Aflac: Is Employer-Sponsored Life Insurance Coverage Enough for Parents?

Health, dental, and vision insurance are common benefits that employers offer. However, in a bid to attract and keep good talent, some offer free life insurance coverage as well. There is a trade-off, though — employer-sponsored life insurance is not always enough for working parents. This article explains how employer-sponsored life insurance works and why parents should consider supplementing theirs with private life insurance.

How does employer-sponsored life insurance work?

Employer-sponsored life insurance is a benefit employers may include in an employee benefits package, just like health, dental, and vision insurance. Employees don’t have to pay for coverage but may be able to apply for more than the provided amount. If the employee passes away while the policy is active, a life insurance beneficiary can file a claim to receive a death benefit payout. They may have to contact the employer who owns the policy for further information on filing a claim.

Why employer-sponsored life insurance may not be enough

Employers typically set the coverage as a multiple of the employee’s salary, rounded up to the next $1,000. In many cases, however, they do not go above $50,000 because doing so may have tax consequences for the employee.¹ The IRS considers the premiums the employer covers to be a form of income for the employee.

Furthermore, employees can’t take employer-sponsored life insurance if they leave their job for any reason. This can cause them to go without coverage between jobs if they get a job that doesn’t offer coverage. Employees may be able to apply for more coverage through their employer, but this limits their options and may not always be the most cost-effective route.

Life insurance policies that can supplement or replace employer-sponsored life insurance

Getting a life insurance policy through a private insurer can supplement employer-sponsored coverage and could replace it if the parent leaves their job. Here are some policy types to consider:

1. Term life insurance

Term life insurance lasts 10, 20, or 30 years, depending on the applicant’s choice. It can expire, meaning the policyholder must get a new policy or renew the existing one to continue coverage. Like employer-sponsored life insurance, term life insurance is competitively priced. However, coverage amounts are much larger and exceed $1 million. So, term life insurance can be the most cost-effective form of private coverage.

2. Whole life insurance

Whole life insurance can be more costly than other forms of life insurance. However, it’s permanent, meaning the policyholder enjoys lifelong coverage and a cash value growth component.

This component grows with each premium and earns tax-deferred interest. Policyholders can eventually borrow or withdraw from this cash value, turning it into a source of wealth. A policyholder who no longer needs their policy can surrender it to receive their cash value minus surrender charges.

3. Guaranteed-issue life insurance

Guaranteed-issue life insurance approves all applicants, omitting the medical exam and applying for coverage faster. Premiums are also budget-friendly, similar to employer-sponsored life insurance. However, coverage is lifelong and cash value options are available. Parents could benefit from guaranteed-issue life insurance.

The bottom line

Employer-sponsored life insurance is beneficial since it provides a basic layer of added security for free. However, it’s rarely enough for parents, even if the parent doesn’t leave the company. Therefore, parents should explore policies outside of work, such as term, whole, and guaranteed-issue life insurance. By finding the right private policy, parents can supplement their employer-sponsored coverage and ensure their loved ones have added protection if job situations change.

Source:

¹ Internal Revenue Service (IRS) – Group-Term Life Insurance. Updated February 6, 2024. https://www.irs.gov/government-entities/federal-state-local-governments/group-term-life-insurance. Accessed July 31, 2024.

Content within this article is provided for general informational purposes and is not provided as tax, legal, health, or financial advice for any person or for any specific situation. Employers, employees, and other individuals should contact their own advisers about their situations. For complete details, including availability and costs of Aflac insurance, please contact your local Aflac agent.

Aflac coverage is underwritten by American Family Life Assurance Company of Columbus. In New York, Aflac coverage is underwritten by American Family Life Assurance Company of New York.

Aflac life plans – A68000 series: Term Life Policies: In Arkansas, Idaho, Oklahoma, Oregon, Texas, Pennsylvania & Virginia, Policies: ICC1368200, ICC1368300, ICC1368400. In Delaware, Policies A68200, A68300 & A68400. In New York, Policies NY68200, NY68300 and NY68400. Whole Life Policies: In Arkansas, Idaho, Oklahoma, Oregon, Texas, Pennsylvania & Virginia, Policies: ICC1368100. In Delaware, Policy A68100. In New York, Policy NYR68100. B60000 series: In Arkansas, Idaho, Oklahoma & Virginia, Policies: ICC18B60C10, ICC18B60100, ICC18B60200, ICC18B60300, & ICC18B60400. Not available in Delaware. Q60000 series/Whole: In Arkansas & Delaware, Policy Q60100M. In Idaho, Policy Q60100MID. In Oklahoma, Policy Q60100MOK. Not available in Virginia. Q60000 series/Term: In Delaware, Policies Q60200CM. In Arkansas, Idaho, Oklahoma, Policies ICC18Q60200C, ICC18Q60300C, ICC18Q60400C. Not available in Virginia.

Coverage may not be available in all states, including but not limited to DE, ID, NJ, NM, NY, VA or VT. Benefits/premium rates may vary based on state and plan levels. Optional riders may be available at an additional cost. Policies and riders may also contain a waiting period. Refer to the exact policy and rider forms for benefit details, definitions, limitations, and exclusions.

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Contact Information:
Senior PR & Corporate Communications
Contact: Angie Blackmar, 706-392-2097 or [email protected]