Many people have at least some life insurance coverage as part of their employee benefits package. This coverage works in the same way as individual policies. Your employer pays a premium to keep the policy active. In return, the insurance company promises to give your loved ones a tax-free lump sum cash payment (the “death benefit”) if you die.
Is this a good perk? Of course! First off, it is usually free. Most employers will pay the premiums for you, although some plans require employee payments in the form of payroll deductions. Second off, it is easy to get. Employer paid life insurance coverage is often “guaranteed issue”, meaning you don’t have to go through any underwriting or health tests in order to get the coverage. This is particularly beneficial to anyone who either is in poor health or has had a recent serious medical diagnosis. But there are some catches.
Your employer paid life insurance is not personalized.
The amount of coverage you get is typically tied to your salary, as opposed to being based on your specific insurance needs. For example, someone who is single and 24 could get the same coverage as someone who is 40, married with kids and sitting on a big mortgage!
Life insurance needs are not one-size-fits-all.
Finding the right coverage level for you involves a deep understanding of your financial situation, your family structure and your lifestyle. And even two families that might look the same on paper, might require very different coverage levels and policy lengths.
How do you know if your employer paid life insurance is enough coverage?
If you’re single with no dependents, a coverage level calculated as one to two times your salary is a big chunk of change. In fact, it is typically more than we recommend. But if you have a partner, kids or debts, it usually isn’t enough.
Not convinced? Think about it this way: A death benefit of one to two times your salary will give your family just a couple of years to adjust to the loss of your income. What about the house you bought when you thought two people would be contributing to the mortgage payments? And what about all the other lifestyle perks your family has become accustomed to – the vacations, after-school sports, restaurant meals, and outings?
Take advantage of your employer’s life insurance, if it’s available
But don’t just assume your life insurance needs have been fully met. Your work life insurance policy is certainly a good start, but it likely needs to be supplemented with additional coverage.
How much life insurance do you need?
Before buying life insurance, consider how your family depends on you financially, and how they would adjust if you passed away. Better yet, complete a free online life insurance checkup with PolicyMe to figure out how much coverage you actually need.
What if your employer paid life insurance is not enough?
It is very common for individuals to supplement their work coverage with an individual term life insurance policy. Individual life insurance policies allow you to customize the death benefit amount and term length to fit your needs.
You can quickly compare life insurance quotes across multiple insurance companies here.
PolicyMe is the easiest way for Canadians to get advice, compare quotes and buy life insurance online. Take a free, 5 minute, life insurance checkup today and get an unbiased life insurance recommendation with prices from the insurers you know and trust. All with absolutely no cost or obligation.