Group life through work isn't your full plan

A lot of people check the “I have life insurance” box in a benefits enrollment window at their job and stop there. It’s a totally reasonable thing to do, and it’s also usually wrong. Group life through your employer covers less than most people think, ends when the job does, and stops being available exactly when you might need it most.

Here’s what group life actually is, what it isn’t, and how to think about it alongside an individual policy.

What group life usually looks like

A typical employer-sponsored plan gives you 1x or 2x your annual salary as a base benefit, often for free. You can usually elect additional coverage at your own cost, often up to 5x or 8x salary, with a maximum in the $500k-$1M range. For most families, 1-2x salary is meaningfully short of what an income-replacement calculation actually calls for (typically 8-12x income).

Group premiums are grouped, unsurprisingly. Everybody in the same age band at the same employer pays roughly the same rate. If you’re young and healthy, you’re subsidizing the older or less healthy people in the pool, and the individual market will usually beat the group rate for the same coverage. If you’re older or less healthy, group can be surprisingly competitive.

The three big limits

It ends when the job ends. This is the single most important thing to know. Group coverage is tied to your active employment. Leave, get laid off, take a sabbatical, or start your own thing, and the coverage usually stops within 30-60 days. Some plans offer a “conversion” option that turns your group coverage into an individual policy without a health check, but the premium is expensive and the terms are almost always worse than what you could have bought on the open market when you were healthy.

It caps out well below what you actually need. A dual-income family with two young kids and a mortgage often needs $1M-$2M of coverage per earning parent. Group life at 2x a $150k salary is $300k. That’s a rounding error against the real number.

You can’t increase it when your health changes. If you get diagnosed with something serious while on group coverage, you keep what you have as long as you stay employed. You can’t bump it up during open enrollment beyond what the plan’s guaranteed-issue limits allow without underwriting, and underwriting isn’t going to go well in that scenario.

How to think about group + individual together

The healthiest way to use group life is as a bonus on top of an individual policy that’s sized to your actual need. Buy a 20 or 30-year individual term policy at the size your family calculation calls for. Enroll in whatever free base group coverage your employer offers. Skip the paid supplemental group coverage unless it’s genuinely cheaper than the equivalent individual term for your age and health.

This gives you three things at once. Your family is protected at the right size regardless of job changes. Your health is locked in at whatever classification you qualify for today. And you still get the small bonus of employer coverage while you’re there.

When group might actually be your best option

There’s one case where group beats individual: you have a health condition that would make individual coverage expensive or unavailable, and your group plan offers guaranteed-issue coverage up to a meaningful amount without underwriting. If that’s you, max out the group coverage, understand the portability terms cold, and treat a job change as a serious insurance event that needs planning around, not just a career decision.

For everyone else, the honest advice is: don’t treat the box you checked at your last benefits enrollment as your family’s life insurance plan. Run the actual number, and buy the policy that meets it.