Workers at small businesses may not want to rely on employee benefits to provide life insurance. A study from industry group LIMRA finds only 25 percent of small businesses provide coverage to their employees, and the number offering benefits may be on the decline.

Small businesses dropping benefits

The limited number of small businesses offering life insurance to workers appears to be part of a larger trend of declining employee benefits. The 2013 LIMRA study found only 47 percent of businesses with 2-99 employees offered any benefits at all, the lowest percentage recorded in 20 years.

Medical and prescription drug benefits were most commonly offered by small businesses, at 44 and 40 percent respectively. Those benefits were followed by dental and then life insurance.

Overall, one in four small businesses offer life insurance benefits, but the percent can vary depending on the number of workers employed by a firm.

  • 2-9 employees: 16 percent
  • 10-24 employees: 41 percent
  • 25-49 employees: 61 percent
  • 50-99 employees: 71 percent

Other benefits surveyed by LIMRA and offered by less than 10 percent of small businesses include cancer insurance, critical illness insurance and supplemental health insurance.

Other options to buy life insurance

With the U.S. Census finding 35 percent of the workforce is employed by businesses with less than 100 workers, many may have to find life insurance some place other than on the job.

However, there can be benefits to purchasing an individual policy rather than relying on insurance from an employer-sponsored group plan. While purchasing life insurance through work can be convenient, it provides limited coverage options. Coverage may be capped, and individuals may lose their benefits should they leave their job.

Fortunately, for families seeking their own coverage, there are a number of options to find individual policies. Agents and brokers can provide life insurance quotes, and online aggregators are becoming increasingly popular. These websites allow visitors to quickly obtain and compare life insurance rates from a number of companies.

Purchasing an individual policy also provides the opportunity to buy whole life insurance which can build cash value. Insurance benefits though work may be limited to term life which, although cheaper, does not provide guaranteed coverage or fixed premiums.

It is unclear whether the LIMRA study signals a permanent change in the number of small businesses offering benefits or if it is simply a consequence of the recent difficult economic climate. Regardless, all workers should take steps to evaluate their life insurance needs and obtain coverage to protect their family finances.