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Employer-Provided Coverage May Not Be Enough–What if you Change Jobs?

Employer-provided life insurance can be an appealing part of an employee benefits package. An employer-sponsored life insurance policy may have extremely low monthly premiums or no monthly premiums, and in many cases, individuals will not need to answer questions or submit to exams to obtain coverage. Although this may sound easy, convenient and affordable, in many cases, relying solely on employer-provided life insurance can be a risky proposition.

Pros and Cons of Employer-Sponsored Coverage

Employer-provided life insurance rarely requires a medical exam unless the policy exceeds a certain amount of coverage. Employees with health conditions or who are close to retirement can enjoy the security of low- or no-cost life insurance coverage that they may not otherwise qualify for outside of a group policy. Much like guaranteed-issue life insurance policies, all employees will generally qualify for group coverage. Unfortunately, the benefits may stop there.

Employer-provided life insurance policies are often restricted in the amount of coverage they provide. Most will offer between one and three times an employee’s base salary, which is rarely enough coverage to provide for the beneficiaries’ short-and long-term needs. When possible, a policy should be large enough to provide between five and seven times an individual’s annual salary, but this is a simple rule of thumb that can vary widely according to an individual, his or her family and their needs. Some employers may offer their employees the option to purchase additional life insurance at the same low group rate, but that may not be an ideal option, either.

Employer-Provided Coverage Not Portable

Even when an individual is able to purchase a sufficient amount of life insurance through his or her employer, there could still be drawbacks to employer-sponsored coverage. According to the Wall Street Journal, Americans hold more than 10 different jobs by the time they reach 42. As with other employer benefits, life insurance is not portable. With every job change, employees may change or even lose their life insurance coverage altogether, leaving them without coverage. Depending on their age or health status, obtaining new coverage could be difficult, expensive or even impossible at that point.

Consider Options

Employer-sponsored life insurance coverage is common. One study revealed that 25 percent of Americans depend on it. However, group life insurance plans may be best thought of as supplemental coverage rather than primary coverage. The protection they offer is simply too limited and non-transferrable, which means that employees who switch jobs or are laid off may be left without a safety net at a time when they are most vulnerable.


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Liran Hirschkorn

Liran Hirschkorn is the founder of His mission is to help individuals across the country in finding the best rates on life insurance as well as helping individuals with high risk life insurance.

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