Group Life Insurance Pros & Cons

January 1, 2019
Melissa Schreur
group life insurance

Group life insurance is employer paid life insurance. Employers offer coverage of 1-3 times your annual salary in your benefits package.

While employer paid life plans sound great, don’t be fooled thinking you don’t need supplemental life insurance. Work life insurance should only be part of your family’s protection plan.

This is usually when most people ask “Why do you need life insurance outside of work?”

I get it. Insurance is not a fun topic and it seems like companies always suggest you buy more.

Let’s review the cons and pros of this employer provided life coverage.

group life insurance

Pros of Employer Life Insurance

How does group term life insurance work? This is life insurance coverage that is offered at a group rate.

The insurance company offers a master plan to the employer.

The main advantage to employees is that if they choose to purchase more than the complimentary amount it is less expensive than buying it on their own. Additionally, if they have a medical condition it may be the best insurance plan.

While having a death benefit through your job sounds like a great perk it is not a good long term option.

Cons of Group Life Insurance

The key difference between basic and supplemental life insurance is that you own and control coverage purchased outside of work.

Have you ever thought about what happens to employer life insurance after termination? It’s rarely a good idea to start over with your life insurance.

Purchasing supplemental coverage ensures that your family’s protection is unaffected should you get fired or better yet choose to take another opportunity.

It is not common for employees to stay with one company more than four years. Who knows, you may just become self employed and start your business.

Purchasing supplemental life insurance gives you the peace of mind to remain flexible about your career options.

Does group life insurance have cash value?

Employers have been known to offer term and permanent plans. Whole and universal life insurance accumulate cash value.

Be cautious about cash value insurance. Often times, people misunderstand how they truly work and mismanage them. If you are considering this type of plan, it should be purchased outside of work!

Most importantly, cash value life insurance offers should be reviewed by a fee only financial planner. They can help you assess whether or not they are within your best interest.

Do I need voluntary life insurance?

The first step in answering this question is to find out how much coverage you need to have.

Then you can review the cost and benefit amounts of your work life plan and alternatives. I suggest using a life insurance needs calculator. It has a place to put in existing coverage.

If you determine that you have a need for more than the complimentary coverage offered at your job than you should purchase supplemental insurance.

Just remember if you leave your job you can have a gap in employment or your new employer may not offer coverage. This will leave a hole in your family’s protection if you die.

It’s much better to purchase a little more coverage and consider your group plan extra. You will find that the cost for your own coverage is not that big of difference when you scale it up a bit.

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Melissa Schreur

Melissa Schreur has 16+ years helping consumers choose the best insurance protection. As a military spouse, she is dedicated to delivering world-class service to her customers. Insure The Heroes Life Insurance Agency is owned and operated by Melissa. She helps military families(past & present), parents and business owners secure affordable term life insurance coverage.