Is Life Insurance Through Work Enough?
Article Written by: Lauren Hoeffel
If you’re like most people, you probably have some form of life insurance through your job. According to a study, 54% of U.S. workers report having life insurance through their workplace. It’s a benefit many employers offer, and for good reason: it gives employees peace of mind and helps companies attract talent. But here’s the question more and more people are asking—and one that you might be wondering, too:
Is life insurance through work enough to protect my family if something happens to me?
It’s a fair and essential question. And the honest answer is: probably not. This article will explain precisely what employer-sponsored life insurance does (and doesn’t) cover, where the gaps are, and why supplemental life insurance might be a smart move.
What is Employer-Sponsored Life Insurance?
Employer-sponsored life insurance, often called group life insurance, is typically offered as part of a company’s benefits package. The employer usually pays for a basic policy, which provides coverage equal to 1x or 2x your annual salary. Some employers also allow you to purchase additional coverage through payroll deductions.
It’s convenient, automatic, and usually free or low-cost. For those reasons, it’s a great starting point. However, relying solely on your work policy can leave your family vulnerable.
Why Employer Life Insurance May Not Be Enough
Let’s look at the main reasons your work coverage might fall short of your actual needs.
1. Coverage Amount Is Usually Too Low
One of the most significant issues with work-based life insurance is the limited coverage. Most people get coverage equal to 1-2 years of their salary. However financial experts recommend 7 to 10 times your annual income to protect your family entirely.
Why that much?
Because your life insurance should cover the following:
• Outstanding debts (mortgage, student loans, credit cards)
• Ongoing living expenses for your family
• Childcare or education costs
• Funeral and final expenses
• Future financial goals (college funds, retirement for your spouse)
If you earn $60,000 yearly and your employer provides 1x salary coverage, your family would receive $60,000 if you passed away. That might help for a few months but won’t support them long-term.
2. You Don’t Own the Policy
This is a critical point most people overlook: your employer owns the policy. If you leave your job—whether by choice, layoff, or health reasons—your life insurance typically ends. In some cases, you might be able to convert it to an individual policy, but it’s often more expensive and limited in options.
If your health changes while you’re still working, and you later lose your job, getting new coverage might be difficult or impossible.
3. You Might Be Underinsured Without Realizing It
It’s easy to assume that you're protected because you have some life insurance. But many people don’t calculate their real needs. Have you decided how much your family would need to continue their lifestyle if your income disappeared?
Spoiler: for most households, the number is far above what employer plans offer.
4. Group Policies Often Lack Flexibility
With employer policies, you don’t get much say in the type of coverage or the insurance provider. You can’t customize it to your financial goals, health status, or family situation.
Plus, group policies don’t usually build cash value, a feature of some permanent life insurance plans like whole life.
What Is Supplemental Life Insurance—and Do You Need It?
Supplemental life insurance is any additional coverage you purchase outside your employer-provided policy. This could include:
• Term life insurance: Provides coverage for a specific period (10, 20, or 30 years) and is generally very affordable.
• Whole life insurance: Offers lifetime coverage and builds cash value over time.
• Critical illness insurance: Add extra financial protection in case of serious health events.
Here’s when supplemental coverage makes sense:
• You have dependents who rely on your income.
• You carry significant debt (like a mortgage or private student loans).
• You want permanent coverage, not just until retirement.
• You expect to switch jobs or work freelance/self-employed in the future.
• You have long-term financial goals like paying for college or leaving an inheritance.
What Is Supplemental Life Insurance—and Do You Need It?
A common rule of thumb is 10 to 15 times your income, but a more accurate method is to use the DIME formula:
• Debt: Total debt (mortgage, credit cards, etc.)
• Income: Your annual income multiplied by the number of years your family will need support
• Mortgage: Remaining balance on your mortgage
• Education: Future education costs for children
This calculation gives you a customized target based on your life, not just a flat number. Online calculators can help, or you can speak with a licensed insurance advisor.
Frequently Asked Questions
Can’t I Get More Life Insurance Through Work?
Sometimes, yes. Many employers allow you to buy additional “voluntary” coverage. But this, too, has limits—usually capped at a multiple of your salary. And it’s still tied to your employment, meaning you lose it if you leave.
Also, the cost of employer-purchased extra coverage often increases as you age and may not be portable. That means you could pay more overtime without the flexibility of an individual policy.
Isn’t It Cheaper to Stick With Work Coverage?
Basic group coverage is cheaper because the employer is footing the bill, and rates are averaged across employees. However, individual term life insurance can be affordable, especially if you’re young and healthy. Policies can start as low as $10-$20 monthly, depending on the coverage amount and term length.
In many cases, it’s better to lock in a low premium now and have control over your coverage.
What’s the Bottom Line?
Here’s the truth, plain and simple:
Life insurance through your job is a great benefit—but it’s not enough to fully protect your loved ones.
It’s limited in coverage, dependent on your job, and not tailored to your needs. If you’re serious about making sure your family is secure no matter what happens, you need to consider supplemental life insurance.
The good news? It’s easier and more affordable than you think. Taking a little time to evaluate your options can save your family from financial hardship.
Ask Yourself This
If something happened to you tomorrow, would your current life insurance be enough to:
• Pay off your mortgage?
• Replace your income for several years?
• Cover childcare or college costs?
• Allow your spouse to take time off or retire later?
If the answer is “no” or even “I’m not sure,” it’s time to explore your options. Your family deserves financial peace of mind—and that starts with having the right coverage.
