Why your company life insurance isn’t enough

Posted : June 8, 2020

Updated : June 6, 2025

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Key takeaways

Employer life insurance is a good start, but it is often not enough on its own.
Coverage is usually tied to your job, so it may end when you leave.
Individual life insurance gives you more control, portability and flexibility.
John Hancock can help you estimate your needs and explore additional coverage options.

If you’re like most people, you probably opted for life insurance through an employer, at some point or another. Perhaps it was during your first job and it was an easy, no-think check box. Or maybe, you still have employer-provided coverage, but haven’t put too much thought into it.

While it may be a first step toward creating a balanced financial plan for yourself, electing an employer-provided plan may not provide the kind of protection that you and your family need. It can actually cost you more in the long run than if you were to purchase an individual policy.

What is employer-provided life insurance?

Employer-provided life insurance is a group policy your employer purchases to cover all eligible employees. You are enrolled automatically, with no medical exam required. The employer pays the base premium on your behalf.

Benefits of employer-provided life insurance:

Provided at little or no direct cost to you.
No medical exam or health questions required for basic enrollment.
Automatic enrollment, often starting on your first day of eligibility.
Pays a lump-sum death benefit directly to your designated beneficiaries.
May include accidental death and dismemberment coverage.

A tailored amount of coverage

The most common life insurance plans provided by employers only cover up to 1-2 times your annual salary. If you are single with no dependents, this amount may be sufficient. However, if you’re married, have kids, or own a home, this amount might not go very far.

A general rule of thumb is that your life insurance should be equal to 10x your salary.

That may seem like a lot, but when you think about what it would take to pay off your house, fund all the monthly bills, and take care of your children’s educations, it makes sense.

Your goal should be to ensure that your loved ones can keep on living their lives after your death.

More affordable than you think

One of the reasons people give for not buying life insurance is that they have competing priorities and that premium payments simply won’t fit within their budget. But many overestimate the cost of a policy – by a lot.¹

For example, a healthy non-smoking 30-something male might pay less than $500 per year for a 20-year term policy with a million dollar death benefit¹ Surprised? You’re not alone – it’s a common misconception.

In many cases, individual policies are usually less expensive than life policies provided through your employer. In addition, unlike employer-provided coverage, where premiums increase each year, premiums for your individual policy will generally not increase as you get older.

You’re in control of your coverage

We all know that nothing stays the same. In the event you change jobs, are laid off or your business stops offering a life insurance benefit altogether, you're left in an awkward place. Because the policy isn’t owned by you, you have limited control over an employer life insurance policy.²

If your employment ends or the benefit is terminated, your life insurance coverage will end too. And if your health should decline, replacing your life insurance may be difficult and premiums may be significantly higher. Having your own policy will help ensure that your family will be financially protected.

The bottom line is that the life insurance available to you through your employer may not be as good a deal as you might think. You are paying more for less coverage than an individual policy can provide.

The purchase of an individual policy may offer the best overall value for your money and it can be just as easy to apply for as the life insurance coverage provided by your employer. Purchasing your own coverage ensures that you have the amount you need to help safeguard your family’s future - without the worry that it could disappear with a change in your employment status.

Employer life insurance vs. individual policies

Feature	Employer-provided life insurance	Individual life insurance
Type of coverage	Group coverage offered through your job	Coverage you buy on your own
Coverage duration	Usually lasts only while you are employed	Can last for a set term or your whole life, depending on the policy
Portability	Usually not portable if you leave your job	Fully portable because you own the policy
Cash value	Typically does not build cash value	Permanent policies can build cash value
Average monthly cost	Often low or partly paid by your employer	Usually higher than group coverage, but depends on age, health, and coverage amount
Coverage amount	Often equal to 1 to 2 times your salary	You can choose the amount based on your needs
Underwriting	Often limited or no medical exam for basic coverage	Usually requires underwriting, especially for larger amounts
Ownership	Owned by the employer	Owned by you
Control	Employer can change or end the benefit	You control the policy as long as you keep paying premiums
Best for	Basic temporary protection	Long-term, personalized protection

