At Open Enrollment, Deciding How Much Life Insurance Is Enough

Employees should take a detailed look at their family’s needs

By Stephen Miller, CEBS Sep 26, 2016
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When it comes to life insurance, many Americans find it difficult to decide how much is enough. But it's a determination they often have to make during open enrollment, when many employees have the opportunity to purchase supplemental life coverage, often in incremental amounts, as a voluntary benefit through payroll deferral. 

In many cases, the basic benefits provided by an employer-sponsored plan may not be sufficient to cover all of a family's financial needs in the event of an untimely death. Long-term needs include ongoing support for a spouse and children, such as savings for college. But just the initial expenses following a death can pose a financial shock to a family. According to the National Funeral Directors Association, the average cost of a funeral is $6,600 and cemetery services can mean an additional $3,000—and all that before paying medical bills, a mortgage or education debts.


Open Enrollment Season

For tips on helping employees make the best choices of benefits during open enrollment, check out the SHRM resources provided below:

· Guide to Open Enrollment
· Health Benefits Glossary of Terms · Explaining High Deductible Plans to Employees

"Losing a family member is devastating emotionally, and often it can be financially difficult as well," said Mike Wozny, Atlanta-based president of Anthem Life, an insurance provider. "With the loss of a loved one, many families also lose their income."

In an April 2016 Anthem survey of 1,010 U.S. adults, 24 percent reported they have no savings and could not pay their family's bills without income. Depending on an individual family's needs, supplemental life insurance can build on the employer-provided life insurance benefit to provide for future financial security.

"When it comes to figuring out how much life insurance to purchase, there are a number of free online life insurance calculators to help provide an estimate on how much would be the best for your situation," Wozny pointed out. He also suggests advising employees to ask these questions when purchasing supplemental life insurance:

How much will your family require to meet current needs?

  • How much will burial services cost?
  • Do you have a mortgage?
  • Do you have outstanding debts?

How much will your family need in the future?

  • Is your spouse working? Will he or she continue to work?
  • How many children do you have?
  • Will your children have major education expenses?

Another point that employees may want to consider: "If you're single and you don't have any children, you still may have a need for life insurance," said Brian Greenberg, president of True Blue Life Insurance in Scottsdale, Ariz. "If you carry a high amount of debt, have a co-signer for a loan or if you take care of an aging or ill parent or family member, having life insurance will help protect your estate, your co-signer and those you care for."

"Life insurance is rarely a topic that families want to think about, but it should be a part of an overall financial plan," Wozny said. "The key is taking a detailed look at your family's needs to determine whether you still have enough coverage, have too little, or have too much."

Related SHRM Articles:

Life Insurance: Help Employees Match Policy Features with Personal Expectations, SHRM Online Benefits, September 2011

Young Workers Undervalue Life Insurance as a Benefit, SHRM Online Benefits, December 2010

SHRM Resource Page:

Guide to Benefits Open Enrollment Season, SHRM Online Benefits, September 2016

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