Your employer's life insurance plan may not be sufficient.

During open enrollment, employees have the option to select their workplace benefits, including life insurance, for the upcoming year.

Typically, group life insurance policies cover multiple individuals under a single policy, and are often free up to a certain limit. The approval process for group life is typically easier, with little to no medical exam or underwriting required.

Workplace coverage is the only life insurance option for a quarter of all American policyholders, as per the Life Insurance Research and Marketing Association.

Employer-sponsored plans have lower coverage limits, are not portable, and offer limited customization options compared to individually purchased policies.

You can have both an individual policy and a workplace policy, and take advantage of the distinct advantages of each.

You're stuck with a term policy

Employer-sponsored life insurance is typically term life insurance, which provides coverage for a set period, usually between 10 to 30 years. If you require a policy that offers lifelong coverage and also builds cash value that can be used while you're still alive, you will need to opt for whole life insurance or another permanent life policy.

One of our top picks for affordable whole life insurance is Amica, which offers low rates, a bundling discount worth up to 30%, and an accelerated death benefit that's automatically included.

Mutual of Omaha is highly ranked for customer service by J.D. Power and offers whole life, standard universal life, and two indexed universal life options.

Not enough coverage

While a workplace-sponsored policy is preferable to no coverage, it may not be sufficient to meet your family's needs.

Experts typically suggest a life insurance policy that covers at least 10 times your yearly income, while group policies typically pay out only one to two times your salary.

Supplemental coverage can be more expensive

You may purchase additional coverage, called supplemental insurance, if your workplace-sponsored policy is insufficient.

For older workers or individuals in poor health, supplemental life premiums may be lower than an individual policy on the open market. However, if you're young and relatively healthy, you could end up paying a lot more.

While you can purchase a standalone term or whole life policy with fixed premiums, the rates for supplemental life insurance may increase with age.

Not much room for customization

Employers can fund group life insurance policies at a low cost because the payouts and options are limited. However, your employer's policy won't offer riders that customize coverage.

• Access to funds in case of terminal illness: Accelerated death benefit (some policies offer this feature at no extra cost).
• Access to funds for home health care, assisted living, or nursing home care is available through long-term care insurance. However, standalone policies are becoming less common, and a rider may be a more affordable option.
• This enables you to convert a term life policy into a permanent policy without any extra cost.
• If you become disabled and can no longer afford to pay premiums, your policy will remain active due to a waiver of premiums.
• A level-term policy for dependent children allows them to purchase their own permanent life policy in adulthood.

Our top pick for customization is the robust rider options with Guardian life insurance, which include endorsements such as an accelerated death benefit, long-term care, term conversion, and guaranteed renewability.

It can't build cash value or earn dividends

Term life policies, which are typically employer-sponsored, lack a cash value component that can be used to pay premiums, withdrawn, or borrowed against.

Since 1872, Northwestern Mutual, the largest life insurance provider in the U.S, has been paying annual dividends to eligible policyholders, which do not contribute to workplace plans' cash value or premium coverage.

You can't take it with you

Group life insurance is typically linked to your job, meaning coverage ceases when you lose employment, regardless of the reason. This applies whether you are laid off, fired, quit, retire, or the company goes bankrupt. While you may be able to convert your group life policy to an individual policy upon leaving, you will need to pay the entire premium out of pocket and the rate may be significantly higher than standalone coverage.

An individual life insurance policy will remain active regardless of job changes or retirement.

Pros and cons of group life insurance

Group life vs individual life insurance

Notably, these policy types vary in terms of payout amount and duration of activity.

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