Starting Your Career

Proceed With Caution in Employer-Provided Life Insurance

More companies are upping their benefits to remain competitive. While life insurance is one of the most popular benefits, remember that you should have additional coverage independently from what an employer might provide.

In a competitive employment field, more and more companies are offering employer-provided life insurance as a perk. In fact, it’s one of the most popular benefits provided by employers, and a large percentage of employees say it’s a must-have. Sign me up, you say. It’s a great bonus, but is it enough? With more information, you may be better prepared to adjust your life insurance policies accordingly.

Employer-provided life insurance may not be enough to cover your loved ones after you’re gone, and additional insurance coverage could be needed. The problem is that most employees aren’t aware of the discrepancy between what their work offers and what they actually need.

There is, of course, an obvious question here to ponder: How much life insurance do we need? A good rule of thumb is to have a policy that covers between seven and 10 times your annual income.1 However, employer-provided life insurance typically covers only between one and three times your salary.2 It also represents 42 percent of all life insurance policies.3 Policyholders may include younger workers who tend to think less about having any coverage at all, but it’s still a concerning statistic.

The benefits of life insurance are meant to provide for your loved ones in your absence, without vastly adjusting their lifestyle. Make sure you’re not among those who leave their families with unmet needs.

Group Think: Understanding Employer-Provided Life Insurance

Benefits provided by your company can be an excellent perk, but they also shouldn’t be relied upon entirely.

With the U.S. economy (and the employment market) on the upswing, companies are rethinking the perks they offer to attract and retain talent. In fact, 51% of employers say using benefits to keep employees satisfied will become even more important in the next three to five years.1 Life insurance is becoming a key benefit, with 57% of employees ranking it as a must-have.2 And while most employees will participate in group plans, the policy usually isn’t enough coverage for their needs.

Employer-Provided Life Insurance

Employer-provided life insurance represented 44% of all life insurance policies in 2015 and provided $8.4 trillion of protection.3

55% of private industry companies and 80% of state/local government offer life insurance to their employees.4

98% of workers who are eligible participate

Your participation may vary

Not surprisingly, as people age, they become morelikely to seek additional life insurance coverage.

Percentage of population relying solely on employer-sponsored policy:5

  • Millennials: 46%
  • Generation X: 41%
  • Boomers: 27%

Over one-third of the working adult population believes the coverage received from an employer is sufficient:5

  • Ages 25-29: 37%
  • Ages 30-34: 36%
  • Ages 35-49: 36%
  • Ages 50-64: 42%
  • Ages 65-70: 38%

But 75 million American families count on life insurance to protect their financial and retirement security.6

Your coverage may vary, as well

The life insurance that comes as part of your benefits package is typically one to two times your annual salary (and likely won’t be transferable to an individual policy if you leave your company).7

Insurance experts recommend having a policy that covers from seven to 10 times your income.8

The median amount of group coverage owned by Americans is $100,000, or the recommended amount for someone earning $10,000 a year.9

Everyone’s life insurance needs will be different, just like everyone’s jobs are. Make sure you’ve got all the information and numbers you need to make the best decision on coverage for you and your family.

Sources

1. Retention is Top Benefits Objective, Employers Say, Society for Human Resource Management, 2017
2. Work redefined: A New Age of Benefits, MetLife, 2017
3. Life Insurance Fact Book, American Council of Life Insurers, 2016
4. Employee Benefits in the United States, Bureau of Labor Statistics, 2016
5. 2016 Amica Life Financial Peace of Mind Study, Amica Life, 2016
6. 2017 Life Insurers Across America, American Council of Life Insurers, 2017
7. Why Relying on Life Insurance From Your Employer Can Be a Bad Idea, Monster.
8. Financial Security and Peace of Mind Are More Important Than Ever, American Council of Life Insurers, 2015.
9. 2016 Life Insurance Ownership Study, LIMRA, 2016.

Everyone’s life insurance needs (like everyone’s jobs) are different. If you’re curious about why you may need your own life insurance in addition to what your employer provides, watch the video, “Differences Between Employer Coverage and Coverage You Can Buy on Your Own.”

1 Financial Security and Peace of Mind Are More Important Than Ever, American Council of Life Insurers, 2015.

2 Why Relying on Life Insurance From Your Employer Can Be a Bad Idea, Monster, 2017.

3 Life Insurance Barometer Report, LIMRA, 2019.

ALIC52119 (exp. 10/20)

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