Is group life insurance enough?

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Most Canadians with life insurance (62%, according to a recent survey) get their coverage through a workplace group benefits plan—but they likely don’t have enough to protect their families. The same study found that group plans generally insure just one to two times the employee’s annual income, or between about $55,000 and $110,000.

While life insurance coverage through a group plan is valuable, advisors who regularly run the numbers for their clients know sums in that range can quickly erode through funeral and other immediate expenses following a death. Based on an individual’s personal situation, something closer to six to 10 times an annual income may be more appropriate—and, it’s at the higher end for those who count on non-salary compensation such as commissions and bonuses.

In addition, spouses and children may not be covered under the group plan, which leaves a hole in a family’s risk protection strategy. Meanwhile, choosing to bump up coverage held with an employer—for example, to increase the life insurance benefit amount or add a spouse—leaves employees vulnerable because they generally can’t take their group coverage with them if they change employers.

Advisors can get their clients thinking about the range of common situations that might require additional, individually held life insurance by asking probing questions. Consider using the following as a starting point for conversations with your clients:

Do you need your own life insurance? 

• How much life insurance coverage would you have if you lost your job?
• What if you moved to an employer that doesn’t offer insurance benefits?
• What if your employer decided to stop offering insurance benefits?
• What would you do if you needed medical underwriting to get your own life insurance at some point in the future but no longer qualified?

Do you need to top up your life insurance? 

• With just your group life insurance, how much would your family have to cut back their expenses?
• Would they be able to keep up with mortgage or rent payments and afford any necessary repairs?
• Could they pay for health, dental, and other benefits if coverage from your employer stops with your death?
• Will your children be able to afford the education you want for them no matter what?
• Will there be some room in the budget for other activities, like travel?

Employees often feel “covered” when they have group benefits, and there’s no question workplace coverage provides an important foundation for the protection your clients need. However, it’s important to ensure everyone has sufficient (and ideally portable) life insurance for the unexpected events life sometimes throws our way. As an advisor, you can play a critical role by helping clients decide how much life insurance they need and then sourcing cost-effective solutions for individually held policies that supplement group coverage.