It is great if you are working in a company that provides you with benefits such as insurance. However, there are some limitations to employer-provided insurance that you should know. Here are 3 of them:
1. It’s a benefit, not a guarantee.
Fact is, companies are not obligated to offer life or health insurance. Just because your employer is offering it now, doesn’t mean they will in the future. A lot of companies are in cost-cutting mode, and benefits like life insurance can disappear without notice.
2. If you have it, it’s most likely not enough.
Most employer-provided life insurance coverage is one to three times your salary. So if you make $50,000, having up to $150,000 of life insurance sounds like a lot, right? But if you try to put that money to work in today’s interest rate environment, you’ll soon find out it doesn’t go very far. And if your family needs to spend $50,000 each year, what are they going to do after the third year?
3. It doesn’t protect your insurability.
Think about what would happen if your health changes while you only have employer-provided health insurance, but then they drop the coverage and you’re no longer able to get covered? Or what if you lose your job, or change jobs and the new employer doesn’t offer life or health insurance as a benefit?
Typically, employer-offered group insurance is not portable, meaning you can’t take that coverage with you when you leave a job. Buying an individual policy prevents this because it’s something you own.
The bottom line, is that it’s good to have employer-provided life insurance, but don’t ignore the greater need you may have for individual life insurance coverage too.