Checking the life insurance box during benefits enrollment feels responsible, and it is a good start. Group coverage through an employer is usually inexpensive or even free, and it requires little or no medical underwriting. The catch is that it was designed to be a convenient workplace perk, not a complete plan for your family’s future. Before you assume you are fully covered, it helps to understand where workplace coverage falls short and how an individual policy fills the gap.

Run the Numbers on Your Workplace Benefit

Many employers offer a benefit equal to one or two times your annual salary. Imagine someone earning $60,000 with a benefit of twice their salary, or $120,000. That is a meaningful sum. But consider what it may need to cover over time:

• The remaining mortgage balance or years of rent
• Daily living costs such as food, utilities and transportation
• Child care and, later, college tuition
• Health insurance premiums and medical bills
• Car loans, credit cards and co-signed student loans
• Final expenses and any charitable gifts you want to make

Spread across several years, that benefit can go quickly. For a family with young children, a mortgage and one primary earner, the gap between what the workplace plan pays and what the family would need can be significant.

Four Limits of Relying on Group Coverage Alone

Life Happens, a nonprofit that educates consumers about life insurance, has pointed out several drawbacks of depending only on employer coverage. Here is how they play out in real life.

1. It is tied to your job

If you change employers, get laid off or move to part-time status, your coverage may end or shrink. Some plans let you convert or port coverage when you leave, but that option can be expensive or limited. Losing coverage during a job transition is exactly the kind of timing nobody wants.

2. It may end when you retire

Many group plans reduce or end coverage at retirement or after a certain age. Trying to buy an individual policy later in life typically costs more, and health changes may make it harder to qualify.

3. Your employer makes the decisions

The contract is between your employer and the insurance company, not you. Employers can change benefits, reduce amounts or drop life insurance altogether, especially when budgets get tight.

4. One size has to fit everyone

Group plans are built for a whole workforce. You may not be able to choose the amount, the length of coverage or features that matter to you. Supplemental coverage through work may be available, but it often has limits and may still end when your job does.

Group vs. Individual at a Glance

Using Both Together

This is not an either-or decision. Many families keep their workplace coverage as a no-cost base layer and add an individual policy to cover the larger, long-term need. An individual term policy, for example, can be matched to the years your kids are growing up or your mortgage is outstanding. Permanent coverage may make sense for lifelong needs or estate planning.

Timing matters. Premiums are based largely on age and health at the time you apply, so buying sooner usually costs less. Having your own policy in place also means a job change will not leave your family exposed.

The team at Callicott Insurance Agency can look at your current workplace benefit alongside your family’s needs and help you decide how much additional coverage, if any, makes sense.

This article is for general information only. Life insurance products and features vary by insurer and state; talk with a licensed agent about your situation.