Why Work Life Insurance Can Be Useless

The Myth

Many people believe that work life insurance through their employer is enough to protect their loved ones in the event of their death. However, this is often not the case. Work life insurance typically only pays out a small amount, and is often not enough to cover the costs of debts and larger financial responsibilities. Additionally, life insurance through work usually stops when you leave your job. So, if something happens after you’ve left your company, your family may not be covered.

Work Life Insurance Pros and Cons

The one positive aspect of work life insurance is that it usually cost pennies compared to a private life insurance. Sometimes it is free and part of the employee package. Which in this case, you don’t mind paying a couple dollars for a small amount of coverage.

The downside of life insurance through is that it’s not private and you do not own or control it.  Americans on average switch jobs multiple times throughout their life.  What happens if there’s no life insurance benefits at the next job. Your family becomes exposed and does not have the proper financial protection.

Case Scenario: Disaster

Often the most devastating life insurance stories come from families who thought they were protected. Let’s take a look at a health issue that came up and what impact it had on a healthy woman.

Mary is 40 years old and has been working a full time job as a biology teacher for the last ten years.  During this time period, she was covered with $100,000 of life insurance through work.  Fast forward to the age of 45, Mary received some news about her health. She had become diagnosed with cancer and had to take a leave of absence from work.

Luckily her employee package also included short term disability pay.  So she was going to financially okay for the next 6 months.  Mary was expecting to go through treatment for 4 months and have a chance to return back to work. Six months had gone by and Mary had still not recovered. Actually, she still needed more treatment.  But after six months, Mary’s short-term disability had been exhausted.  Her managers had requested she needed to return back to work or temporarily take a leave of absence from work. Without pay..

She had no choice but to take a temporary leave of absence from work until she got better.  But since she took that leave of absence, she would no longer receive any of the employee benefits. This was because she was not working anymore and going through treatment.  Two months went by and unfortunately Mary did not make it and passed away. 

The family was burdened with funeral/burial expenses they were not prepared for.  The family had no choice but to set up a go fund me campaign for the funeral to cover the cost.

In conclusion

While having work life insurance is good to have, majority of adults will always opt for additional private life insurance.  Something that they own and cannot be taken away from them.  The power of owning something has much more value and security for a family.  Private Life insurance does not have to be expensive either.  It can cost as low as $8/mo if approved.

For this reason, it is important to look at life insurance from all possible angles.  Even the worst-case scenarios are possible and you want to be protected from that. Private life insurance gives families the best peace of mind. Work life insurance should be viewed as more of a complimentary type of life insurance to private life insurance.