Why Group Life Insurance at Work Often Isn't Enough

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  • Many employers offer life insurance as a workplace benefit.
  • This insurance may not provide sufficient protection for several reasons.
  • Buying supplementary coverage could be crucial to provide for loved ones.

Don't end up with regrets due to inadequate life insurance coverage.

Many companies offer term life insurance as one of the workplace benefits they make available, along with other kinds of benefits such as health insurance.

While term life insurance provided by employers may seem like a nice perk, it's typically not sufficient to provide enough protection for loved ones. In fact, many people who are eligible for group life insurance should still buy their own coverage independently of what their company provides.

Here's why.

Group life insurance comes with few choices for policyholders

When group life insurance is offered by employers, workers have few choices. They can either accept the policy from the insurer the employer offers or not. It's not possible to shop around and make sure the insurance is purchased from a company with a solid reputation.

And most often, workers are restricted to buying term life coverage only. While this is the right choice for most people, those who would prefer a whole life policy are usually out of luck.

The maximum coverage amount may not be high enough

Often, there is a cap on the amount of life insurance coverage that is available when the policy is purchased through an employer. The total amount of coverage may be limited to a certain multiple of the workers salary, such as twice the annual amount of earnings.

If there is a maximum coverage limit on a group life insurance policy, it is possible that the total coverage available will not be high enough to provide full protection for loved ones. It's important for consumers to carefully estimate how large their death benefit needs to be to fully provide for the needs of those who would be left behind after an untimely death.

If a group life insurance policy sold through work has a coverage limit that is below the death benefit that is necessary to provide full protection, then buying additional life insurance is definitely essential.

The insurance could be lost due to a job change

In many cases, if life insurance is provided as a workplace benefit, the coverage will be lost when the policyholder leaves the company. This could be a huge problem because if the policyholder has developed pre-existing conditions in the interim, it may not be possible to just go buy insurance from another carrier at that point.

And, even without medical conditions, waiting to buy insurance until a later age can result in premiums being higher than they would have been if a policy was purchased at a younger age. By accepting group coverage as their only life insurance, employees could find themselves without the protection they need later in life or paying much more for it.

If an employer offers life insurance, consumers who are eligible for it should carefully consider whether they will need a separate policy purchased outside of their job. In most cases, for the three reasons listed here, buying a standalone life insurance policy from a trusted insurer will be their best bet in order to ensure that the life insurance coverage provides the needed financial protection and peace of mind.

Our picks for best life insurance companies

Life insurance is essential if you have people depending on you. We’ve combed through the options and developed a best-in-class list for life insurance coverage. This guide will help you find the best life insurance companies and the right type of policy for your needs. Read our free review today.

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