Why tech workers need a different approach to life insurance
If you work in tech or at a startup, your paycheck probably isn’t the full picture. You might get most of your compensation from restricted stock units (RSUs), options, performance bonuses, or a future liquidity event. That’s great for long-term wealth building — but tricky when it comes to life insurance.
Life insurance is designed to protect your loved ones if you pass away. But if you’re only insured based on your salary — or relying solely on your company’s group plan — you might be leaving your partner or dependents exposed.
How equity compensation affects your coverage needs
Most coverage rules of thumb — like buying 10–15x your income — assume a steady paycheck. But what happens when your income is uneven or your net worth is mostly tied up in stock?
Let’s say you earn $120,000 in salary and $150,000 in RSUs annually. If your life insurance only covers the salary portion, that’s a huge gap.
Even worse, if those RSUs vest over time, your family may not get full access if something happens to you early on. That makes it essential to factor in:
Vesting schedules (what’s guaranteed vs. at risk)
Company valuation or volatility
Liquidity or exit timelines
Your partner’s reliance on projected equity or bonuses
What happens if you only rely on group life insurance
Many tech employees have free life insurance through work — usually 1-2x salary. But there are some big drawbacks:
Group Life Insurance | Individual Term Policy |
|---|---|
Usually 1–2x salary only | Can cover total compensation |
Ends if you leave the company | Stays with you if you switch jobs |
Not always portable | Fully owned and customizable |
No underwriting required | Requires application but better value |
Disclaimer: Employer-sponsored group life insurance is helpful, but often insufficient for full coverage. Always assess if it meets your family’s financial needs. Don’t just guess. Use the same formulas recommended for salaried professionals — but adjust them for your total income and goals.
Example 1: 10x income rule
If you earn $120K base + $150K RSU: 10 x ($120K + $150K) = $2.7 million in recommended coverage
Example 2: DIME method (Debts, Income, Mortgage, Education)
Add up:
Outstanding debt: $50K
Income replacement: $2M
Mortgage: $600K
Child’s education: $250K Total: $2.9M coverage
Coverage needs vary by individual financial situation. These formulas are common guidelines and may not reflect your exact needs.
Use a life insurance calculator to tailor coverage to your exact scenario.
Best types of life insurance for tech employees
For most equity-heavy professionals, term life insurance is the smartest place to start.
Term life insurance: Affordable, flexible, and covers you for 10–30 years
Permanent life insurance (e.g. whole or IUL): Can build cash value, but more complex and expensive
Policy Type | Pros | Cons |
|---|---|---|
Term life | Low cost, high coverage, simple | No cash value, expires after term |
Whole life | Builds cash value, permanent | High premiums, slower break-even |
IUL | Flexibility + growth tied to market | Requires active management, not guaranteed |
Disclaimer: Always speak to a licensed agent to find the right product based on your financial goals and risk profile.
How to protect your partner, kids, or future goals
If your family is relying on a future IPO, promotion, or bonus — don’t wait to protect them. A life insurance policy helps ensure:
Your partner can stay in the home
Your kids’ education is funded
Your startup dreams don’t become liabilities
It also buys time. Whether your company goes public or not, your loved ones will have breathing room to adjust.
Bottom line
Tech workers with equity-based compensation need life insurance that reflects more than just salary.
Start by calculating how much you really need — then explore policies that match your full financial picture.
If your current coverage doesn't reflect your RSUs or bonus structure, it may be time to supplement it with a personal term policy.
Methodology: Policygenius reviewed internal pricing estimates for term life policies in 2025 based on applicant profiles including base salary, RSUs, and bonus structures. Coverage recommendations used the 10x income rule and DIME method, applied to total compensation for tech workers. Rate comparisons were sourced from Policygenius product data and aligned with industry averages from top insurers.
References
Policygenius internal pricing database (2025)
SEC.gov – RSU taxation guidance
IRS – Group term life insurance rules
Society of Actuaries – Life insurance trends in tech
