Should You Get Life Insurance Through Your Employer?

It’s open enrollment season once again, which means perusing through the annual buffet of employee benefits. As you sift through the package, you might notice your company offers a group life insurance plan.

You might wonder what “group life insurance” means We’ll explain the highlights here. And we’ll help clarify if it’s a good idea to get this type of insurance through your employer, or if you should buy a policy on your own.

Getting group life insurance through your employer

You may already have group insurance through work. (In this case, the group being covered is the employees.) This might include health insurance benefits, dental coverage, vision care or similar products. In general, a group insurance plan offers guaranteed coverage up to a certain amount at standardized rates.

Enrollment for group life insurance plans typically occurs once a year, usually in the fall, although dates can vary by employer. During this time, you can enroll, change or opt out of group life insurance coverages. You can also enroll in group life insurance after a qualifying life event such as marriage/divorce or having a child..

This type of coverage is popular--data from the U.S. Bureau of Labor Statistics shows that approximately 60 percent of Americans had some type of life insurance through their job in 2024.

There are two types of group life coverage:

• Basic life insurance: Basic life insurance, if offered, is generally provided at no cost. The coverage amount may be fixed, so every employee receives the same benefit. Often, employers format the coverage to match a multiple of your annual salary, typically one to two times what you earn every year. Or it might be a particular amount like $60,000. Many employers cover the premiums for a basic policy, meaning you don’t need to pay anything extra to receive this benefit.

• Supplemental life insurance: Supplemental life insurance is sometimes offered in addition to the basic life policy. You’ll pay out of pocket for this level of protection, but you’ll continue to enjoy group-based rates. An added benefit is that you can purchase anywhere from a few thousand dollars to several times your annual salary—whatever your unique situation calls for.

Though basic group life coverage typically won’t require a health check, the rules may differ for supplemental coverage, particularly for higher amounts. You may be required to fill out additional forms, share medical history details or get a physical exam with supplemental life insurance. And, while your basic coverage is guaranteed under the plan, the insurer might reject your application for supplemental coverage.

Types of policies

Many employers offer term policies to their employees, meaning they’ll have coverage for a specific time period. Permanent life insurance, on the other hand, is indefinite.

Permanent life insurance policies are less commonly offered by employers as part of a group plan. Many people choose to supplement their group plans with a permanent policy—allowing them to take advantage of the benefits of both.

Your advisor can help you understand the different types of life insurance available and help you land on what’s right for you.

Potential advantages of group life insurance

There are some of the advantages of group life coverage:

• It’s convenient. You don’t have to look for coverage yourself. If you’ve been putting off buying a policy of your own, you can easily opt into your employer’s plan for coverage during their open enrollment period. Even if you plan to get your own policy someday, putting some coverage in place right now beats having no protection in place at all.

• Some or all of your premiums may be covered. Premiums can be cheaper than private life insurance and may even be fully paid by your employer.

• You’ll have guaranteed coverage: Basic life insurance through an employer-provided plan is one of the most common ways to get life insurance without a medical exam. Choosing group life insurance without an exam simplifies the enrollment process and ensures coverage if you have a pre-existing health condition.

Potential drawbacks of group life insurance

While there are definite benefits to participating in your employer’s life insurance plan, it may not always be your best option. There are a few reasons for this:

• You might get a better deal on your own. Particularly if you’re young or in good health, your quoted rate for an individual policy may be less than the group rate.

• Your group policy may not suit your needs. If you’re looking to get a whole life or universal life insurance policy, your workplace’s term insurance may not be enough. Employer-sponsored life insurance generally caps the death benefit, as well. So if you need more, you’ll need to look elsewhere. Additionally, an employer plan might not have the flexibility to add specific benefits that riders can add to a personal life insurance plan.

• Coverage generally isn’t portable. What happens to life insurance when you leave a job? When your job ends, your group policy usually does too, unless your employer allows you to convert the policy to an individual rate. This is the case for employer life insurance after termination., If conversion is an option, your rate may change to a higher premium since the policy will no longer include a group rate. What’s more, your age and any new health problems could mean costlier coverage at in the future.

• Your rates may not be locked in. Even if you stay with one employer, your premiums may still go up over time. An individual term plan generally offers a consistent rate for the length of the term. But your group policy might raise your rates over the years, or the company can cancel its contract with the life insurance provider at any point. So, you may be unexpectedly uninsured.

Your financial advisor can help with important insurance questions

If you’re thinking about participating in a group life plan, take the time to review the fine print. Think about whether it’s the right move for you and how it fits into your broader financial plan.

It can also be worth shopping around. Get some quotes for individual life insurance coverage, and talk with your Northwestern Mutual financial advisor to ensure you and your dependents have a solid financial plan and are safely protected with the right life insurance policies in place.

Your advisor will ask questions to get to know you and what is important to you, then help you build a comprehensive plan that includes growth and protection strategies—like life insurance. By looking at all your financial tools together, your advisor can recommend solutions custom-tailored to you that help to meet your goals now and in the future.