Group Life Insurance at Work: Is It Enough?

If your job offers life insurance, that is a real benefit, take it. But here is the lesson most people learn too late: employer (group) life insurance is usually borrowed coverage, not owned coverage.

The concept: borrowed vs owned

• Group life (through work) belongs to the arrangement between you and your employer. It is often free or cheap, but typically small (commonly about one year of salary) and tied to your job.
• Individual life (your own policy) belongs to you. You own it, it goes where you go, and you choose the amount.

Two problems with relying only on work coverage

1. It is usually too small. One year of salary rarely covers a mortgage, years of income, and the kids' future. If your real need is 10–15x income (see how much you need), a one-year-salary policy leaves a big gap.
2. It disappears when the job does. Change jobs, get laid off, or retire, and the coverage often ends. You could then be older or in worse health, when a new policy costs more or is harder to get.

A simple example

A worker has $60,000 in group coverage through their employer, about one year of pay. Their family's real need is closer to $750,000. They switch jobs at 45 and lose the $60,000. Now they are shopping for coverage five years older. Had they bought their own term policy at 40, the rate would have been locked in and portable.

The smart move

Use work coverage as a bonus layer, then add your own individual policy sized to your family's real need. The personal policy is the foundation; the group policy is a little extra on top.

The takeaway

Group life is a great perk, but treat it as supplemental. Own a policy that cannot be taken away when your job changes.

Not sure how big the gap is? Check what you may qualify for or grab the free Hawaii family checklist.