Is Workplace Life Insurance Enough?

An employer-sponsored life insurance policy could pay for funeral expenses in the event of an employee’s premature death. However, many families are often surprised to learn of the substantial limitations of a basic group life insurance policy. While coverage is often guaranteed and low-cost, it might not fully ease financial stress after a sudden loss in income.

Here are three questions to ask as you consider whether your workplace life insurance policy is enough to care for your family.

1.    What would happen to my family if my next paycheck was my last? 

If your household relies on your income to pay housing, debts, and other bills, losing it could be devastating. But full-time or primary income earners aren’t the only ones who should consider the financial impact of their passing. Part-time workers should also examine workplace insurance policies. While such employees may not bring home most of the income, the loss could also create financial instability.

Record your household income from the past two years and add up your savings account balances to help answer this question.

2.    How much is the death benefit?

The amount the insurance policy pays out after your death is typically no more than two times your annual salary. Some payouts are much lower. Depending on your financial situation, this may be enough to cover immediate needs but not enough to care for your family long term. For example, the amount might be enough for funeral expenses but fall short of paying off debts or funding your children’s college education.

Review your policy details to confirm the death benefit.

3.    What are the policy limitations?

Free workplace life insurance plans come with various limitations. For example, assuming that coverage will stay with you when you change employers could be a mistake. Since these policies are typically offered as an employee benefit, they do not move with you when you switch jobs. It’s also crucial that you recognize that no-cost coverage is often only available through a specific carrier.

Confirm the portability of the policy by speaking with your human resources department.

If your workplace life insurance policy is free, sign up. But don’t stop there. When you understand your specific financial needs and the policy’s limitations, you can more easily recognize gaps in coverage. Consider supplementing your policy by speaking with LifeHelp® Insurance, a SAFE Federal Credit Union partner. An agent can help you figure out how much insurance you need and take the hassle out of finding a budget-friendly policy. Call 1-800-824-1166 today!