Steps to take if your employer life insurance isn’t enough

If your employer coverage is not enough, start by estimating how much protection your family may still need. John Hancock offers a life insurance calculator to help you explore the right amount of coverage for your situation. You can use it to:

Review the life insurance benefit you have through work.
Estimate your family’s needs, including income replacement, mortgage payments, debt, final expenses and future education costs.
Compare that total with your current coverage to identify any gap.
Consider an individual policy you can keep even if you change jobs.
Explore John Hancock term life insurance, which lets you choose your coverage amount and term length.
Talk with a licensed agent about options that fit your budget and long-term goals.

Explore your own life insurance options today.

With over 160 years of experience, John Hancock is a well-established provider of trusted life insurance products, like John Hancock Life Insurance with Vitality.

Depending on your goals, you can choose term life insurance for straightforward protection over a set period or permanent life insurance for coverage that may last longer and build cash value over time. John Hancock term life insurance offers coverage amounts from $250,000 to $65 million, with term lengths of 10, 15, 20 or 30 years in most states.

You can also enhance your coverage with John Hancock Vitality PLUS, available with John Hancock Vitality Term, which offers opportunities for premium savings³, as well as rewards and discounts for healthy living.

With a range of options, tools and guidance available, you can find a solution that aligns with your family’s needs, budget and long-term financial goals.

Frequently asked questions

Usually, no. Employer-provided life insurance generally ends when your employment ends, although some plans may let you convert or port coverage for a limited time. The exact options depend on the employer’s plan, so it is important to review the policy details before you leave.

If your employer reduces the benefit, your coverage may drop to a lower amount or change in scope. In some cases, you may be allowed to buy supplemental coverage, but the base plan is controlled by the employer. Check the plan rules so you know what changes affect you.

If your employer coverage is not enough to protect your family, additional individual life insurance may help close the gap. It can give you more control over coverage amount, duration and portability. A personal policy can also stay in place even if you change jobs.

Usually, no. Most employer-provided life insurance is group term coverage, which provides a death benefit but does not build cash value. If cash value is important to you, that is typically a feature of certain permanent individual life insurance policies, not standard workplace coverage.

Citations:

¹Forbes: "10 Things you absolutely need to know about life insurance." by Tim Maurer, January 15, 2016 https://www.forbes.com/sites/timmaurer/2016/01/05/10-things-you-absolutely-need-to-know-about-life-insurance/#36e0bc72560c

²USA Today: "Is your life insurance through work enough?" by Alice Holbrook, February 14, 2015, https://www.usatoday.com/story/money/personalfinance/2015/02/14/nerdwallet-life-insurance/23401007/

³ Premium savings are in comparison to the same John Hancock life insurance policy without Vitality PLUS. The level of premium savings is cumulative over the life of the policy and will vary based upon underwriting status, issue age, policy type, the terms of the policy and the Vitality Status achieved. Premium savings are only available with Vitality PLUS and may not be applicable to certain products.

Vitality PLUS refers to the benefits provided under the Healthy Engagement rider (HER) or the Healthy Engagement Benefit rider (HEBR). The Healthy Engagement rider offers the opportunity to earn premium savings by engaging in the Vitality Program. The Healthy Engagement Benefit rider does not offer premium savings but instead offers the opportunity to enhance the death benefit by engaging in the Vitality Program and is only available on certain products.

Vitality is the provider of the John Hancock Vitality Program in connection with policies issued by John Hancock. John Hancock Vitality Program rewards and discounts are available only to the person insured under the eligible life insurance policy, may vary based on the type of insurance policy purchased and the state where the policy was issued, are subject to change and are not guaranteed to remain the same for the life of the policy.

To be eligible to earn rewards and discounts by participating in the Vitality program, the insured must register for Vitality and, in most instances, complete the Vitality Healthy Review (VHR).

Insurance products are issued by: John Hancock Life Insurance Company (U.S.A.), Boston, MA 02116 (not licensed in New York) and John Hancock Life Insurance Company of New York, Valhalla, NY 10595.

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