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If you’re trying to decide if you need life insurance, ask yourself: Would anyone be put at risk financially if I weren’t around anymore?

Many jobs come with a benefits package on top of paid wages or salary — things like, health insurance, dental insurance, and 401(k) retirement accounts. Employer life insurance may also be included in a benefits package to give an employee’s beneficiaries some added financial security in the event of their death.

According to the U.S. Bureau of Labor Statistics, approximately 98% of workers with access to employer life insurance choose to participate. But is life insurance offered through your employer enough to take care of your loved ones if you pass away?

There’s no one-size-fits-all approach to financial planning and purchasing life insurance. Depending on an individual’s unique situation and financial goals (or obligations), the amount of life insurance coverage needed can vary from person to person.

To help determine how much life insurance is right for you, let’s break down the basics of employer life insurance and how different policies might work in practice.

What Is the Typical Coverage Offered?

Commonly, employers that provide life insurance purchase a group term policy for their employees. Term life insurance grants coverage for a specific time period, known as the term, in exchange for regular payments (called premiums) by an employer or the insured employee. Unlike individually purchased term insurance, the term for group insurance is typically the duration of the employ of the insured.

Group term life insurance can also vary by amount. An employer may offer a flat rate of coverage to their employees. Or, in some cases, an employer may calculate the total life insurance coverage according to an employee’s current salary. For example, an employer life insurance policy may pay out one, two, or three times the employee’s annual salary.

While the benefit coverage amount under employer life insurance may vary by salary, you may still qualify for a group policy even if you’re older or have pre-existing conditions and less-than-perfect health. However, note that coverage may lapse when employment ends or if an employee switches from full-time to part-time work. Some companies offer policies that are “portable,” meaning the employee can take the policy with them when/if they leave the employer.

Life insurance could reinforce a long-term financial plan.

If an insured employee dies during the policy’s term, the insurance company is then responsible for paying the coverage amount to the designated beneficiaries, barring a few exceptions, like suicide within two years of the policy start date or death from an exempt hazardous activity (e.g. piloting a plane).

This payment is called a “death benefit,” and can be paid as a lump sum or in installments depending on a policy’s conditions. On the other hand, if an insured employee dies after the insurance term ends, their beneficiaries do not receive a payout of death benefits.

Recommended: What Is Life Insurance & How Does It Work?

How Much Can Employer Life Insurance Cost?

For employers with many employees, obtaining a group life insurance policy parallels wholesale purchasing, meaning that the price per individual is generally less than if each employee paid for their own policy. Therefore, employment life insurance is usually very affordable for employees, if not free, for the most basic coverage.

However, this sort of baseline benefit does not account for additional coverage, which employers may also offer (on top of the standard group policy) at the partial or full expense of the employee.

Determining if extra coverage through an employer is cost effective may depend on several factors, including age, health, income, and number of dependents. For example, smokers can pay up to two or three times more on life insurance premiums than their non-smoking counterparts.

Keep in mind that employer life insurance may be subject to payroll taxes, such as Social Security and Medicare. For any benefits coverage greater than $50,000 that is paid or subsidized by an employer, the total amount exceeding $50,000 would be counted as employee income by the IRS.

The threshold for taxation on coverage for spouses and dependents is significantly lower, at just $2,000. Any employer life insurance plan with coverage above $2,000 would be liable for taxation in its entirety.

Is It Possible to Switch Coverage?

Employer life insurance can be affordable, but it may not be very customizable or flexible.

Since the employer holds the group policy with a specific insurance company, employees do not usually have the individual discretion to shop around for the coverage offered in a benefits package.

Opting for an alternative or supplemental life insurance policy may require undergoing a life insurance medical exam. This exam could consist of a verbal questionnaire with a medical professional and collecting blood and/or urine samples.

Together, medical history and personal information are some of the different factors used to decide whether an applicant is eligible for life insurance coverage.

Information from the medical exam can impact the cost of the eventual insurance premium as well, assuming the applicant is deemed eligible. In this scenario, younger, healthier employees may opt to switch to an individual life insurance policy, since they could obtain a lower rate that may last for decades of coverage.

Since employer life insurance coverage can lapse when employment ends, it may be useful to research various policy options (or speak with a benefits specialist at your job) to ensure coverage is not interrupted when jobs change.

Recommended: How to Buy Life Insurance

What Happens If I Change or Lose My Job?

For many working adults, changing jobs is necessary for career growth and achieving financial goals. But changing or leaving a job may come with some financial challenges beyond a disruption to income. Employer benefits, such as health insurance, 401(k) retirement account, and life insurance may be put on hold or not carry over to a new employer.

