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But I Have Life Insurance Through Work

As an insurance agent, "But I have life insurance through work" is a typical response I hear when I ask, "Do you have life insurance"? It’s a great thing that many employers do indeed offer life insurance as part of employee benefits. However, many employees do not know the limitations of employer-sponsored life insurance.



If you do not pay anything on the life insurance at work, your employer owns the policy, not you. If you leave that employer, the insurance plan does not come with you since you do not own it. You think, oh, I love my job. I would never leave. If you are 25 years old, are you planning on staying at the same employer until you die? The average person has at least 4 different careers in their lifetime.

One of the benefits of getting life insurance when you are young is that one is generally healthy, not taking medication. So, let’s say that at age 35, you decide to leave your current employer. It’s a great new job, but no life insurance. So, you choose to buy a separate life insurance policy. Unfortunately, you were diagnosed with a chronic illness 2 years ago, and even though you can get life insurance, you now have to pay three times more because of the chronic illness you did not have at age 25. 

Employer-sponsored plans often only cover accidental death, like a car accident. Again, this is good, considering that there are approximately 45 000 deaths by car accidents annually in the United States. However, if an illness causes your death, your employee life insurance plan will not pay out anything to your beneficiary. 

Employee life insurance plans typically only pay out 2 times your annual salary. If you make $40,000 a year. Your beneficiary will receive $80,000. That is a significant amount of money. However, if you have a spouse, a mortgage, and children, will that be enough to support them for the next 20 years? Perhaps not. 

If we take the average salary of $50,000 a year times 20 years, the average 30-year-old needs 1 million dollars worth of life insurance to support their family for 20 years. 

So, while it is worth taking the life insurance that your employer offers, it will not support your family for decades after you pass. 

Please invest the time to learn more about the different life insurance options available outside of your employer-sponsored life insurance. Life insurance can take care of your family long after you are gone.