What to Do if Your Employer-Provided Life Insurance Isn't Enough

iQuanti: Many employers offer low-cost life insurance as part of employee benefits packages. However, these may not always offer employees enough life insurance, especially those with families. According to LIMRA's 2021 Barometer Study, 22% of life insurance owners think they need more coverage. 

Fortunately, employees can seek out additional life insurance policies outside of their work through private insurers. This article will dive into several life insurance policies you can look for outside work and explain why you should consider life insurance with cash value so you can get coverage that meets your needs.

How does employer-sponsored life insurance work?

Employer-sponsored life insurance is also called group-term life insurance because it offers low-cost term life insurance to employees. The employer pays most or all these premiums. These can be a great starting point, but employers don't usually offer more than $50,000 in death benefits. The IRS may consider amounts over this taxable income for the employee, so the employer may charge you for extra coverage. Additionally, you can't take the policy with you if you leave your job.

Life insurance policies to consider if your coverage isn't enough

If your employer-sponsored policy isn't enough, and you want a policy you can take with you regardless of where you work, consider the following types of policies that can provide a much higher death benefit:

Term life insurance

Term life insurance lasts a fixed number of years, usually from 10 to 30 years. If you pass away during the policy term, your beneficiaries can receive a significant death benefit to replace your income and pay off debts.

Whole life insurance

Whole life insurance is a form of permanent life insurance, meaning coverage lasts for a lifetime, although premiums are higher than term life insurance. Whole life insurance is also a form of life insurance with cash value. Part of each premium goes into this component, which grows tax-deferred at a fixed interest rate.

When your cash value grows large enough, you can borrow against it at a low rate with no credit check, withdraw from it, or surrender the policy and get the full cash value minus surrender charges.

Universal life insurance

Universal life insurance is a permanent policy that allows you to adjust your death benefit. You can increase it, subject to a new medical exam and increased premiums. You can also reduce it to lower your premiums. You can use your cash value to pay premiums once you have built up enough.

Final expense insurance

Final expense insurance is a small whole life insurance policy designed to cover end-of-life expenses, like medical care and funeral costs. Premiums are much lower than a standard whole life policy, and you don't need to take a medical exam. Just keep in mind that the death benefit is smaller as well. These policies also come with cash value growth components. 

Get the coverage you need

Workplace life insurance coverage can be great early in life when you have no dependents and want to keep costs low. However, many employees find that the $50,000 death benefit soon becomes insufficient, especially if they plan to change jobs. Seeking an individual policy can provide them far more coverage and let them take it anywhere. 

Term life insurance can be best if you want to keep costs low, as long as you're fine with the possibility of the policy expiring before you pass away. On the other hand, permanent life insurance policies like whole life, universal life, and final expense insurance offer peace of mind with guaranteed coverage, and it lets you build wealth with cash value. When determining what policy to get, make sure you weigh your coverage needs against your budget. From there, shop for multiple quotes to find a policy that offers the best rates on the coverage you need.