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What You Should Know About Employer-Provided Life Insurance

If your employer offers a life insurance benefit, by all means take it. But be aware of what group insurance is, and isn’t. While life insurance is a good benefit, it’s a good idea to learn the facts about the pros and cons of this type of coverage.

Some Life Insurance Facts

Life insurance through work probably has a low benefit. The amount of pay-out depends on the policy your employer provides, but chances are good it’s not high enough to depend on alone. If you’re depending on life insurance to pay off a mortgage and take care of your family, you’re probably going to need an amount at least two times your annual salary, or more.

Employer-sponsored coverage is usually term coverage, not permanent. If you’d prefer coverage that you can hold onto in the long run, you may want permanent coverage. Term insurance will only pay benefits for a specific amount of time.

Your policy probably won’t follow you if you leave your job. Generally, group insurance through work is unlikely to go with you when you leave the company. Your new employer may not offer a life insurance benefit.

Life insurance is a benefit that can be taken away. Even if you stay at the same job, there’s no guarantee your employer will continue to offer the benefit over time. The company may decide to drop it due to the expense. If it was the only policy you have and you have health issues or are older, it could be hard to purchase an individual policy you can afford.

You could think of your group coverage as supplemental to an individual policy. If you’re healthy and don’t have a family or assets to protect, you may not need anything more than your group plan. However, if you have major financial obligations group coverage probably isn’t enough. Keep it, but also purchase an individual policy that pays out a higher amount.

What it comes down to is, it’s good to have a life insurance benefit through work. But there are a lot of variables to consider and, depending on your circumstances, you may be better off having an individual policy as well.

Learn more about the different kinds of life insurance policies and compare quotes on our Life Insurance page.

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