Why Workplace Life Insurance Is Not Enough

Written By Mary Beth Eastman
Last updated December 8, 2020

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February 21, 2018

Simple. Thrifty. Living.

When your workplace offers good benefits, you are able to relax a bit. You have health insurance, sick days and, sometimes, life insurance. These policies usually cost you little to nothing, so you should certainly enroll in them, but you should not count on this coverage to meet all your life insurance needs. You need to take out a policy that is separate from your job in order to fully protect your family.

Your workplace life insurance will be a term policy, so once your employment ends, the coverage will too, and you won’t receive any monetary value from it. While workplace coverage doesn’t depend on your physical condition, outside life insurance policies will. Your health can change quickly, so you should not wait to get an outside policy. Once you have health issues, companies will either charge you a higher premium or reject you altogether. Get a separate policy while you are reasonably young and healthy.

Workplace life insurance is a nice benefit, but you should consider it a supplement to your “real” coverage. Companies typically offer coverage that pays out one to three times your annual salary. Experts recommend that your insurance covers at least 10 times your salary. After all, that money is meant to help your family maintain their lifestyle and pay off possible debts. A year or two of salary isn’t nearly enough.

Insurance experts have long debated the advantages of whole life insurance versus term insurance. Term policies pay out only when you die. Whole life policies have a monetary value that you can cash out after a certain number of years. You can also withdraw some of the cash when you need it and pay the policy back if you wish. Having a term policy through work and a whole life policy individually makes sense for some people.

If you have a workplace life insurance option, you should certainly take it. Do not rely on it as your primary policy, however. You will need more coverage, and the longer you wait to get it, the more difficult and expensive that process becomes. Consult with your insurance specialist and find a policy that fits your family’s needs.

About the Author

Mary Beth Eastman

Mary Beth Eastman serves as the content manager for Simple. Thrifty. Living, where she is dedicated to helping readers use money and credit wisely. Mary Beth believes that access to the right financial information paired with a growth mindset are essential tools for getting out of debt and building wealth. Mary Beth has a degree in Journalism from Bowling Green State University and has focused her 20-year journalism career on putting readers front and center, carefully considering their concerns and presenting information that will help them in their everyday lives. She has won numerous statewide journalism awards. Her writing on personal finance as been featured on numerous websites in addition to Simple. Thrifty. Living, including Huffington Post and Lexington Law blog. Mary Beth resides in Pittsburgh, Pa., with her family and two rescue dogs.

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