Does your employer offer you enough insurance cover?

Basic life insurance or income protection provided by an employer is usually low-cost or free. There are options to buy additional coverage however, your policy’s face value still might not be high enough to cover your regular monthly commitments or pay off your debt.

If you have financial dependents, i.e., a family who rely on your income, then you probably need life insurance coverage worth at least six times your annual salary to ensure it is beneficial. In many cases, it is even recommend getting coverage worth 10 times your salary as you may find that multiplying your salary may not be enough to replace your actual income as it does not take into account bonuses, overtime or commission.

You should support this by having a private policy to ensure you are leaving behind enough money to clear any outstanding mortgages but also leave enough money to replace your income for the years to come.

You may find your employer’s benefit for life insurance may be fit for purpose if you are single or if you have a spouse who is not dependent on your income to cover household expenses. If are in this position, then you may not need life insurance at all unless you want to ensure the mortgage which you have taken out on your home is cleared. Alternatively, an additional life insurance sum can help to cover your funeral expenses or clear any debts that you do not want to leave behind to someone else.

What happens if your employment situation changes?

The average person in the UK changes their employer every 5 years so it is imperative to ensure you will be financially stable should the unexpected happen to you. If you do decide to change jobs, reduce your hours, or become redundant, then you will most likely face losing your current employee benefits.

There may be a scenario where you go self-employed or contracting and would rely solely on your own efforts to continue to earn.

Due to the lack of transferability of employee benefits you could see yourself in a situation that you are no longer covered for a policy that you once had. You may find that your next employer may not offer you any employer provided insurance.

What happens if your health and lifestyle changes?

As life goes on, you could see yourself in a position where you may need to leave your employment because of ill health.

If you are relying solely or heavily upon employer provided insurance and suffer a medical condition that forces you to leave your job, then you may be losing your life insurance coverage just when you or your family will be in need it the most.

At that point, it may be too late to purchase your own policy at an affordable rate, as mortgage protection is linked to your health, lifestyle and primarily your age. It is a fact that the younger, fitter and healthier you are, the most cost effect a private policy will always be.

Even if your health problems aren’t significant enough to stop you from working, they might limit your employment options and you be then forced to stay with your current employer due to the employer benefits.

Does your existing employers insurance cover your spouse or family?

There is the possibility that some employer’s benefits may offer the facility to allow you to add life insurance for your spouse. If this is the case, then the coverage may be minimal for example a set amount of £50,000 – £150,000 which is usually a common sum. As you could expect, this may not be sufficient when you have just lost your husband or wife unexpectedly.

It is a common perception that the family will only suffer a financial impact if the primary breadwinner dies and as a result many fail to have adequate protection. However, the death of a nonworking or lower-earning spouse can put great demands on the family’s income.

This could have an impact on the surviving person’s lifestyle as they will most likely need to take up the responsibility of running the family home, upbringing of any dependents and covering all costs themselves.

Is your employer insurance your cheapest option?

It is always an excellent idea to explore your options for insurance. You could find it cheaper elsewhere.

The younger, fitter and healthier you are, the more likely you will be to find a cost-effective insurance policy. With guaranteed level-premium insurance that you can purchase from an insurer, the price you are provided with when you take the policy will stay the same amount every year for as long as you have the policy.

However, the coverage provided by your employer you will find usually gets more expensive as you age. It is common that employer insurance policies start out being cheap when you are under 30 and will rapidly increases in price.

Most policies change in price every five years, and you may even find they change sooner if your company changes their insurer. If you are healthy, a non-smoker and have very few/ no pre-existing medical conditions, buying a stand-alone policy might be cheaper than taking coverage through your employer.

Why should you support your employer insurance with your own private policy?

You shouldn’t simply reply on your employer insurance policy to cover you. A way to ensure you do not face the problems we have identified is to purchase some of your protection policies directly in the form of a term assurance for life insurance, critical illness cover and income protection.

Firstly, term life insurance is designed to cover you for a set period, such as 20, 25 or 30 years and is designed to pay a lump sum on the event of your death.

You should also consider critical illness cover which is also pay a lump sum in the event of having a serious life-threatening illness.

Income protection will provide a regular income in the event of being out of work due to an illness.

There are options to have these policies in joint names, or sole names along with a combination of these to work alongside your employer’s insurance.