Most employers offer life insurance as a benefit if you are a regular employee. This is a group plan and usually comes at no additional cost. Even in the case that it is a paid benefit, the costs are extremely low. Employer-provided life insurance usually offers a payout that is comparable to your yearly salary. So, if you’re currently covered by the life insurance plan provided at your workplace and wondering if it suffices, make sure you go through the following points. This will give you an idea about why you need to get more coverage than what your employer currently provides.

1. Advantages of employer-provided coverage: 

While we are going to see why you need to purchase additional life insurance coverage, it is important to understand the benefits of your employer-provided plan; they are

• Life insurance provided by your employer comes at little to no cost. This helps you save some costs in the expenses you allocate towards insurance in your financial plan.
• If you don’t already have a life insurance policy, getting it through your workplace is the most convenient means.

2.Drawbacks of having only employer-provided life insurance:

If you choose to only maintain the insurance coverage provided by your employer, you will encounter several problems; such as,

• A payout to the amount of your annual salary will not suffice if you were the sole breadwinner of your family. Further, this amount does not account for bonuses, commissions, secondary income and various other factors that have additional value.
• You might be forced to remain at your job to secure your life insurance, even if you want to quit. Leaving your job may not be an option if you can’t afford to get an individual policy or don’t qualify for one. 
• Your employer might try to cut costs by using an insurance company that has a low rating. Their services can be unpredictable and unreliable.  

3.Is your employer-provided life insurance enough? 

You should avail the life insurance plan that your employer provides but you definitely need to get more insurance coverage than that. While getting additional coverage will come at a cost, we have seen that the life insurance plan you get through your workplace will not suffice – especially if you have a family. Further, buying an additional life insurance policy will help you reduce the risks involved in depending on your employer-provided coverage. This process of diversification is more effective when your second policy comes from a different insurance company than the one your company uses. 

4.How much additional insurance coverage do you need? 

You should ensure that a majority of your life insurance coverage comes from your individual plan. Your life insurance payout should be around 8-10 times your salary in order to ensure your family’s well-being in the event of any contingency. Consulting a financial advisor will help you identify the exact quanta of life insurance you need. They will be able to help you estimate a good balance between your employer-provided life insurance coverage and the amount you will need to purchase individually. 

Keeping these points in mind, there are two reasons why it is essential that you purchase your individual life insurance policy as early as possible,

1. Premiums are much lower when you are younger. The older you get, the tougher and more expensive it becomes for you to purchase life insurance. Finding a new job that offers a similar salary and benefits also becomes harder as you get older.
2. The chances of you contracting a serious illness increases with time. A history of serious illness might either disqualify you from purchasing life insurance, or force you to pay extremely high premiums.