Most companies offer group life insurance, often a multiple of your salary. It is easy to check that box during open enrollment and assume you're covered.
Here is why that assumption deserves a second look.
1. The amount is usually too small
Group coverage is often one or two times your salary. A common rule of thumb for income replacement is several times that, before you add a mortgage, college costs, or other debts. And bonuses, equity, and deferred compensation may not count toward the group benefit at all.
2. It belongs to your employer, not you
Leave the company, get laid off, or retire, and the coverage may end or become expensive to keep. Converting group coverage to an individual policy is sometimes possible, but often at a higher cost. If your health has changed by then, replacing that coverage on your own could be difficult.
3. Extra coverage can be taxable
Under federal tax rules, the cost of employer-paid group term life coverage above $50,000 is generally treated as taxable income to you. It shows up on your W-2 as imputed income. A tax professional can tell you what it costs you each year.
4. You don't control it
Your employer chooses the carrier, the plan design, and whether the benefit continues. Personally owned coverage is yours. You choose the amount, the term, and the beneficiaries, and it stays with you through every career move.
How executives typically close the gap
- Personally owned term life sized to cover the years your family depends on your income.
- Permanent life insurance for longer-term goals such as estate planning or legacy.
- Individual disability insurance to protect income above what group disability pays, since group plans often cap benefits for high earners.
Keep your group coverage. Just don't let it be the whole plan.