Employee life insurance coverage is a valuable and attractive benefit. But what is supplemental employee life insurance? Many workers are surprised to learn that life insurance from an employer may not be adequate. Every employee has a unique situation—responsibilities could include children, a mortgage, or student debt. That’s why it’s so important to consider having your policy outside of your employee life insurance; one that gives you the ability to customize your coverage based on your needs and allows you to select features and riders that are specific to your future goals.
There’s a lot of uncertainty in today’s job market. Economic shifts, the impacts of COVID-19, and industry disruptions are redefining the framework of employment in many job sectors. Employee supplemental life insurance is a coveted benefit for many people—from gig workers to tenured professionals—but it’s important to know that this coverage comes with terms. One limitation is that it’s tied to your job, which may not last forever. According to the U.S. Bureau of Labor Statistics in 2018, the average length of time people stay with an employer is 4.6 years. For employees between the ages of 25 and 34, it’s only 3.2 years.1 When you leave your job, your employer-provided coverage ends, and your next job may not come with the benefit of life insurance.
The coverage from employee life insurance, welcome as it is, probably falls short of what you need. The policy you get through work is usually a one-size-fits-all policy that’s offered to every eligible employee of the company. This type of life insurance is commonly referred to as “group life.” Employees are either automatically enrolled in a group policy with their company or are given the opportunity to purchase coverage. The amount of group life insurance coverage provided by employers is typically a base amount, like $50,000, or the amount as your yearly salary. Purchasing additional—supplemental—insurance is often an option, and it can come with a low premium if you’re healthy. But even if you purchase supplemental insurance through your employer’s plan, you may not end up with enough coverage, and your coverage will probably not be personalized to your needs.
Life insurance from an employer usually doesn’t come with options to customize your coverage, and it may not allow you to purchase as much protection as you need. A personal policy from New York Life can be customized with riders (some at additional cost) to better prepare for life’s many uncertainties, as well as other features that make your policy personalized to you. If you purchase your own policy, you will still have the benefit of your employee life insurance, which will cover a base amount or match your annual salary. But you will also have your own customized coverage which will continue if you switch jobs. And while your employee life insurance will be a term policy (no cash value growth), if you purchase a whole life policy which builds cash value, you will be able to access that cash value to help with specific needs like a down payment on a home or paying for college.2
Purchasing a term life policy outside of your job will allow you to decide on the amount of coverage you need for a set period of time. This could be a simple way for you to “top up” on what you have at work and gain adequate coverage. With a whole life policy, you can lock in a premium that will never increase. As long as you pay your premiums, the coverage will last a lifetime and the policy’s cash value will grow tax-deferred over time. With New York Life, if certain conditions are met, you have the ability to convert some or all of your term coverage to whole life, making it easy to update your policy when your family grows and your needs change.
2Accessing cash value reduces death benefit and available cash surrender value.