Does my company's group life insurance provide enough protection and are group life insurance rates affordable?


Group life insurance is typically provided by the company you work for as part of the company's fringe benefit package. It is usually either free of charge or exceptionally cheap, and it sounds like a great deal.

However, you cannot rely on your company's group life insurance alone.

Why isn't group life insurance enough?

There are two reasons why you should look for additional life insurance coverage elsewhere:

  1. Group life insurance alone does not provide adequate coverage for the average American household.

    According to a simple traditional formula used to estimate insurance needs, a family is likely to need coverage of between eight and ten times the amount of the breadwinner's annual earnings. In comparison, your company's group life insurance will typically provide only one to two times your annual income. This is the reason why you should look for an individual life insurance policy elsewhere, which will give your family a more adequate coverage.

    This is not to say that you should drop your employer's group life policy altogether, simply combine it with an individual policy that best matches your needs.

  2. Remember that your company's group life insurance might be something you can easily lose if you get laid off, decide to leave the job or retire.

    It is usually not portable, although some companies allow you to buy extra coverage. However, the costs of an individual life policy might still be lower.

Group Life Insurance Termination Options

  • Conversion privilege: employees have the right to convert their group life insurance into an individual policy after signing a contract. Employees, whose group life coverage has been terminated, have to apply for a converted policy within 31 days of the date of termination. To do that, you don't need to provide any evidence of insurability.
  • Coverage may be prolonged for a certain short period of time at the employer's discretion. In that case, however, the employee has to pay the premiums. Coverage is terminated and the employee can convert to permanent life insurance at the end of that period.
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