Some insurance companies may let you transfer to a new employer’s policy, especially if they are the new employer’s insurance provider. In some cases, it may be possible to convert a former employer’s group term policy to individual term or whole insurance with the same insurance company.

When life insurance had previously been paid for or subsidized by an employer, taking out an individual policy could translate into an increased individual monthly expense. That’s because the policyholder, not the employer, would now be paying the life insurance premiums.

Whole life insurance, sometimes called permanent life insurance, is generally more expensive than term policies, since it can cover an insured individual for life.

What About an Additional Policy?

Employer life insurance could provide at little to no cost basic coverage for a family in the event of an unexpected death. But many people decide to take out additional insurance or expand their coverage through a rider, which is an add-on that allows insured individuals to customize their policy to their needs.

Cost and conditions for riders can vary between insurance providers. The following are some common types of riders that might supplement an existing life insurance policy:

•   Accidental Death Rider: If the insured individual dies from an accident, a greater death benefit is paid out to beneficiaries. This could be advantageous for a working parent to take care of surviving family’s future expenses if the unexpected were to happen.

•   Accelerated Death Benefit Rider: An insured individual could receive a portion of their death benefits while they’re alive if a diagnosed terminal illness is expected to significantly reduce their lifespan. This could help pay for the sudden cost of care and treatment, but might be subtracted from the amount family and beneficiaries receive upon the insured person’s death.

•   Spouse Insurance Rider: This rider can add a spouse to an insured person’s policy instead of taking out separate life insurance for them.

•   Waiver of Premium Rider: This rider can waive the need to pay insurance premiums while maintaining coverage, if an insured person becomes permanently disabled or can no longer work due to an injury or illness. Policyholders who are at risk due to dangerous jobs or family history may find this sort of policy worthwhile.

In addition to considering the perks and costs of riders, comparing term and whole life insurance is helpful for finding the right policy for you.

Determining How Much Coverage You Need

Everyone’s situation is different. And, securing life insurance may provide confidence and reinforce a long term financial plan. To figure out how much life insurance coverage may be needed, it can be helpful to first get an accurate picture of your finances and likely future expenses.

For people with children and dependent family members, a breadwinner’s death could result in lost income that supported essential spending, such as groceries, rent or mortgage payments, and utilities. It could also create additional expenses for childcare or a home health aide, if a surviving parent or caregiver then needs to work.

There are also down-the-road expenses, like retirement and college tuition for children, that could be impacted by the loss of a spouse, partner or parent.

Unpaid debt — such as, a mortgage loan, credit card balances, and student loans — are some long-term payments to factor in — since cosigners or the estate could still be left with the burden of making payments on certain debts. (Note that estate and debt laws vary from state to state).

Death can be accompanied by notable end-of-life expenses, too. On average, funerals cost between $7,000 and $12,000 depending on location and whether the deceased is buried or cremated.

In addition to savings and investments, life insurance can offer a financial safety net and support the future of those left behind.

The Takeaway

Employer life insurance can be an asset to a family’s financial security, as typically it grants coverage for a specific time period. The benefit coverage amount may vary by salary, and older employees or those with pre-existing conditions may still qualify for a group policy. Coverage could expire when your employment ends or if you move from full-time to part-time work. If you need more coverage, you may decide to take out additional insurance on top of your employer life insurance.

If you’re thinking about getting life insurance, SoFi has partnered with Ladder to offer competitive life insurance policies that are quick to set up and easy to understand. You can apply in just minutes and get an instant decision. As your circumstances change, you can easily change or cancel your policy with no fees and no hassles.

Coverage and pricing is subject to eligibility and underwriting criteria.
Ladder Insurance Services, LLC (CA license # OK22568; AR license # 3000140372) distributes term life insurance products issued by multiple insurers- for further details see ladderlife.com. All insurance products are governed by the terms set forth in the applicable insurance policy. Each insurer has financial responsibility for its own products.
Ladder, SoFi and SoFi Agency are separate, independent entities and are not responsible for the financial condition, business, or legal obligations of the other, SoFi Technologies, Inc. (SoFi) and SoFi Insurance Agency, LLC (SoFi Agency) do not issue, underwrite insurance or pay claims under LadderlifeTM policies. SoFi is compensated by Ladder for each issued term life policy.
Ladder offers coverage to people who are between the ages of 20 and 60 as of their nearest birthday. Your current age plus the term length cannot exceed 70 years.
All services from Ladder Insurance Services, LLC are their own. Once you reach Ladder, SoFi is not involved and has no control over the products or services involved. The Ladder service is limited to documents and does not provide legal advice. Individual circumstances are unique and using documents provided is not a substitute for obtaining legal advice.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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A death benefit is a lump sum payment beneficiaries receive when the owner of a life insurance policy dies. Here are a few other things you should know.

