Life Insurance Through Work Benefits: Does it Provide a False Sense of Security?

53 per cent of Canadians who have life insurance through their employer — and who do not have additional life insurance coverage — are between the ages of 30 to 50; which means they risk leaving their families financially burdened in the event of an untimely death

TORONTO (May 4, 2021): According to a study from PolicyMe, a digital life insurance platform, the majority (62%) of Canadians with life insurance have it through their employer, and over half of those rely solely on employer-provided insurance despite many needing more to cover loved ones in the event of an untimely death. Of particular concern, the study found that 53 per cent of those without additional coverage are between the ages of 30 to 50, a group most likely to have dependents and large liabilities, such as a mortgage. This begs the question: does life insurance provided through work benefits offer a false sense of financial security?

Life insurance provided as a work benefit — also called group life insurance — is typically worth one to two times an individual’s annual salary. With the average salary in Canada coming in at just over $54,630 per year, this means $54,630-$109,260 in coverage. After funeral-related costs and other expenses following a death, this doesn’t leave much in the form of income protection. While that amount may be sufficient for some, for most families it is too low to cover ongoing living expenses once future earnings are suddenly taken away.

“We’re not saying that everyone needs to supplement their employer’s group life insurance benefit,” explains Andrew Ostro, Co-founder & CEO of PolicyMe. “However, it is important to stress that many Canadians are not sufficiently covered through work benefits alone. The key is for people to ask themselves if their life insurance will be enough to support their family if they pass away suddenly. Group life insurance is a valuable benefit, but it shouldn’t be viewed as a one-size-fits-all solution.” 

Here are three scenarios where Canadians would benefit from supplementing their group life insurance with additional coverage:

The majority of the large expenses that an individual shares with their partner (i.e. mortgage payments, rent, property taxes) are not reduced by half if one income is suddenly lost. One to two years of your salary will not keep your partner afloat long-term. And in the case where children and ageing parents are dependent on your income, additional coverage may be required.

Relying solely on life insurance through an employer can be risky when you consider that many people no longer stay at their jobs for long periods of time. If you switch jobs, lose your job, or become self-employed (i.e. without benefits) you generally lose the protection that your previous job offered. Additionally, employers have the right to change their benefits at any time, meaning you could wake up one day with less protection. For these reasons, coverage is better tied to you as an individual — providing more flexibility and predictability — rather than to you as an employee.

Age is a major factor in determining life insurance premiums: the younger you are, the less expensive your monthly payment. If you rely solely on employer’s benefits throughout your 30s and 40s, and determine you need it later in life, you’re going to pay higher rates. More importantly, if you’re young and healthy, it’s likely you’ll get better rates purchasing individual life insurance than what you’re paying through your work benefit plan as work policies distribute risk across an entire group, which penalizes healthier individuals.

Here’s a look at the average life insurance rates through PolicyMe for $500,000 in coverage for healthy individuals. The younger you are when you purchase individual life insurance, the better the rates you will receive.

Wondering if you need additional coverage to supplement your work benefit plan? To find out, visit policyme.com.

PolicyMe is a new kind of digital life insurance platform built for the modern consumer who values ease and affordability. PolicyMe makes it easy to get a quote, apply for coverage, and get approved in minutes, not weeks. The fully-underwritten term life insurance policies we offer are stripped of unnecessary bells and whistles, resulting in fewer steps, lower costs, and the same high quality coverage you deserve. PolicyMe is licensed to operate in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, New Brunswick, Prince Edward Island, Nova Scotia, Yukon Territories, Northwest Territories & Nunavut.

These are the findings of a study/survey conducted by PolicyMe from August 12 to August 16, 2020 with a representative sample of 1,001 online Canadians with life insurance who are members of the Angus Reid Forum. The survey was conducted in English and French.

The precision of Angus Reid Forum online polls is measured using a credibility interval. In this case, the poll is accurate to within +/- 3.1 percentage points, 19 times out of 20, had all Canadians been polled. All sample surveys and polls may be subject to other sources of error, including, but not limited to coverage error, and measurement error.

The Angus Reid Forum is Canada's most well-known and trusted online public opinion community consisting of engaged residents across the country who answer surveys on topical issues that matter to all Canadians.

Media Contact:

Linda North

NorthPR (for PolicyMe)

linda@northpr.ca

416-708-8012