Group Insurance Is Inadequate

Many non-government workers have access to life insurance through work. It’s a valuable benefit that employers often offer at no cost to employees. Plus, coverage is guaranteed so you don’t have to submit to a medical exam. 

If you get life insurance for free through work, there’s no reason not to take advantage of it. But it still may not be enough, particularly if you have a spouse, kids, or other family members that rely on you for financial support.

Here’s why you may want to consider buying an individual life insurance policy too:

It’s probably not enough coverage - Group life insurance is broad and there’s no opportunity to customize your policy. Employers typically offer coverage amounts that are a multiple of your salary. The median worker with access to group life insurance receives $200,000 in coverage. That’s a reasonable amount, but anyone with a family to support, debt to pay off, or big future expenses will likely need a larger death or disability benefit.

You can’t add riders to your policy - You also can’t add riders to a policy you get through work. Riders are additional terms and conditions that enhance your coverage for specific situations. There are riders that allow you to accelerate the death benefit in the event of illness, get an additional benefit for the death of a spouse or child, or add more coverage for accidental death or dismemberment.

You can’t take your Group Insurance policy with you - Most group life insurance policies aren’t portable when you leave your job. While you may have the chance to convert it to an individual policy, you’ll have to pay the premiums your employer previously covered. Since a group life policy is guaranteed coverage – there’s no evaluation of your health, age, or overall risk to determine your premium – it will likely be more expensive than an individual policy if you’re low risk (e.g. you have no major health conditions).

You may want a permanent policy - Most group life insurance policies are term, meaning they last for a set number of years and then expire. Financial experts often recommend term life insurance for most people because it’s affordable and acts as a safety net while you build up your savings, but it’s not the only option.

If you want to build cash value and/or leave money behind for your spouse, kids, or grandkids, a whole life policy could be a better fit.