Open Enrollment: Should You Buy Life Insurance Through Your Employer?

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Some companies allow you to buy life insurance as a workplace benefit. Read on to see if this is a good idea. 

If you’re a salaried employee, now’s the time when your company may be asking you to elect your benefits for 2024. In the coming weeks, you may have to sign up for health insurance, decide if you’ll be funding a flexible spending account, and figure out if you should sign up for employer life insurance.

Many companies offer employees the option to buy life insurance through their workplace plans. And if you don’t yet have life insurance, that could be a tempting option.

But there are pros and cons to buying life insurance through your job. And it’s important to know what those entail. Let’s take a closer look.

The upside of employer life insurance

One major benefit of buying life insurance through your job? It’s easy — or at least it should be.

Most employer life insurance plans guarantee you coverage as long as you buy in. Compare that to applying for coverage on your own, and you’re at the mercy of a life insurance company that may or may not approve you depending on the state of your health, among other factors.

Employer life insurance might also be pretty cost-effective. Employers — especially larger ones — are often able to negotiate competitive rates with insurers so the cost of life insurance is affordable. You might pay more for comparable coverage if you shop around for life insurance on your own.

The downside of employer life insurance

When you buy life insurance through your employer, that coverage may end up being tied to your job. This means that if you were to leave your job, you might either lose your coverage or be forced to convert it to an individual policy that ends up being far more expensive.

To be fair, sometimes employer life insurance is portable, which means you can take it with you from one job to the next. But definitely ask that question before making your choices.

Also, with employer life insurance, you may not get many choices concerning the specifics of your coverage. When you buy life insurance on your own, you can generally choose between a term life policy or whole life insurance, which covers you permanently. If you buy insurance through your company, you may be limited to a specific term life plan that doesn’t last as long as you’d want it to.

For example, if you have very young kids, you may want a 20-year term life policy at a minimum. Your employer, however, might only offer a 10-year policy.

What’s more, you may not get all of the coverage you need. Because it’s so easy to qualify for employer life insurance, coverage limits are usually capped. You may need more life insurance to protect your loved ones than what your employer’s policy provides.

For example, you may want to replace your $80,000 income 10 times over, as that’s what experts tend to recommend at a minimum. But if your employer’s policy maxes out at $100,000 of coverage, you’re clearly going to be short of your goal.

An estimated 52% of Americans have a life insurance policy in place. If you want to join their ranks, you may be considering a policy through your employer. But make sure to get the details of that plan and ask the right questions so you can make an informed choice.

Our picks for best life insurance companies

Life insurance is essential if you have people depending on you. We’ve combed through the options and developed a best-in-class list for life insurance coverage. This guide will help you find the best life insurance companies and the right type of policy for your needs. Read our free review today.

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