How To Choose Between Term Life Insurance Through Work Or On Your Own

By Lacie Glover

Your employer offers term life insurance, so you don't need to shop around for a different policy, right?

Not so fast. After you review your employer's life insurance offerings during the annual open enrollment period, you get to decide if a policy works for you -- and that choice is highly individual. Sixty-five percent of workers who buy life insurance through work say they need more coverage than offered by their employers, according to studies by industry group LIMRA.

If your group life insurance is free, there's no reason to decline the coverage. But if it's not free or the coverage amount isn't enough, which often is the case, you may have to search for a policy on your own. Group life insurance typically ends when your job does. On an individual policy, however, you get to choose the coverage period.

Open enrollment typically starts in late fall in many workplaces, so now is the time to figure out how much life insurance you need and where to get it from.

Basic and supplemental group life insurance
Getting the free group life insurance offered by many employers is simple. All you do is sign up, and coverage is guaranteed. The death benefit, or payout to your beneficiaries if you die while the policy is in force, often is about one to two times your annual salary.

But your family may need more coverage, especially if you have many dependents or a lot of debt. It's important to determine how much life insurance coverage you need before open enrollment time, because many employers offer supplemental policies at a premium. Those policies will increase the death benefit by up to three to four times your salary or more.

Getting supplemental term life may not be easy. You may need to fill out a health questionnaire and could be denied coverage depending on your health history or that of your family.

If you don't plan on staying in your current job much longer, you may want to buy a policy elsewhere that's more portable.

Upsides of life insurance through an employer
Even if you have to pay for a workplace life insurance policy yourself, keep in mind that group rates tend to be cheaper than individual term life insurance plans and be more convenient.

When you buy life insurance on your own, you may have to submit to a medical exam, a blood test and a lengthy questionnaire in order to qualify for a policy. The insurer can deny you a policy, depending on your risk factors.

If you're older than 45 or a smoker, or have a chronic condition, getting life insurance through work may be the only affordable option. Buying an individual policy on your own will get more expensive each year as you age and for every medical condition you develop.

Shopping for your own term life insurance
Providing your family with the financial safety net of life insurance that doesn't depend on your work is the best strategy, because then you won't have to worry about losing coverage if your job ends. Buying on your own term life policy can also give you access to higher coverage amounts and specialized life insurance riders that add other benefits.

Prices vary considerably among life insurers for the same coverage, so it's wise to get quotes from several companies.

Lacie Glover is a staff writer at NerdWallet, a personal finance website. Email: Twitter: @LacieWrites.