Open enrollment season is here, and many employees are reviewing their benefits packages. While it's tempting to check all the boxes on what your employer offers, personal finance expert Suze Orman warns that one popular perk may not be enough to protect your family financially: employer-provided life insurance.
Why Workplace Life Insurance Falls Short
Orman points out that most employers offer a basic life insurance policy worth only one or two years of your salary. "I am not saying that's a lousy benefit — but it is a dangerously insufficient benefit," she writes in a recent LinkedIn post.
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For families with dependents, this limited coverage may leave loved ones vulnerable. According to Orman, a meaningful life insurance policy should cover at least 20 times annual living expenses, and ideally 25 times, to provide enough financial security.
The Risks of Relying Solely on Employer Coverage
The problem, Ormans says, with relying only on workplace life insurance is straightforward: it rarely matches the financial needs of a surviving family. She adds that a death benefit equal to one or two years of salary cannot support a household if the primary earner dies unexpectedly.
This is especially critical for younger families, or those with a mortgage, student loans, or children's education costs. Without sufficient coverage, surviving partners may face tough financial decisions, including scaling back work hours or cutting lifestyle expenses.
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How Term Life Insurance Can Bridge the Gap
Orman says term life insurance is a better option to supplement employer coverage. Term life insurance lasts for a set period — such as 10, 20, or 25 years — and pays a death benefit if the insured passes away during that term.
The cost of term life insurance is generally manageable. Orman shared this example:
A 35-year-old man in average health could expect to pay around $350 annually for a 20-year policy with a $500,000 death benefit. For someone age 45, premiums may be roughly double that, while premiums for women at the same age are usually lower.
"To be clear: when you buy a ‘level term' policy, the premium you pay in the first year will be the same premium you pay every year," Orman wrote. She said that for most people, these premiums are less than the monthly payment on a typical car loan, making term life insurance an affordable way to enhance financial protection.
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Shop Beyond Your Employer
While some employers offer the option to buy additional coverage, Orman says employees — especially younger and healthier individuals — should explore the open market. Online marketplaces often provide competitive rates that could save money over employer-sponsored plans.
In short, Orman tells employees not to treat basic employer life insurance as sufficient. By supplementing it with a thoughtfully chosen term life policy, you can give your family the financial peace of mind they need, even if the unexpected occurs.
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