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Is Employer-Provided Insurance Enough?

Is Employer-Provided Insurance Enough?

For decades, Americans have relied on their employers to provide essentials like health care, dental insurance, 401Ks, and even pensions. However, today, most employers are offering fewer benefits, causing more responsibility to shift to employees to ensure they have the necessary coverage to stay financially prepared.

If you’re lucky enough to work for a company that provides multiple types of insurance coverage, that’s great news. However, there are two kinds of insurance that employees should pay close attention to when reviewing their benefits package to ensure appropriate coverage amounts – term life and long-term disability insurance.

Term Life Insurance

If your employer provides term life insurance, you’ll need to ensure it’s enough coverage to fit your financial needs. Keep the following factors in mind when reviewing an employer-provided policy and deciding if you should purchase a policy through another provider:

The Coverage You’re Getting May Not Be Enough

Most employer-provided term life insurance plans only cover a small amount of lost income in the event of an employee’s death — often a year or two of lost salary. If you were to die, your family would likely require significantly more than one year of your salary to remain financially stable, particularly if you have a mortgage, children, or a non-working spouse.

If you’re getting life insurance from your employer, how do you know if it’s enough? Take a close look at the policy and its coverage amount and term length. As a rough rule of thumb, most individuals should maintain a policy in the amount of six to 10 times their annual salary.

If You Leave Your Job, You May Lose Your Coverage

A crucial fact to keep in mind when thinking about holding an employer provided term life insurance policy is that you’ll lose most employer-provided benefits if you leave your job for any reason. Given how often we change jobs in today’s marketplace, this is a serious consideration. Term life insurance is like health insurance when it comes to gaps in coverage — you never know when something will happen, so you don’t want to be without either one.

If your new employer offers coverage similar to the old one, and that was sufficient for your lifestyle, then you may not need your own policy. But if you leave to start your own company, get laid off, or switch to part-time, your employer-provided policy will lapse, and you’ll be without coverage. Some policies allow you to convert from a group policy to an individual one if you leave a job, but your premiums will likely increase.

If Your Health Declines, You May Have Difficulty Getting New Coverage

If, eventually, your reason for leaving a job is health related, it could be more difficult to purchase a new life insurance policy when your employer-provided coverage lapses. Once you do find a new policy, you’ll likely find that the premium has gone up substantially because of your health issue. For this reason, you should consider buying a term life insurance policy, separate from work, while you’re healthy and eligible for lower rates.

Long-Term Disability Insurance

Long-term disability insurance replaces a part of your earnings during a lengthy period of time where you’re unable to work because of illness or injury. Employer provided plans don’t replace your full income if you’re unable to work, so it’s important to look into exactly how much coverage you have and determine if you’re potentially in need of more. Here are factors to keep in mind when reviewing your employer-provided benefits:

Most Employers Don’t Provide It, Or Don’t Provide Enough

While some employers still offer long-term disability insurance at no cost to employees, the number that do has been declining. Many of the companies that still provide it are lowering the amount of coverage per employee, while giving workers the option to buy more. As a result, many Americans either don’t have any long-term disability coverage, or don’t have enough – meaning that most of us are in an extremely vulnerable position should we have an accident or sudden illness that keeps us out work.

How much long-term disability coverage you need depends on your income, age, health, lifestyle, and other criteria similar to term life insurance. But given the consequences of having too little or none at all, it’s worth taking the time to get a personalized quote for individual disability income insurance. You could also explore purchasing supplemental insurance through your employer. You may be surprised at how affordable either option can be.

You Don’t Want To Be Without It If You Need It

Not having long-term disability coverage when you need it can be disastrous to your finances, not to mention the stress it could cause should you be without a policy and end up in need of one. If you’re the breadwinner, your family will not only have to find a way to replace your income should you become suddenly disabled, but also handle the expenses of caring for you.

If you’re rendered disabled while you’re still young, then your lost earnings could be substantial over time. And while the federal government offers disability benefits, they won’t be nearly enough to supplement all of your lost income, and they have strict eligibility requirements.

Revisit Your Benefits

Employer benefits – especially term life insurance and long-term disability policies – can be subject to coverage changes, which is why it’s important to ensure that you and your family have the insurance coverage you need to stay financially secure. Researching the coverage you have, and determining the needs of you and your family, is a crucial step in maintaining that security, both for now and years to come.