Work coverage fits almost everyone as a free or cheap base, and fits people with health issues since there are often no health questions. A private policy fits anyone who needs more than their job gives or wants coverage that stays if they leave.
Through work vs Private policy at a glance
| Through work | Private policy | |
|---|---|---|
| Cost | Employer may pay part or all. Group rates are often cheaper. | You pay the full premium. |
| Health questions | Often none for basic coverage. | Usually yes. Some plans need an exam. |
| Amount | Basic is often 1 or 2 times your salary. | You choose the amount. |
| If you leave your job | Coverage usually ends. You may convert to an individual policy at a higher cost. | Stays with you as long as you pay. |
| Control | Very little control over the terms. | You pick the insurer, type and features. |
| Type | Most is term. | Term or permanent. |
| Taxes | Employer paid coverage over $50,000 counts as taxable income. | Not affected by this rule. |
What to know
Life insurance at work is a great start. Texas says the basic amount is often one or two times your salary, and you usually do not answer health questions. Group rates are often cheaper because the risk is spread out. Your employer may pay some or all of it.
The weak spot is that it is tied to your job. Texas says coverage usually ends when you leave. California law says group life must let you convert to a permanent policy, but it will probably cost much more. The NAIC also warns the amount is usually less than you need.
A private policy is yours. You choose the amount and it follows you from job to job. Many people use both. Keep the work plan, then buy a private term policy to fill the gap while you are young and healthy.
- You have health issues that make a private policy hard to get.
- You only need a small amount and your job pays for it.
- You plan to stay at your job for a long time.
- You need more than 1 or 2 times your salary.
- You may change jobs or start a business.
- You want to lock in a rate while you are healthy.
Common questions
Is my work life insurance enough?
Often not. The NAIC says the death benefit usually is less than you need. Many people add a private policy.
Do I pay tax on work life insurance?
If your employer provides group term coverage over $50,000, the IRS says the cost of the extra amount counts as income.
Can I keep work coverage if I quit?
Usually not as is. You may be able to convert it to an individual policy without a medical exam, but it will likely cost more.
