Question: I’ve been in my job for several years, and it has some great benefits, including life cover. The subject has come up a few times lately, and I’m wondering if I should be looking at taking out my own separate policy, too. A friend said I should, but I’m not sure what the benefit would be. Isn’t the cover from my job enough to protect my family if something happened to me?

Answer: That’s a great and very common question – and the short answer is: it depends on your personal situation. Life cover through work, also known as death in service benefit, is a valuable part of many employment packages.

This is typically a lump-sum payment made to your chosen beneficiaries if you pass away while employed with your current company, and it is generally calculated as a multiple of your annual salary – often two to four times your earnings.

How does work life cover work?

This type of cover is usually automatic, meaning there’s little to no paperwork or medical underwriting involved, and the payout is typically tax-free. It’s a generous perk and certainly worth having.

However, there are some important limitations to remember that might affect whether it’s enough on its own for your needs. These include:

1. It’s tied to your job: If you leave the company, your cover stops. Some policies may allow you to convert it into a personal plan, but this often comes at a higher cost.

2. The payout may not be enough: If you have a mortgage, dependents, or other financial commitments, a lump sum of two or three years’ salary may not stretch as far as you’d like when you consider household expenses, debts, and the cost of raising children or maintaining a home.

3. Limited flexibility: You don’t control the policy terms, the level of cover, or the ability to adjust it as your circumstances change – such as when you buy a home, get married, or have children.

Personal life policy

A separate, personal life insurance policy gives you control and security, regardless of your job situation. Here’s why it’s worth considering:

• It stays with you: Unlike employer cover, personal life insurance follows you all throughout your career and on into retirement, ensuring continuity of protection.

• Tailored cover: You can choose a payout that truly reflects your family’s full financial picture, including mortgage repayments, your children’s education, and ongoing living costs.

• More options: With personal cover, you can decide between term assurance (which provides cover for a specific period, such as 20 or 30 years) or whole-of-life assurance (which guarantees a payout whenever you pass away).

Additionally, you can include specified illness cover – a benefit that pays out if you’re diagnosed with a serious illness.

• Specified illness cover: Personal policies allow you to add specified illness cover, which pays out if you’re diagnosed with a serious illness. This benefit is not included in most work-based life cover policies.

So, do you need both?

It really depends on your circumstances. If you’re single with no dependents and minimal financial commitments, workplace cover might be enough. But if you have a family, a mortgage, or long-term financial responsibilities, relying solely on work-provided life insurance could leave gaps in your safety net.

Work life cover is a great benefit, but for most people, it shouldn’t be the only protection in place. A personal policy provides certainty, control, and peace of mind that your family will be financially secure, no matter what happens.

If you’re unsure about your level of cover or what you need, it’s worth reviewing your situation. Getting it right now could make all the difference in the future.

Martin Glennon is head of financial planning at ifac, the professional services firm for farming, food and agribusiness