Questions to Ask When Considering Employer Life Insurance

October 18, 2023 |read icon 7 min read
A husband and wife in their 50s take a walk on a beautiful fall day. They’re relaxed knowing they have employer life insurance.

Life insurance is a crucial financial tool that provides protection to you and your loved ones. Some of the most common reasons families buy life insurance are to: 

  • Help replace lost wages or income.
  • Cover burial and other final expenses.
  • Help pay off the mortgage and other home expenses.
  • Leave an inheritance.
  • Provide funds towards a college education.

Life insurance provided by your employer offers a convenient way to get important coverage, which is the amount your policy provides to your beneficiaries upon your death. For many, it’s the first step in protecting loved ones from the unexpected. However, you may want to consider other options as well, such as buying your own individual life insurance policy, either in addition to or instead of your employer life insurance. Both have advantages and disadvantages which are important to look at to decide what might be the most suitable choice for your needs.

Employer life insurance

Employer insurance is offered by employers as part of their employee benefits package. It covers a group of employees under a single policy. Key characteristics of employer insurance include:

Employer-sponsored: Employers may pay for a part of the entire premium up to a certain amount of coverage. Employees usually have the option to buy added coverage at a discounted rate.

Simplified underwriting: Employer life insurance often involves a simplified underwriting experience, which means that employees may not need to undergo a medical examination or provide detailed health information. This can be advantageous for employees with pre-existing health conditions.

Limited customization: Employer insurance tends to offer limited customization options. Coverage amounts are typically based on a multiple of an employee’s salary, with a maximum limit. This may not be enough to meet all your needs.

Portability: One of the main drawbacks of employer life insurance is that it is not always portable. When an employee leaves the company, coverage may cease or become more expensive. Some policies offer conversion options, allowing individuals to convert their employer insurance to an individual policy upon ending employment.

Cost effective: Employer life insurance may be available at a lower cost than individual policies, especially when the employer subsidizes the premium. This makes it an attractive choice for those looking for more affordable coverage.

Individual life insurance

Individual life insurance is a policy bought by an individual directly from an insurance company. It provides coverage tailored to your specific needs and circumstances. Key characteristics of individual insurance include:

Personalized coverage: Individual policies usually provide the flexibility to choose your coverage amount; policy type, such as term, whole life and universal life; and added benefits called riders to suit your needs.

Comprehensive underwriting: Underwriting for individual policies may include a medical examination and a more detailed health questionnaire. This ensures that the policy is priced based on your health and lifestyle factors. However, some companies are beginning to offer accelerated underwriting for some of their individual policies, which offers a more simplified underwriting process.

Ownership and control: When you own an individual life insurance policy, you have full ownership and control of the policy. If you buy a permanent policy, you can change the amount of coverage and access the savings part of your policy. Read this blog to learn more about permanent vs term insurance.

Portability: Individual life insurance policies are portable and not tied to your employment. This means you keep coverage even if you change jobs or retire.

Cost variability: The cost of individual life insurance can vary widely based on factors such as age, health, coverage amount and policy type. While it can be more expensive than employer insurance, it offers greater flexibility and often offers more comprehensive protection.

4 questions to ask about employer life insurance

Many employees who lose access to employer-provided life insurance hadn’t considered the consequences of tying their insurance coverage to their employment. As you look over what your options are, ask yourself these questions:

1. What if you’re in good health?

Underwriting for employer life insurance may not be as beneficial if you’re young and healthy. But the practice is considered a benefit by some people who look at employer insurance in part because they may have a hard time getting insurance on their own. Individual policies tend to have more rate classes than employer policies do, offering lower rates to people in the best of health. If you’re healthy, buying an individual policy could be just as affordable.

Underwriting process:

  • Employer life insurance: Simplified underwriting, often with no medical examination needed.
  • Individual life insurance: Comprehensive underwriting, including a medical examination and health questionnaire, but accelerated underwriting may also be available.

2. What if your group coverage comes at a discount?

A compelling reason people sign up for employer-provided insurance is that the coverage comes discounted or even free depending on the source. This is an attractive draw. It’s important that you still do a needs analysis to make sure you don’t need to supplement the coverage.


  • Employer life insurance: Generally, more cost-effective, especially when subsidized by the employer.
  • Individual life insurance: Costs can vary widely but it offers more comprehensive coverage options.

3. What happens if you leave your job?

You may not be able to convert your employer policy to an individual policy, leaving you without coverage. If your health has changed, private coverage may no longer be affordable or available.

Ownership and portability:

  • Employer life insurance: Typically, not owned by the employee and portability may be limited or costly upon leaving the employer.
  • Individual life insurance: Owned by the employee, fully portable and not tied to employment status.

4. Do you have adequate coverage for your needs?

You’re not always able to select the level of coverage with employer life insurance. If there is a coverage gap, then you need to supplement your employer insurance with an individual policy. Read this blog to see if you have enough life insurance. An individual policy may also provide added options called riders, that may help meet your current and future life insurance needs.

Customization and flexibility:

  • Employer life insurance: Coverage may be limited and often based on salary multiples. Maximum coverage amounts are often set.
  • Individual life insurance: Coverage amounts can be tailored to your needs and may be large.
  • Employer life insurance: Limited customization with little to no options for riders.
  • Individual life insurance: Offers various riders that provide added protection.

Consider combining your coverage

When comparing employer life insurance and individual life insurance, there is no one-size-fits-all answer. The choice between these two types of insurance depends on individual circumstances, needs and preferences.

Employer life insurance can be a convenient and cost-effective choice for employees who have access to it through their employers. It provides a basic level of coverage without the need for complex underwriting, making it accessible to individuals with pre-existing health conditions. However, it may not offer the level of customization and flexibility that some individuals need.

On the other hand, individual life insurance offers customization, control and portability. It is suitable for those who want coverage tailored to their specific financial goals and circumstances. While it can be more expensive, the benefits often outweigh the cost for those seeking comprehensive protection.

Ultimately, you should carefully assess your financial situation, future goals and family needs when deciding between employer and individual life insurance. In some cases, a combination of both types of coverage may be necessary to meet various financial objectives. Consulting with a qualified financial professional can help you make informed decisions and select the most suitable life insurance strategy. Learn more about life insurance offerings from Ameritas.

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