June 24, 2020

Your No-Nonsense Guide for Group vs. Individual Life Insurance

Anything surrounding death can be difficult to talk about. And the discussion of life insurance policies may be daunting and even anxiety-provoking. However, given the strange time we’re living in, life insurance has probably been on your mind lately. Feeling overwhelmed? Not to worry. Today we break down everything you need to know about individual and group term life insurance. There may be nuances to different geographies with this article covering the most common pros and cons impacting Canada and the US. Which one is right for you? Keep reading to find out.

Here’s the Gist:
  • Group term life insurance is often provided by your employer — it’s convenient, but doesn’t offer much control over the policy.
  • Individual life insurance offers full control over the policy — but some may pay high premiums or be denied coverage.
Group Life Insurance

Employers often times provide life insurance —this is called basic group life insurance. Typical coverage amounts range from $25,000 to $50,000 or 1-2 times your annual salary.

  • For group life insurance, there are no medical requirements. So, people with pre-existing medical conditions or those in poor health can get coverage at affordable rates — yay!
  • Coverage can also be converted to individual coverage without proof of insurability. If you leave your job you don’t lose access to life insurance. Cool, right?
  • Although group life insurance sounds perfect,there are a few disadvantages.
  • A caveat to group life insurance is that people in good health have to pay the same premium as the rest of the group.
  • If it is tied to your employer, you could lose coverage if you become unemployed.
  • While this may not seem like a big deal to some, others aren’t fans of the idea of not getting the best premium despite being in tip-top shape.
  • Your employer or plan sponsor controls the plan and makes changes without consulting group members. If you’re a control freak who likes to manage details, this may bother you a bit — or a lot.
  • We mentioned that you could convert your group insurance plan into an individual plan, but there’s a catch.
  • Premiums for individual coverage are not guaranteed. This means you may end up having to pay a higher premium should you convert your group life insurance plan.
Individual Life Insurance

Individual life insurance is a product you purchase yourself — making you the policy owner.

  • One reason why people choose individual life insurance over the latter is that they can control the policy — control freaks rejoice! As a policyholder you can
  1. Determine how beneficiaries receive death benefits
  2. Withdraw policy cash values
  3. Determine how long coverage lasts — lifelong or permanent coverage
  4. Transfer the ownership of your policy
  • Preferred rates are available for those in good health. Also, unlike group life insurance, coverage continues past age 65.

TIP: Use a free quote calculator to get an estimate of your premium.

  • Individual life insurance seems like the way to go, right? Well, not so fast. There are a few things to consider.
  • People in poor health may have to pay higher premiums or get denied coverage. Along with this, a policy may include certain exclusions — depending on the applicant’s lifestyle or travel plans.   
Which Life Insurance is Right for You?

Congrats! You made it to the end of this guide. Let’s recap:

  • The difference between group life insurance and individual life insurance is the level of control and eligibility requirements.
  • When choosing which is right for you it all boils down to your lifestyle and if your employer already provides life insurance.