Is It Advisable To Obtain Voluntary Life Insurance Through My Workplace?
Many employers offer life insurance as a workplace perk and subsidize some or all of the benefits. These employer-provided life insurance policies are sometimes referred to as “basic group life.”
| Advantages of Group Life Insurance | Disadvantages of Group Life Insurance |
|---|---|
| Convenience | Coverage is tied to your job |
| Price | Limited choice |
| Acceptance | Low coverage amounts |
| Premiums aren’t fixed |
Coverage amounts are typically capped at low amounts, such as one to two times your annual salary. Since employers usually cover premiums and you won’t be declined for coverage, there’s no reason not to sign up for group life insurance.
Many people opt to buy more insurance, known as supplemental life insurance, through their workplace plans. The amount of coverage available varies among companies, but typically maxes out at around $500,000. The higher coverage amounts mean you may have to fill out a health questionnaire to qualify. The results are used to calculate your rates and eligibility for coverage.
While group life insurance is a “work perk,” it might not be sufficient for your needs. These are the downsides:
- Coverage is tied to your job
- Limited choice
- Low coverage amounts
- Premiums aren’t fixed
If your employer pays for your coverage, the premiums for coverage over $50,000 may be subject to income tax. The first $50,000 worth of coverage is tax-free.
The first thing to do is to take advantage of any free basic group life insurance offered. Next, compare the cost of supplemental life insurance available through your work to what you can find on your own. If you can get a comparable deal on your own, it may be worth buying an individual policy to complement the group life insurance you’re getting through the workplace.
If you’re older or have a medical condition that prevents you from getting competitively priced coverage on the open market, supplemental group life may be a good fit. Just remember the limitations, especially if you don’t expect to stay at the employer for a long time. Plus, you also have the option to apply for no-medical exam life insurance — which doesn’t require a physical — on your own.
