Iowa Fiduciary

Life Insurance Employer Benefits vs. Private Policies

There’s a long list of factors to consider on your road to retirement. And life insurance should be near the top of that list. This blog will go over the difference between group (employer) and individual life insurance and their advantages and disadvantages.

As you approach retirement, you’re probably wondering if there are any moves to help your transition all that smoother. More than half of employers offer life insurance as a standard benefit with the option to increase the death benefit amount, but should you purchase more life insurance coverage through your employer, or purchase an individual policy on your own?

With many questions and possibly retirement anxiety at stake, you may be wondering where you should start. Johnson Wealth and Income Management is here to help you find those answers. Continue reading below to learn more about life insurance employer benefits vs. private policies.

Life Insurance & Retirement

If you’re thinking about retirement, you may be wondering how you’ll pay for it. Like most nowadays, you might have some debt to pay, like a mortgage or student loans, or a spouse who depends on your income. Insurance transfers the financial risk of life’s events to an insurance company. A sound insurance strategy can help protect your family from the financial consequences of those events. A strategy can include personal insurance, liability insurance, and life insurance.

For retirees, life insurance works the same way as most term or permanent policies: If you pass away, the death benefit is meant to help replace your income and help your beneficiaries pay for your final expenses.

If you lose your employer-provided life insurance plan when you retire, then it’s important to have an individual policy in place so that your loved ones don’t have to worry about paying off any outstanding debts or other financial obligations. Whether you’re nearing retirement or you’re a recent retiree, there are a few things to consider as you shop for life insurance, including:

  • The cost of the policy
  • The length of the policy
  • The cash value feature of a permanent policy

Employer Insurance & Retirement

Whether you need further insurance can sometimes depend on the size of the organization you work for. Just 46% of small companies offer a 401(k) or similar plan to employees, compared to 92% of large companies and 89% of midsize companies, a Transamerica study shows. Among employers that don’t offer a 401(k) or similar plan, 43% said they’re likely to begin doing so in the next two years, according to the study. The survey illustrates the impact that access to workplace retirement benefits can have: Workers at large companies had saved an estimated median of $96,000 in total household retirement accounts and those at midsize companies had saved $73,000, while employees of small companies had saved just $41,000.

You can keep the plan you acquired under your employer after you’ve retired. However, there are some stipulations. Most employer-sponsored life insurance plans are term life policies, meaning you’re covered for a set period of time — in this case, until you leave your place of employment, regardless of the circumstances. That includes retirement.
If you’re not sure whether your employer’s group life insurance is portable, add life insurance to your checklist of items to discuss with your benefits manager or human resources department.

Pros and Cons of Life Insurance Employer Benefits

Employer provided benefits, though well-intentioned, can nonetheless be a minefield for misinterpretation. Here are some of the main advantages of getting life insurance through your employer.


  1. Convenience – Getting covered by your employer is simple. Your HR department handles the paperwork and assists in answering any questions you may have about policies and premiums.
  2. Price – All employers vary in what they offer their employees. However, basic coverage for life insurance is typically free in most places. This makes it simple to get a small amount of coverage at zero cost.
  3. Acceptance – This is perhaps the biggest benefit you can have. Most basic life insurance plans are guaranteed–even if you have a serious medical condition you could still qualify. Supplemental plans allow you to buy additional coverage without providing information about your health.


  1. Coverage is tied to your job – If you decide to leave your job, most times you won’t be able to take your policy with you. This is known as policy portability. If your next job doesn’t offer group life insurance, you could buy an individual policy from the open market. However, the cost of life insurance increases as you age, and you never know if you might develop a medical condition that could raise your rates.
  2. Limited coverage – Most employers will work with one provider. Meaning, you won’t find the range of coverage that you could find outside of work. 
  3. Low coverage amounts – Your employer may have a cap on how much life insurance you can buy. If you need more coverage, you might consider finding an individual term life insurance policy instead.

Pros and Cons of Private Policy Life Insurance 

Private policy life insurance, also known as PPLI, is designed to hold various assets within its insurance structure. Life insurance offers significant tax advantages. Let’s take a look at the following pros and cons below.


  1. Lower costs – Private policies offer lower fees and commissions compared to other retail insurance products.
  2. Estate planning – private policy holders have opportunities to enhance their benefits for wealth transfers and charitable planning strategies.
  3. Enhanced creditor protection – if structured properly, life insurance policy values can be claimed by creditors.


  1. Lifetime distributions – Withdrawals of cash values are subject to income tax to the extent attributable to gain in the policy.
  2. Interest – Interests paid on policy loans are generally nondeductible.
  3. Flexibility – The flexibility with respect to premium payments and death benefits permits policyowners to change the policy in such a way that it may inadvertently become a modified endowment contract (MEC) with adverse tax consequences.

How Johnson Wealth and Income Management Can Help

Navigating your insurance options is one of the most daunting aspects of retirement. But ignoring this costly issue could prove extremely damaging to your finances and quality of life.

Making the right choice when it comes to choosing a reliable life insurance policy is easier with the help of a trusted Fiduciary. At Johnson Wealth and Income Management, our team of financial professionals work tirelessly to further your long-term financial goals, including focussing on all types of insurance as you approach retirement.

For more information on our insurance planning options, contact us here today.


All written content on this site is for informational purposes only. Opinions expressed herein are solely those of Johnson Wealth & Income Management and our editorial staff. Material presented is believed to be from reliable sources; however, we make no representations as to its accuracy or completeness. Investing involves risk. There is always the potential of losing money when you invest in securities. Asset allocation, diversification and rebalancing do not ensure a profit or help protect against loss in declining markets. All information and ideas should be discussed in detail with your individual advisor prior to implementation. The presence of this website, and the material contained within, shall in no way be construed or interpreted as a solicitation or recommendation for the purchase or sale of any security or investment strategy. In addition, the presence of this website should not be interpreted as a solicitation for Investment Advisory Services to any residents of states where otherwise legally permitted to conduct business. Fee-based financial planning and Investment Advisory Services are offered by Sound Income Strategies, LLC, an SEC Registered Investment Advisory firm. Johnson Wealth & Income Management and Sound Income Strategies LLC are not associated entities. Johnson Wealth & Income Management is a franchisee of the Retirement Income Store. The Retirement Income Store and Sound Income Strategies LLC are associated entities. © 2021 Sound Income Strategies.