Work Life Insurance Facts (Employer Provided Life Insurance)

Buying employer provided life insurance might seem like a no-brainer.

Do you want to make sure your family can sustain financially after you die?

Of course.

Do you want to take full advantage of your benefits package at work?


Is it easier to buy life insurance through your employer than to shop the market? Yes, but is the convenience worth the inflated price? What will happen to your coverage if you change jobs?

In this article, we’ve provided some work life insurance facts you should know before you decide on purchasing life insurance coverage from your employer.

Quick Article Guide:

1. What Is Work Life Insurance and How Does It Work?
2. Should I Buy Life Insurance Through Work?
3. If I Don’t Buy Through Work, Where Do I Start?
4. Term Life Insurance Crash Course
5. Why Work With An Independent Agent?

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What Is Work Life Insurance and How Does It Work?

Work life insurance is life insurance that is provided by an employer as a benefit for their employees. Every employee is eligible for this coverage, regardless of their health, or any pre-existing conditions they may have.

Employer provided insurance is also commonly referred to a group coverage and while this type of coverage is usually offered a business and their employees, it can also be offered to members of an exclusive club, collective, bank, or professional organization.

In a group, every individual represents their own risk to the insurer. However, the insurance company cannot evaluate each individual’s health and lifestyle, so they must evaluate the group’s risk as a whole. To do this, the insurance company must consider all of the group, from the youngest person in to the oldest person, and from the healthiest person to the unhealthiest person. Once the group’s collective health is assessed, an average rate is offered to each member based exclusively on their age and gender.

Employer provided life insurance does not mean that your life insurance is “connected” to your employer or anyone else in your company. You will still control your own policy and it will protect your family as long as you remain in the group. Most employer provided life insurance policies are sold as annual renewable terms which allows you to renew your coverage every year at an increased rate.

Should I Buy Life Insurance Through My Work?

If you are older or extremely unhealthy, the life insurance coverage your work offers might be your best option, especially if you have been denied coverage in the past. Cigarette smokers also benefit from employer provided life insurance because insurers typically charge smokers 3 to 4 times more than non-smokers due to the health issues commonly attributed to tobacco use.

On the other hand, if you are young and relatively healthy, you should purchase your life insurance policy outside of work. Why pay a higher “group” rate to subsidize the cost of your co-worker’s life insurance when you can secure better coverage on your own? We’re not saying you should judge your coworkers for driving up the cost of group coverage; it’s just the nature of this type of life insurance.

Here are the overarching benefits and drawbacks to weigh when considering group life insurance:

Benefits of Buying Employer-Provided Life Insurance

  • It’s easy to apply, and the employer takes care of the legwork.
  • Applicants who might otherwise be uninsurable can qualify for affordable coverage.
  • The premium comes out of your paycheck and doesn’t feel like an added expense.

Drawbacks of Buying Employer-Sponsored Life Insurance

  • Healthy applicants will pay much more for much less coverage compared to other term life insurance policies on the market.
  • Employer-sponsored policies generally provide a death benefit (money paid to your beneficiary) of 1-3 times your annual salary. This is not nearly enough to support your family, especially if there are medical expenses that precede your death.
  • Your employer owns your life insurance policy. They can stop subsidizing, raise rates, or even cancel coverage whenever they choose.
  • The days of working with one company from entry-level to retirement are largely gone. Most U.S. workers now change jobs every 5 years, and when they do, there’s almost always a probation period of several months before their new employer’s benefits kick in, resulting in a lapse of coverage.
  • The cost of your work life insurance coverage will likely increase 10-15% every year.

The Case for Term Life Insurance

Instead of purchasing life insurance through work, many people choose term life insurance instead. Term life insurance ensures a death benefit at a fixed premium, for a set period of time (your term). It is ideal for many different situations, from ensuring that your spouse will not left without a means to pay the mortgage, to providing general income protection for family. Term insurance is usually available in 5-year increments ranging from 10 to 30 years.

Term life insurance is affordable and it typically provides more coverage than most work life insurance policies will offer. In addition, if you change jobs or if your employer decides to stop offering insurance, you won’t have to worry about buying a new policy or going without coverage.

Here are some additional benefits that term life insurance provides:

  • Affordable coverage
  • Flexible options
  • A fixed rate for a set period of time
  • No startup costs
  • No surrender charge
  • No hidden fees
  • The freedom to cancel or change your policy at any time

What Determines the Cost of My Insurance?

When you apply for a life insurance policy, the insurance provider you apply with will determine your rate class and the cost of your coverage by evaluating the following:

  • Age
  • Height-to-weight ratio
  • Cholesterol
  • Blood pressure
  • Pre-existing health conditions
  • Medications
  • Smoking
  • Alcohol consumption
  • Family medical history

You can try to determine your own rate class, but its easier to work with an independent agent that represents at least a few dozen companies. Shopping the market and comparing rates from multiple insurers will help you find you the best rates.

Likewise, you shouldn’t choose the cheapest option by default. For example, if you have a two-year-old child and are shopping for a 20-year policy to provide coverage through their college years, you might be presented with a cheaper, 10-year policy. If you buy that 10-year policy, there is no telling what your health will be like when it expires, and you could very well find yourself paying substantially more for a new policy.

Should I Get a Medical Exam

You might be able to get a better rate if you agree to complete a free in-home medical exam, especially if you haven’t been to the doctor for at least a few years. The caveat here is that if the insurance company discovers an undiagnosed health issue, such as diabetes or high cholesterol, you might see higher rates that you initially expected.

While this might not be the greatest of news, you would want to know about a potentially serious health condition in the early stages so you could seek treatment. In addition, discovering a health issue wont prevent you from falling back on the coverage your work offers.

Don’t Go By Advice From a Friend or Family Member

By all means, if someone you know recommends a policy or provider, you should listen. However, you don’t want to turn around and purchase the first option you learn of. Every insurance provider has 16 different rate categories based on a slew of variables in addition to the factors we’ve discussed. The best deal for someone else might not necessarily be the best deal for you.

Why Work With An Independent Agent?

When we think of buying insurance, we often refer to our local home and auto insurance agents that represent the big-name insurance companies we constantly see on TV. Unfortunately, these agents are “captive” which prevents them from selling another insurance company’s products.

At JRC Insurance Group, we have the ability compare rates and coverage options more than 50 top-rated life insurance carriers, and our services are completely free. Whether you’re looking for term life insurance, whole life insurance, or permanent life insurance, we can help you find the best protection for your family. Give us a call today, toll-free at 855-247-9555, or request a free quote online using the button below.

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Cliff Pendell

VP of Marketing at JRC Insurance Group
Cliff is a licensed life insurance agent and one of the owners of JRC Insurance Group. He has helped thousands of families of businesses with their life insurance needs since 2012 and specializes with applicants who are less than perfect health. In his spare time he enjoys spending time with family, traveling, and the great outdoors.
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