Does my employer-sponsored life insurance provide enough coverage?

This is a hard question to answer, but it's one that I get on a regular basis. Many people receive life insurance through their employer's group benefit plan. But they often wonder, "Is this enough coverage for me?" (See An Overview of Commercial Group Life and Health Plans to learn more about these policies.)

While it's impossible to give you a definite answer without knowing your particular plan and situation, there are a few things you should consider when trying to determine whether your group life insurance is all the coverage you and your family needs.

• What type of insurance is it? With group life insurance plans, the most common coverage you will see is a term life insurance policy. While term life insurance policies are cheaper than whole life policies, they expire after a certain number of years. The problem here is that if you relied entirely on your employer's policy and it expires before you pass away, you are left without coverage. You can always apply for personal life insurance after that, but by that point you may have developed a medical condition that makes you ineligible for coverage. Because of this risk, it might be better to get your own insurance early on, before any medical conditions arise (find out what is The Perfect Age to Get Life Insurance).
• What sort of limit do you have on your policy? The most common limit of insurance we see is $100,000 or less (the rule of thumb here is usually twice your annual salary). If this is enough for you, then you should be okay without a personal life insurance policy.
• What's your employer's policy for employees leaving? When an employee is let go or quits, they usually have a few options about their group life insurance plans: they can convert it into an individual policy, they can cancel or lapse the policy, or they can port the policy to their new employer if it is with the same insurance company.
• And finally, the big question: what can you afford? With a group life insurance plan, your employer is likely paying for most if not all of your premiums. If you can't take any money out of your monthly budget for your own policy, then you will have to stick with your employer's policy (for plenty of advice on budgeting and managing your money, check out our Top 25 Personal Finance Bloggers to Follow on Twitter).