Is Life Insurance Through Work Enough?

If your employer offers life insurance, chances are you’ll get a decent amount of coverage.

Even so, you may wonder whether it’s enough for your loved ones if you were no longer here.

 

Start at the End

There’s a trick from childhood that can help you figure out if the life insurance from work is enough. Remember trying to find a path through a maze by starting at the end and working backwards?

While you could see how far your coverage from work would go, you could easily end up stretching that money more than you should. Instead, you should calculate the right amount of coverage first, and then work your way back to the coverage you currently have.

There are a number of different ways to tackle that task, like multiplying your salary by 10, or using our insurance calculator. But if you’re looking to get more of a custom fit, again, start at the end of the maze. But instead of thinking of the goal as a specific dollar amount, consider your life goals.

What do we mean by that? Simple: Ask yourself what you’d like to accomplish in the next 10, 20, or 30 years. We’re talking about things like buying a house, paying off debt, sending your kids to college, going on a dream vacation, or retiring by a certain age. Now jot each down on a piece of paper.

As you might have noticed, these kinds of goals are both emotional—helping your loved ones enjoy their lives more fully—and financial—they’ll cost a lot. So the next step is to figure out the money part. Next to each goal, write down how much each will cost, and how soon you’d like to accomplish it. Congrats! You’ve worked out your goals. Not that difficult, huh?

With those numbers in front of you, figuring out your life insurance coverage is easy. Take the time frame from your farthest out goal—for instance, 20 years if that’s when you’d like your mortgage paid off. That’s your policy term. Now add up the dollar amounts. That’s your target coverage amount.

Now that you’ve figured out where the maze ends, let’s work back to the start.

 

Coming Up Short

A typical employer plan offers 1–2 times your annual salary. To most people, a windfall of a year’s salary would be life-changing. Double that? Forget about it. Even though that life insurance policy from work would be sizable, it would need to last much more than a year or two. As your target number shows, it can take a shocking amount of money to make sure everything’s covered.

Besides, you have to remember that coverage through work is, well, through work. It’s tied to your job. Change your job, and that coverage vanishes into thin air. Depending on your particular situation, you may want to think of your work-sponsored policy as a life insurance bonus. If it isn’t costing you any extra, it certainly won’t hurt. But you probably don’t want to opt for supplemental coverage on that plan if you’re getting life insurance elsewhere.

Luckily, term life insurance is an affordable way to get the coverage you need.

 

What to Get

Clearly, you need more than you’re getting through work. And the method above gives you a pretty solid idea of what you should have. So just subtract the work coverage from your target amount, right? Not so fast. For one, you should consider any assets you have on hand that would go to your survivors: bank accounts, stocks, retirement accounts, and the like. Those will obviously bring your target number down.

So if you’ve got your target number in hand and are ready to find that life insurance elsewhere, give Ladder a look. We’ve got flexible term life insurance that’s easy to adjust as your life—and your target number—changes. Get your quote today.