3 reasons not to rely solely on group life insurance

By Maryalene LaPonsie on April 11th, 2013

The workplace can be a convenient place to purchase life insurance, but employer-sponsored benefits aren't always enough to meet the needs of many families.

Here are three reasons you shouldn't rely on group policies as your only source of life insurance.

1. Coverage levels may be capped or restricted

Workplace policies may be part of a benefits package or offered as a voluntary benefit employees can purchase. Coverage included in a benefits package is typically limited to one to two times an individual's salary and may be far less than what is needed to pay expenses in the event of a death.

Voluntary coverage available for purchase by workers may provide additional coverage. However, even these plans may not offer the level of coverage needed by families to pay for final expenses, eliminate debt and replace lost income.

2. You may lose coverage if you lose your employment

Workers relying solely on employer-sponsored life insurance may find themselves without coverage should they leave or lose their job. In many cases, life insurance provided as part of a benefits package is not portable which means an employee cannot take their policy with them should their employment end.

Some plans may be converted to an individual policy at the end of employment. While this may allow coverage to continue, a conversion typically takes plans from a term life policy to whole life. The result can be a significant jump in life insurance rates.

3. Life insurance quotes may be lower for individual plans

Finally, while employer-sponsored plans may offer affordable life insurance, don't assume they are necessarily cheaper than individual plans.

Life insurance rates for group policies may be calculated on five year bands which means premiums may increase after only a few years. On the other hand, rates for individual term life policies may be locked in for as many as 20 years.

Group life insurance can be a good deal, particularly if your employer provides free coverage as part of a benefits package. But before limiting your coverage to only what your employer offers, make sure the policy can meet the level of financial protection your family needs.

Then, rather than automatically purchasing additional coverage through voluntary benefits offered in the workplace, compare life insurance quotes from individual policies to ensure you are getting the best possible rates.

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