Taking a break from financial obligations can offer some breathing room, but it’s important to understand how deferred payments may affect your credit score.

Money orders are a form of payment that are sometimes very useful if you need to transfer funds to someone. They can be obtained from various outlets, at typically a low fee, and can be a good way to move cash when a person doesn’t have or doesn’t want to use a bank account.

Here, you’ll learn more about what money orders are, how they work, when to use them, and what alternatives to money orders exist.

What Is a Money Order?

Think of a money order as a paper check that can never bounce because it has been prepaid by the sender. It can be cashed or deposited just like a check, but it offers a few benefits over checks beyond never bouncing.

For one thing, if for whatever reason you don’t have a bank account, that isn’t a problem. You don’t need a bank account to get a money order, cash one, or even use money orders to pay bills.

To send a money order, here’s the protocol of the U.S. Postal Service:

1.    Take cash, a debit card, or a traveler’s check. You cannot pay with a credit card.

2.    Fill out the money order at the counter with a retail associate.

3.    Pay the dollar value of the money order plus the issuing fee.

Recommended: Can You Buy a Money Order With a Credit Card?

Where to Get a Money Order

Many of the biggest banks offer money orders and often require that they be purchased at a branch. There can be a $5 to $10 fee when buying a money order worth up to $1,000 (though the fee may be waived for premium accounts).

Sometimes the money order fee is also waived for members of the military. However, many banks require that you already have an account with them to purchase a money order.

Money orders are also issued at places like Walmart (with a maximum fee of $1, and the exact fee varying by location), convenience stores, credit unions, and the Postal Service.

Postal Service fees for money orders are based on the dollar amount: $1.45 for a money order of up to $500, $1.95 for one from $500 to $1,000 (which is the maximum amount for a single money order), and 50 cents for postal military money orders issued by military facilities.

Advantages of a Money Order

Money orders may be safer than some other forms of money. For example, while a check contains sensitive personal information like your home address, phone number, and bank account and routing number (plus the name of anyone else on the account), a money order usually only contains the names of the payer and payee.

So a money order is usually a more anonymous and therefore a potentially more secure method of payment than a check, although some money order issuers may require an address. That’s usually in case the check’s payee needs to contact the sender about the payment.

Sometimes both halves of the transaction may have to include this information. If you’re unsure, the best bet is to just ask.

Potential Drawbacks

Here are a few of the cons of money orders:

•   Fees. While you can pay bills with money orders, the small fees can add up if you’re relying on them for that purpose.

Check cashing stores may charge a flat fee of $2.99 per money order, while some might charge around 4% to 5% to cash a money order. Many banks usually will do it for free. Also note that there are banks that will deposit a portion of the order and then after a couple of days release the rest.

•   Payment limits. Usually $1,000 is the ceiling for most money orders.

•   Inconvenience. The fact that many banks require your presence to process a money order may make putting money orders you receive into use less convenient.

The cap on a money order’s value also means there’s a time investment if, say, you need to pay $2,000 to someone — that’s two money orders, two fees, and twice as much time spent getting them issued.

In addition, not all businesses may accept money orders. If you are trying to use one to pay a bill, check with the payee first. Every now and then, you may encounter someone who accepts only, say, online bill paying.

•   Use in scams. A big strike against money orders overall — and this is why banks can be somewhat cautious in accepting them — is that they can be used in banking scams. Money orders are perceived as a safe way to receive payments, and that is true when they are legitimate.

But the news can share stories about counterfeit money orders that revolve around suspicious prizes, employment opportunities, classified ads, and so on. Because money orders are not checks, it can make them harder to trace. It’s a good idea to keep your receipt for a money order until you are sure the order has been received and cashed.

Alternatives to Money Orders

Sometimes vendors or recipients aren’t able to accept a check, and a money order might make sense. But there are digital age options like peer-to-peer payments or P2P transfers.

P2P platforms are often a free service offered by financial institutions that lets users send and receive money, usually in minutes.

And P2P transfers are generally quick, as fast as a few seconds. Examples of services people use for P2P payments are PayPal and Venmo, as well as Zelle which moves money in a slightly different way, from bank account to bank account, but is usually mentioned in the same breath with the others.

Also, many banks now offer ways to transfer money from one bank to another as part of their services, making it easy to move money between your own accounts and to other individuals and businesses.

Recommended: Pros and Cons of Electronic Banking

The Takeaway

Money orders are a paper financial tool, which, like a check, can move funds. They have the added benefit of being able to be used even if you don’t have a bank account, and the fees involved in getting one can be quite low. However, there is typically a $1,000 cap on the amount of a money order, and it can take some time and energy to get one.

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SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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