Should You Buy Life Insurance Through Work?

This post may contain affiliate links which may compensate us based on your interaction. Please read the disclosures for more information.

It will likely be cheaper and easier. 

Getting a life insurance policy is one of the kindest things you can do for your loved ones. If you have people (or even beloved pets) in your life who depend on your salary or care you provide, life insurance can ensure they’ll be able to get by if you pass away.

Thankfully, life insurance isn’t hard to come by. The best life insurers offer many policy options, and you’ll have your pick of life insurance types. You might even be able to purchase a policy through your employer as part of a slate of benefits offered, like health insurance and a 401(k) plan. Is it a good idea to sign on for group life insurance, though?

Reasons to buy life insurance through work

If your employer offers life insurance as a benefit, it will be as part of a group life insurance policy. The company purchases the policy on behalf of staff, and you’ll each receive proof of insurance. The very nature of these policies makes them pretty one-size-fits-all, and they are generally either free or very low cost to the employees.

The policy itself will be for a set dollar figure, or it will cover a multiple of your salary, and you just select your beneficiaries (those who will receive the money in the event of your death). Unlike private life insurance, you won’t need to fill out a medical questionnaire or go for a medical exam to qualify. If you have health conditions that might make it costly or difficult to get a private life insurance policy, group life insurance can make it so you can get coverage. And you might even have the option to pay a little extra and tack on a voluntary life insurance policy as well. This would provide even more coverage. Group life insurance through work is inexpensive and convenient. But it has some downsides.

Reasons not to buy life insurance through work

If your employer offers life insurance through one of these policies, it likely makes sense to sign on for it, especially if it comes at no cost to you. But you may also want to explore additional coverage options beyond just this, rather than relying on it to serve all your life insurance needs.

Group life insurance is usually term life insurance, meaning it will only cover you for a certain period of time before expiring. It also doesn’t build a cash value. If you would prefer a whole life insurance policy (much more costly, and builds cash value, so you may be able to borrow against it), you’ll have to seek that out on your own.

Also, the life insurance offered may not amount to much money. Common wisdom is to buy enough life insurance to replace 10 times your salary, and it’s unlikely that your employer will offer this much coverage, especially for free or at a very low cost to you.

If your life insurance is tied to your employer, it will end when you leave that employer. Gone are the days when any of us could expect to spend all our working years with the same company, so even if you take the life insurance through your job, it makes sense to purchase an additional policy on your own to be sure you always have coverage. If you quit your job or are laid off, you’ll have enough to worry about without also immediately lining up more life insurance coverage. And you could lose your job at any time and with no warning.

All in all, it might be a good idea to get on a group life insurance policy through your employer. But to ensure you have enough coverage and that it will last as long as you need it to, you might consider supplementing it with a policy through a private insurer.

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.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

 Read More