Many people assume they already have life insurance because their employer provides it.
And technically, that’s true.
But in many cases, the coverage is far less than what a family would actually need.
A common workplace benefit provides life insurance equal to one or two times your salary. For someone earning $100,000, that might mean a $100,000–$200,000 benefit.
That may sound like a lot, but in financial planning terms, it often isn’t.
If you have a spouse, children, a mortgage, or other long-term financial responsibilities, the purpose of life insurance is to replace income and give your family time to adjust. For many households, that means coverage closer to five to ten years of income, sometimes more, depending on circumstances.
Employer plans also come with a few important limitations.
First, they are tied to your job. If you leave your employer, the coverage may disappear or become expensive to continue. Second, employer policies are often one-size-fits-all, meaning they don’t adjust to your specific family situation.
Another issue is that many people never revisit their coverage. Someone may sign up during their first open enrollment and assume they’re set, even as their financial life becomes more complex.
Life insurance isn’t the only area where workplace coverage can fall short. Disability insurance through employers is also often limited, sometimes replacing only a portion of income and occasionally being taxable if premiums are employer-paid.
The goal isn’t necessarily to replace employer coverage. It’s often a good starting point. Instead, the key question is whether it fits into a broader plan.
A simple review can help answer a few important questions:
- How much income would your family need if something happened to you?
- How long would that support need to last?
- Is your coverage portable if you change jobs?
For many households, the biggest risk isn’t having no insurance at all. It’s assuming the coverage they already have is enough.
A quick review today can prevent a difficult surprise later.