Life Insurance Through Work vs. Personal Life Insurance
If you have life insurance through work, understanding work life insurance vs personal life insurance can help you determine whether your current coverage is enough for your family. But workplace life insurance and personally owned life insurance work differently. Understanding those differences can help you determine whether your employer coverage would actually be enough — and what happens to your protection if you change jobs or retire.
Work Life Insurance vs Personal Life Insurance: How Do They Work?
With workplace life insurance, the coverage is connected to your employer's group plan. If you leave the company, retire or your employer changes its benefits program, your existing coverage may change or end.
A personally owned life insurance policy is different. You own the policy and, provided the required premiums are paid and the policy remains in force, the coverage isn't dependent on remaining with a particular employer.
That portability can become increasingly important as your career changes over time.
Employer-provided life insurance is typically part of a workplace group benefits plan. Coverage is often based on a fixed amount or a multiple of your salary, and your employer may pay some or all of the cost.
The advantage is convenience. You may receive coverage automatically or have access to additional optional coverage through your benefits plan. However, the amount, features and availability of the coverage are determined by the group plan rather than by you personally.
The Biggest Difference: Who Controls the Coverage?
Is Your Workplace Life Insurance Enough?
The amount of life insurance provided through work may not necessarily reflect your family's actual financial needs.
When determining how much coverage may be appropriate, consider obligations such as your mortgage and other debts, replacing income for your family, childcare and education costs, final expenses, and other long-term financial commitments.
For someone with significant financial responsibilities, a basic workplace benefit may represent only one part of the protection they need.
What Happens to Your Life Insurance If You Change Jobs?
This is one of the most important questions to ask about workplace coverage.
If you leave your employer, your group life insurance may terminate. Some plans may provide options to convert or continue certain coverage, subject to the terms, eligibility requirements and deadlines of the particular plan.
The problem is that your health can also change over time. If you wait until after leaving a job to apply for personally owned insurance, your age and health at that time can affect the coverage available to you and what it costs.
Do You Have to Choose One or the Other?
No. Workplace and personal life insurance can work together.
Employer coverage can provide a useful foundation, while personally owned coverage can be designed around your specific needs and remain with you independently of your employment.
The right combination depends on your income, debts, dependants, existing insurance and longer-term financial goals.
How Much Life Insurance Do You Actually Need?
There isn't one amount that's appropriate for everyone.
A proper insurance review looks at what your family would need financially if you died, subtracts existing resources and insurance, and identifies any remaining protection gap.
If you're relying primarily on life insurance through work, it's worth understanding exactly how much coverage you have, how long it remains in force and whether it would be enough for the people who depend on you.
Not Sure If Your Workplace Life Insurance Is Enough?
I can help you review your existing workplace coverage, identify potential gaps and compare personal life insurance options from multiple Canadian insurance companies.