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Is employer-provided life insurance enough?

Life insurance
Life insurance provided by your employer, often in the amount of one to two times your annual salary, may not be enough.

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Life insurance is one of the most important types of insurance both for policyholders and to have them beneficiaries. In exchange for a fee to a provider each month (often cheaper if paid annually), policyholders can rest easy knowing that their loved ones will have financial support in the event of their death.

Some policy types will even allow the insured access their account for cash while they are still alive.

While the benefits of life insurance are multiple and substantial, the amount that policyholders must have differ significantly. The question of the “right” amount is often compounded by the fact that many employers in the US already provide policies to their employees, often at no extra cost.

But is employer-provided life insurance enough? Or do you need to supplement your policy with additional coverage? A life insurance expert can answer these questions and help you get started now with a free price quote so you know exactly what to expect.

Is employer-provided life insurance enough?

As is the norm with personal finance considerations, there is no one-size-fits-all answer. However, here are some guidelines to help determine when your employer-provided coverage is enough…and when it might be time to add to it.

When life insurance provided by the employer is sufficient

Life insurance provided by your employer, often in the amount of one to two times your annual salary, may be enough if you fall into one or more of the following categories:

  • If you are single and not married: If you are not married, you may be able to get away with just the insurance you have from your job. If you don’t have a partner who relies on you financially, a baseline of insurance may be enough.
  • If you don’t own a home: If you don’t own a home, or rent from someone else, you won’t have a mortgage to pay off in your absence. Accordingly, an employer-sponsored plan may be sufficient.
  • If you have no children: Many policyholders designate their children as their beneficiaries. But if you don’t have children who depend on you for financial support, you may be able to get away with just an employer plan.

One note: Just because you fall into one of these categories doesn’t mean you shouldn’t get additional coverage anyway. Everyone’s budgets and personal financial goals are different. Learn more now.

When employer-provided life insurance is not enough

There are times when an employer-provided life insurance policy just won’t cut it. These types of plans may not be enough:

  • If you are newly married: Just as a policy from your job might be enough when you’re single, it probably won’t be enough after you’re married. Life milestones affect many factors of your financial health and life insurance is one of them. If you want to keep your partner covered in case of an emergency, you should probably supplement the life insurance policy you have from your employer.
  • If you have just bought a house: Mortgages almost always come in terms of 30 or 15 years. Do the math. Will your employer-provided plan be enough to cover what you owe the bank and will owe the bank for years and decades to come? If not, you will probably want to increase your coverage amount.
  • If your partner no longer works: If your spouse or partner is no longer employed, regardless of the reason, you should think about bumping your life insurance protection. Two salaries – and two insurance policies – are better than one. If you’re reducing or eliminating one of them, you’ll want to make sure you have an appropriate level of protection by increasing the amount of life insurance you have.

The bottom line

The decision to increase your life insurance coverage is a personal one that depends on a variety of factors and considerations.

The above categories are a good place to start. Consider speaking with a life insurance expert now who can help you build a customized and cost-effective policy.

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