Should You Buy Life Insurance Through Your Employer?

Joseph Meyer
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Group Plans Make Sense for Pre-Existing Conditions

Group insurance usually has a cheaper premium and a larger death benefit than individual policies. Still, buying life insurance through your employer may not make sense for everyone.

First, you must qualify for the group life insurance benefit in your company plan. The plans are not usually available to every employee, and plans may be denied to people with pre-existing medical conditions.

Also, some people add life insurance to their retirement plans, which can be complicated. There are several factors to weigh when deciding whether to apply for life insurance through your employer, and you’ll want to enlist the help of a financial professional to help you decide what makes the most sense for your particular situation.

Situations When You May Consider Purchasing Life Insurance Through A Third-Party Provider

Many employers offer a type of life insurance called a group term life insurance. When you are eligible for a job or to receive benefits, you can generally start purchasing life insurance. If you aren’t offered group life insurance through your employer, you have to purchase a policy on your own (e.g. through an independent broker or directly through a company). There are some benefits to group term life insurance through your employer, but there are some situations when you may want to consider buying life insurance directly.

What happens if you leave your job?

It’s quite likely that over the course of your career you will change industries and employers a few times. More often than not, when people leave a company, they also leave their employer-provided life insurance policy. Their new insurance policies often don’t offer the same level of coverage or come with higher costs.

For many who are earing a good salary, a life insurance policy through their employer is the preferred option. Not only is the cost normally much lower than private insurance, but it may also be easier to become insured. For instance, you may not be able to purchase life insurance on the job market because of pre-existing medical conditions. But you may be able to get insured with your employer’s life insurance policy.

If you do choose to purchase life insurance through your employer, be sure to ask your company what they plan to do if you leave. It’s difficult to compare life insurance offered by different companies, but you need to be certain your policy remains in effect if you leave your employer.

How Much Life Insurance Does Your Job Allow?

There are three main ways to get life insurance “ through your employer, as a standalone product, or through a select group of insurance professionals. While it is possible to get a standalone policy through a group like an employer-sponsored plan, you’ll need to do some math to find out if it’s a money saving choice. Purchasing life insurance through your employer keeps your premiums low because your employer pays a percentage of the premium for you. It lets you avoid the often higher fees and commissions that an independent agent or broker would take.

With some simple math, you can find out whether it’s worth it to have your life insurance through your employer or whether it’s better to go with a standalone life insurance plan. Many times, whether or not the employer premium is going to be cheaper than going the independent route will depend on a few factors. Often, it’s cheaper if you’re young and healthy.

Bottom Line


If you are in good health, you should have life insurance. It only costs a few dollars a month and can help a lot of people in your situation.

The benefits of getting recommended life insurance through your employer is you have coverage with no medical exam, and it’s typically cheaper than policies purchased elsewhere.