Is Employer-Provided Life Insurance Coverage Sufficient?

Life at all times is unpredictable as we don’t know what is going to happen in the future. With the complicated modern lifestyle, stress level, increasing rate of inflation, it is of extreme importance to have a robust Life Insurance Coverage which will cover us against the unfortunate incidents resulting in a huge financial burden on our families. An all-inclusive life insurance plan is always critical to managing such crises that take care of your family in all probable ways in the absence of the main breadwinner of the family of the insured person. Hence, Life Insurance Coverage is very important in everyone’s life and it is always better to start early irrespective of you being salaried or self-employed.

Keeping the above points in mind and considering the importance of Life Insurance Coverage, employers offer Life Insurance Coverage to its employees so that they can protect themselves and their families against the sudden financial requirement. And this is one of the strategies or HR benefit policy which every employer offers to its employees to attract talented resources and retaining them as well, as human resources are the greatest asset of any organization.

Now the question is, whether the insurance provided by the employer is sufficient or not in case you are a salaried person? Even though insurance plans provided by the employer are usually free, simple to get insured and at times comes with a very little charge, but the question remains the same as whether the coverage is enough to meet the expenses for the entire family. And the answer is dependent on two situations, one when you are a family person with spouse, children, and parents. And second, if you are at your young age and you are single. In the first situation, the answer will be Life Insurance Coverage provided by only the employer will be inadequate keeping in mind the various insurance needs required by all the family members of different age groups. On the contrary, in the second scenario, Life Insurance Coverage provided by the employer will be suitable for you, as you are at your young age and you do not have any dependents or debts.

We will talk more about the first situation as mentioned above and see the factors or the reasons why you as a salaried professional with a family should opt for additional Insurance Coverage.

Let us see the reasons below:

Insufficient insurance coverage

You may be able to buy any additional Insurance Coverage at low rates. however, your policy’s death benefit may not be sufficient. In case of unfortunate death, if your family comes under a huge financial burden and risk, then you perhaps will need Insurance Coverage worth six to eight times of your yearly income. While the normal coverage may be good for some individuals but is not adequate for employees with housewives, a huge loan, bigger families or dependents with special needs.

Loosing of Life Insurance Coverage in case of a job change or job loss

Situations may arise where you decide to quit your current job and want to move on another one for a better opportunity and scope, but you are unable to do so as you are getting a Insurance Coverage here provided by the employer. On the other hand, in a situation where you are dismissed from your job, you also lose the Insurance Coverage completely. In both scenarios, there will be a need for a back-up or additional Life Insurance Coverage to protect yourself and your family. Also, in the latter case, lack of transferability can be an issue if you are not moving to a similar job with the same Insurance Coverage and are too expensive to be eligible for an individual policy. Hence, if you go for an individual Life Insurance Coverage, then all these situations can be easily tackled without any effect on the Life Insurance Coverage.

Not always the inexpensive option

Although you can get a Insurance Coverage for your family from your employer, you also must see whether your employer’s added insurance truly comes with low-cost or not. You may find the rates are quite high. On the contrary, if you are opting for an individual plan, the rates turn out to be quite cheaper.

Cost-cutting by employer

Being a cost-effective company is a very common phenomenon these days for almost all the employers, which essentially means a tactical cost-cut that helps an employer to lower the cost components or taking them out to improve the company’s profitability by reducing expenses. The company might ask its highly paid employees to leave or may cancel the benefits like a Insurance Coverage. Also, there might be a change in the strategic decision resulting in the change of senior management and which again may affect your Insurance Coverage. Employer-based Life Insurance Coverages are dependant on all these variable factors thereby increasing the risk of losing the Insurance Coverage and hence, an individual Life Insurance Coverage plan is much more dependable and steadier.

Bigger risk of Mortality

As you grow old, premiums for life insurance turn out to be more expensive. And if you at your later stage of life, decide to avail the benefit of  insurance coverage from your employer, you will find it quite expensive, as the mortality risk increases. Here again, an individual Life Insurance Coverage plan will be much more effective and powerful to protect you from the unseen financial loss.

So, what should be the solution?

Well, although there is absolutely no reason for not taking the advantage of a free or a low-cost Insurance Coverage from your employer, it perhaps should not be your sole source of Life Insurance Coverage, nor you should depend profoundly on the additional life insurance that your employer offers. The answer to each of the difficulties as explained above is buying a few or maybe all your Insurance Coverage straight through an individual plan. You may need to buy as much as 75%-80% of your Life Insurance Coverage personally and ensure that you and your family are covered always and under all conditions.

During the time of distress and grief, the last thing which you would want is to leave your family with one more disturbance in life, like spouses changing their jobs or kids leaving their schools due to financial stress, hence have a close observation at whether the life insurance coverage which you are getting from your employer is the best mode to stay financially protected.