The lives of over 62% of Americans are insured by employer-provided policies. Typically employers provide term coverage, meaning it provides protection for a specific period of time, has no cash value and only pays benefits if the insured dies during the term. Sometimes the employee pays a small amount for this coverage (often in the form of an automatic payroll deduction for the premium), but in many cases the employer picks up the entire amount as part of a larger benefits package. Here’s what you need to know about this kind of life insurance and whether it’s sufficient for your needs.
Should you accept it?
Absolutely! If your employer offers it, take it. Doing so has a number of advantages:
- Employer-provide group life is affordable. Your employer purchases it through an insurance provider on a wholesale basis, so the cost per worker is much lower than similar coverage would be if you bought it separately.
- It’s easy, convenient and guaranteed. You don’t have to do much more than sign the policy and designate your beneficiaries. At most, depending on the plan design and the type and amount of life insurance coverage you select, you may not even have to answer any health questions or take a medical examination. That’s because group policies are underwritten using an experience approach. Instead of basing rates on your individual health and lifestyle, the insurance company bases them on the risk of the entire group. 
- It’s pressure-free. Your employer deals with the insurance provider so you don’t have to. You will probably have access to a company representative who can answer your questions and help you understand your choices, but nobody is going to try to sell you anything.
- Many employer-provided plans automatically increase coverage when you get a salary bump or will allow you to increase coverage when your family status change (e.g., when you marry, have a baby or buy a home).
- Premiums for up to $50,000 of employer-provided life insurance coverage are an income tax-free benefit.
What’s the downside?
Although there really aren’t any downsides to life insurance coverage that’s provided free or cheap, there are some things you need to be aware of:
- In order to be affordable, employer-sponsored group life insurance policies are pretty much one-size-fits-all.
- Your policy may not be portable meaning you lose the benefit if you quit, are laid off or are terminated.
- Your policy may not be convertible meaning you can’t upgrade to a cash-value policy when the term expires, or if you can, the price to do so may be cost-prohibitive.
- Employer-sponsored group life typically pays benefits equivalent to one, two or at most three times an employee’s salary. Unless you’re a single person with few responsibilities (i.e., no mortgage or other hefty debts, and no dependents who rely on your income to maintain their lifestyle), the benefit may not be sufficient.
Supplementing your employer-provided group life insurance
If the coverage provided through your employer isn’t enough, you have the option of supplementing it. In some cases, you may be able to purchase additional coverage through your company, but before doing so you should determine how long you plan to stay at your current job and whether or not the coverage is portable and/or convertible down the road.
A more flexible option is to supplement your employer-provided coverage by buying directly from an insurer. This will let you choose from a variety of products including more term coverage or a cash-value policy such as whole life. You will at minimum be required to answer questions about your health and lifestyle; you may also be required to pass a medical exam. But you will be able to buy exactly the coverage you want and need. You can learn more about the types of individual life insurance coverage available and shop for competitive quotes online here.
 “Life insurance-- an integral part of every benefits program,” http://www.lifebenefits.com/lb/Products/LifeInsurance.html
 “The difference between Group and Individual insurance,” http://www.lifebenefits.com/lb/LifeBasics/Difference_GRp-Ind.html
 “FAQs - Imputed Income for Term Life Insurance,” http://www.oshr.nc.gov/Reward/ncflex/FAQs/FAQs-imputedincome.pdf
 Christina Couch, “Do you need supplemental life insurance?” http://www.bankrate.com/finance/insurance/supplemental-life-insurance-1.aspx