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Infographic: Group or Individual Life Insurance?

Feb 27, 2018 3 min read


Here are some factors to consider when weighing group and individual policies.


Group coverage benefits  

Life insurance offered through your employer, or a professional or trade group, can offer several benefits. To start, enrolling usually requires little effort. Your employer has done the work of finding a policy, and enrolling typically requires little more than signing a form.

Moreover, you may be able to obtain this coverage without taking a medical exam or providing medical records.

Your employer may cover the premiums, at least for a modest level of coverage, such as one or two times your salary. Some employers will allow you to obtain additional coverage by paying for the increase in the premium.


When an individual policy may make sense

Employer-sponsored life insurance can be a start. At the same time, you may need greater coverage to help provide financial security to your loved ones.

Depending on the level of coverage, employer-sponsored life insurance often helps cover funeral and burial costs, but may not leave enough over to ensure that your spouse and any dependents can maintain their lifestyle. And that’s the primary reason to purchase life insurance: the death benefit can be used to replace the income you bring in, so your loved ones remain financially sound.

Moreover, if you move to a new employer, you may lose coverage, unless the policy is portable. Similarly, if your employer stops offering this benefit, you’ll also be left without coverage.

Some group policies can convert to individual ones, but the cost may rise and the individual policy may offer less coverage. In addition, the premiums may increase more frequently—say, every five years—than they would if you purchased life insurance on your own and locked in a premium.

Many workplace policies cover both individuals in great health and those with poorer health, and may not offer as much opportunity for customization. That can mean workers with medical conditions may pay less than they might if they purchased a policy on their own, while employees in good health may pay more.


On your own

Purchasing your own life insurance policy can be the right decision for some people. Find a policy that fits your needs, in terms of both the premiums you’ll pay and the coverage offered. You don’t have to worry about losing coverage because you change jobs or your employer drops this benefit.

Where to start? You’ll need to decide which type of policy is best for you. Term insurance, as its name suggests, covers you for the term of the policy, such as 15 or 20 years. If you have young children, you may want to look for a term policy that provides coverage until you expect them to be on their own. If you decide to renew at the end of the term, the premiums may increase.

Whole life insurance policies provide coverage over your entire lifetime, so long as you continue to pay the premiums. They also accumulate cash value. For these reasons, the premiums tend to be higher than they are for term life insurance.

Between these options are several variations, including universal and variable life insurance. Universal life insurance offers a death benefit and the ability to accumulate cash value. As the cash value increases, you may be able to use it to help fund your premiums, the Insurance Information Institute Opens in a new window notes. Just be aware that using a policy’s cash value could reduce the death benefit, shorten or cancel a guarantee, or cause the policy to lapse, and may have tax consequences.

A variable life insurance policy offers both a death benefit and an investment feature.  You have the potential to build cash value based on how the underlying investment options like stock, bonds and mutual funds perform. This offers the opportunity for more-rapid growth of the cash value, as well as greater risk because the cash value can decline if the investment options perform poorly.



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