it matters, it really matters.
Your employer’s coverage is a solid starting point but not the whole story. If you want real peace of mind, you need a life insurance plan that reflects your values, your family’s needs, and your financial goals.
Coverage gaps are sneaky. At The Benefit Doctor, we help you find them and fix them with a plan that protects your people and your peace of mind, for the long-haul.