Life Insurance

A benefit that pays a lump sum to designated beneficiaries upon the insured employee's death — most employers provide basic coverage at no cost, with options to purchase more.

Employer-provided life insurance is typically a group term life policy that pays a death benefit to your named beneficiaries if you die while covered. Most employers offer a base amount of free coverage — commonly 1× or 2× your annual salary — with the option to purchase additional supplemental coverage during open enrollment. The benefit is straightforward: if you die while employed, your beneficiaries receive the stated payout. Term life policies have no cash value or investment component.

Employer life insurance is valuable but has important limitations. Coverage is typically tied to employment — if you leave, you lose it, though some plans allow conversion to an individual policy at higher rates. The coverage amount may be insufficient for employees with significant financial obligations: a mortgage, young children, or dependents who rely on your income. Financial advisors commonly recommend 10–12× your annual income in life insurance coverage; employer plans at 1–2× salary rarely approach that level. Most employees supplement employer coverage with an individually purchased term life policy.

Group life insurance through an employer offers a meaningful advantage over individual policies: no medical underwriting for the base coverage amount, and often for additional supplemental coverage up to a guaranteed issue limit. This is especially valuable for employees with health conditions that would make individually underwritten life insurance expensive or unavailable. Electing supplemental coverage at new-hire enrollment or during open enrollment at guaranteed issue limits — without medical review — can secure coverage at group rates that would not otherwise be accessible.

Employer-provided life insurance creates a dangerous sense of coverage completeness that discourages employees from examining their actual needs. A 2× salary policy sounds substantial — $200,000 for a $100,000 earner — but the math against real financial obligations is sobering: a $350,000 mortgage, childcare and education costs for two children over 18 years, and income replacement for a surviving spouse quickly exceeds $1 million in total coverage need. The right approach is not to dismiss employer coverage — it is to treat it as a base and supplement with a private term policy sized to your actual financial picture, not a salary multiple that felt adequate when the benefit was designed.