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Is Employer Provided Life Insurance Enough?

Having your employer offer group life insurance is indeed an added benefit to your employment position. An employer that offers life insurance coverage can give you the peace of mind in knowing that your family members are covered for financial risks in the case that you should pass unexpectedly. 

But what are the details surrounding employer provided life insurance? Is the coverage enough to provide for your family after you’re gone? Or is it better for you to consider personal life insurance instead?

What Is Employer Provided Life Insurance?

Employer provided life insurance coverage is a benefit that is paid out by your employer to you. Very often, employer provided life insurance is a group plan offered to employees during their employment term with the said company. According to Brent McKay, a Sun Life financial advisor in Simcoe, Ontario, employer provided life insurance as a benefit “can vary from $25,000 - $75,000. In some cases, it might even be more than that. Or your employer may provide a one-time payout that matches your annual salary.”

Benefits Of Employer Provided Life Insurance

The upside to employer provided life insurance is that the costs of buying into this coverage is very low, sometimes even free as your employer subsidizes most of the costs. Also, it is easy to apply for as your employer already has the pertinent information about you and in most cases you are guaranteed to be covered with no medical exam required. 

Another important benefit of employer provided life insurance is that you can take your coverage and transfer the amount to your personal life insurance policy. 

An added perk to employer provided life insurance is that you can add a secondary, or contingent beneficiary to your policy. For example, if both spouses die at the same time, the insurance benefit would go to the secondary beneficiary and not the estate.

By bypassing the estate, the beneficiaries could save a lot of money by avoiding certain fees, i.e. probate fees in Ontario.

Drawbacks Of Employer Provided Insurance

When contrasting employer provided life insurance with personal life insurance, a few important details come up. First, your employer provided life insurance coverage is limited with respect to a few factors: 

  1. The benefit ends when you reach a maximum coverage age: whether you retire early or at 65, the coverage ends when your employment term is finished. 

  2. When you leave the company: the benefits of employer provided insurance come to an end when you find a job with a different company or if you have been let go from your employment position. 

It is good practice to consider buying into a personal life insurance policy as the trends in employment have changed, and very few people remain with the same company over their employment span. This means that the coverage that you count on for life insurance can very quickly disappear as you are laid off or change jobs. 

If you would like to find out more about our life insurance coverage options, please contact us today so that we can help you in meeting your insurance needs.