Life Insurance Gaps

In 2014, 57% of private businesses offered their employees Life insurance plans, and a whopping 97% of employees enrolled.

That’s not surprising, since LIMRA’s 2013 Insurance Barometer Study found that 85% of consumers think most people need Life insurance. Even so, 1/3 of all consumers still don’t believe they have enough Life insurance.

Are they right?

How Employer-Provided Life Insurance Works

Employer-provided or group life insurance can be a powerful and affordable benefit. Generally, a company will pay for Life insurance for their employees (and families) for a small cost taken from their paychecks, all without a medical exam. This makes employer-provided coverage an affordable option, even for those in less-than-perfect health.

To keep costs down though, and deliver benefits to everyone, company-provided Life insurance may have limitations and:

  • Restrict your coverage and additional options to small amounts (typically up to 2X your salary).
  • Not travel with you if you leave your job.
  • End suddenly if your company discontinues the policy.

While these plans do benefit employees and help families in tough times, far too many households rely on them as their sole source of Life insurance. That means employees are typically not carrying enough coverage (especially in single-income households) and leaving their loved ones exposed between jobs.

It also means 30% of consumers are right…they are underinsured. That’s especially true as most financial experts recommend having Life insurance for at least 5X-7X your annual salary.

Personal Life Insurance vs. Employer-Provided Coverage

Personal Life insurance plans are another coverage option that you can purchase directly from an insurance provider, outside of your employer.

These policies don’t have the same drawbacks and restrictions as employer-provided plans. They may also supplement and fill gaps in your employer’s coverage by:

  1. Allowing you to choose the insurance provider
    Personal Life policies are a direct relationship between you and an insurer you choose. That means you choose the company, and you buy the policy.
  2. Providing consistent coverage
    Unlike employer-provided Life insurance policies, personal Life plans aren’t tethered to your job. Continue to pay the premiums and your policy continues to cover you and your family (subject to policy provisions).
  3. Delivering expanded limits and coverage options
    Personal Life policies offer a wider variety of options and limits to choose from, and aren’t as restricted as an employer-provided policy might be. Take some time and evaluate what limits you might need to cover the mortgage, your kids’ educations, any special needs they may have, and any other expenses, the way you want.
  4. Locking in rates and saving money in the long term
    Personal plans may be more expensive than the cheap and sometimes free benefits provided by your employer. However, with the restrictions and coverage gaps, you may find employer-provided plans more costly in the long run if they’re your only Life insurance. This is especially true if a medical condition forces you to leave your job, or you become ill between jobs. With personal Life insurance though, if you obtain coverage when you’re young and healthy, you have a better chance of locking in a good rate, and remaining covered when you actually need it.
  5. Do You Have Enough?
    If your employer provides a Life insurance policy benefit, this is a great place to begin. After all, when it comes to Life insurance, some coverage is always better than no coverage. For some, like a single person without dependents, or those in multi-income households, this affordable limited coverage may be enough.

However, if you have children, dependents, or rely on a single income, limited, non-transferable group life insurance may not provide the coverage you want. Consider a personal Life insurance policy to help fill the gaps in your coverage, and protect your family when they need it most.