If you work for a company that offers life insurance as a benefit, that’s great news. It’s usually free (or very cheap), and it’s a wonderful “floor” for your financial plan. But we often get asked: “My work gives me a basic policy… am I all set?”
The short answer? Probably not.
While employer-sponsored life insurance is a nice perk, relying on it as your only protection is a bit like relying on a company car—it’s great while you’re there, but you don’t own the keys. Here are the two biggest pitfalls we see most often.
1. The “Insurability” Trap
The biggest risk with work-provided life insurance is a lack of portability. In plain English: if you leave your job, your insurance almost always stays behind.
This leads us to a concept we talk about a lot: Insuring your insurability. Think about it this way: Right now, you might be healthy and easy to insure. But what happens if, five years from now, you develop a health condition? If you are relying solely on your employer’s plan, you are effectively “tethered” to that job. If you decide to leave for a better opportunity, or if the company downsizes, you have to go out into the open market and apply for a new policy.
If your health has changed, that new policy could be incredibly expensive—or the insurance company might decline you altogether. By owning your own individual term life policy now, you lock in your “insurability” while you’re healthy. It belongs to you, not your boss. It doesn’t matter if you change careers or start your own business; that coverage follows you, regardless of your future health.
2. Is it Actually Sufficient?
Most employer plans offer a “flat” amount (like $50,000) or a small multiple of your salary (like 1x or 2x your annual pay). On the surface, that sounds like a lot of money.
But let’s do some quick math. If you make $75,000 and have a spouse, two kids, and a mortgage, will $150,000 really sustain them?
- It might cover the funeral and a year or two of mortgage payments.
- But what about college tuition?
- What about the 15+ years of lost income your family was counting on?
Most financial experts suggest having 10x to 15x your annual income in coverage. Relying solely on a 1x salary benefit from work often leaves a massive “coverage gap” that your family would have to bridge alone.
Why Own Your Own Policy?
When you buy your own policy, you get to control the two most important variables:
- The Amount: You choose a number based on your actual needs, not a company HR formula.
- The Security: You can lock in a 20 or 30-year rate today, ensuring that no matter what happens to your health or your employment status down the road, your family is protected.
Start the Conversation
Think of your work insurance as a “bonus,” not the “foundation.” For many healthy adults, an individual term policy can cost less than a couple of pizzas a month.
Don’t wait until you’re transitioning jobs to realize you’ve lost your safety net. Give us a call to see what your “gap” looks like. We’re here to help you make sure your family is in good hands, no matter what happens at the office.