Private Life Insurance Policy vs Employer Provided

Private Life Insurance Policy vs Employer Provided

by Leslie Freeland, October 26, 2018

Having a “good job” has long been defined as having a job with benefits, and one popular benefit is life insurance. While having this benefit through your job might feel like a safety net, it’s probably not enough to protect your family. It would be beneficial if you also owned a private life insurance policy.

Many people with life insurance through work don’t really know what they have, and they’re usually in the dark about the many benefits of owning a private life insurance policy.

Here are some of the limitations and disadvantages of only having life insurance through your job (aka group life insurance).

#1: Not enough coverage and fewer options.

  • When it comes to private versus group life insurance plans, group life insurance plans typically offer coverage that is one or two times your salary. For most households, this isn’t enough. And because these plans are meant to be a one-size-fits-every-employee policy, they rarely offer benefit riders. Riders are options that you can add onto your policy for little or no cost. They give you the power to customize your policy however you like.

#2: You’ll lose your coverage if you lose your job.

  • The life insurance at your job probably isn’t portable. If you leave your company, get laid off, or if your employer decides to pull the plug on its benefits program, you’ll probably lose your coverage. Or, you’ll be forced to buy your own policy somewhere else based on your current age and health. This is important if you have to leave your job due to an unexpected illness or disability. Private life insurance is yours to keep, providing coverage no matter where you go or what happens – as long as you keep paying your monthly premiums.*

#3: It can be a surprisingly expensive option.

  • This is because employer plans determine how much to charge you based on the overall risk of the group they are insuring. If you’re young and healthy, you’ll pay the same rates per thousand as an older coworker with several health problems. With a private policy, you can afford to buy more coverage at a better price than your job’s group plan.

#4: Your policy might not be what you think it is.

  • Many life insurance policies offered through group plans are actually accidental death and dismemberment policies (AD&D) or funeral/burial expense policies. Sure, those are forms of life insurance, but they work very differently. An AD&D policy will only pay out benefits if you die accidentally. So, if you were to die some other way, you wouldn’t see any benefits.
  • Also, many of those policies may be funeral/burial policies (often called Final Expense Insurance) which gives your family funds to cover your final expenses. Such policies are typically capped at $5,000 to $10,000. This type of policy is just right if that’s your only goal, but for many people, this isn’t enough.

#5: You probably won’t be able to use it for retirement purposes.

  • Having life insurance through work is great, but usually, you can’t use it to supplement your retirement. This is because most employer sponsored life insurance is term life insurance. And there are real differences between term life insurance coverage and permanent life insurance policies that an agent can help you understand. Term life insurance will eventually expire. Permanent life insurance will not.
  • When you buy your own permanent life insurance policy, you can withdraw or borrow against the cash value of your policy. You can use this to supplement your retirement income, pay college tuition, or even finance your own car.**

Having Both

Having a private life insurance policy means you don’t have to re-enroll every time you switch jobs. This protects your family and prevents gaps in your insurance coverage, so as you consider your options, think about supplementing your current employer, group life insurance with private life insurance as well.




Asurea offers Life Insurance, Mortgage Protection Life Insurance, Medicare Supplement Insurance, Final Expense Insurance, Disability Insurance, Long-term Care Insurance, Retirement Planning products and more. For additional information, click on the ‘Learn More’ button below. Want to have articles just like this delivered to your inbox? Just enter your email address in the box below and click ‘Subscribe.’

This information is provided for general consumer educational purposes and is not intended to provide legal, tax or investment advice. Loans borrowed from your life insurance policy will accrue interest. An outstanding loan balance (loan plus interest) will be deducted from the death benefit at the time of claim.

*Accessing cash values may result in surrender fees and charges, may require additional premium payments to maintain coverage, and will reduce the death benefit and policy values. Dollar amounts are for illustrative purposes, not actual.


Leslie Freeland

Leslie Freeland

Find her at LinkedIn
Leslie joined Asurea as the Marketing Communications Coordinator in February 2015. Since then, she has been working closely with insurance professionals to educate the public on the importance of life insurance and protect the public from common scams with informational articles.
Leslie Freeland