Published July 2020
Let’s say you have life insurance through a group plan at work. And let’s say you might think of it as a less expensive option than individual term life insurance, and even be confident that it’s enough to protect your loved ones. Would it surprise you to know that group plans may not provide the protection you think they do for your loved ones?
Individual term life insurance, on the other hand, can provide you with coverage that’s tailored to your unique needs, is more comprehensive, and is longer-lasting than that offered by your group plan. Another perk: you may also qualify for preferred rates with an individual term life insurance plan, which could save you money.
Individual plans can provide a range of coverage amounts and a choice of a variety of term lengths.
Group life insurance
The amount of life insurance provided by a group plan is often a multiple of the member’s salary, such as 2x the employee’s salary.1 Employees can usually purchase additional coverage for an extra cost.
The cost of group coverage is based on an average of all the employees in the group. The premium, or rate, is applied to each member of the group regardless of their health status, age or sex. Unlike individual term life insurance plans, employer premiums aren’t personalized. So, if you’re in great health, you won’t benefit from access to better rates under a group plan.
In addition, the standard 2x a person’s salary in coverage is rarely enough. In general, experts recommend that you buy 7 to 10 times your annual salary in life insurance to replace lost income.2 Speaking with a CAA licensed insurance advisor can help you make a decision based on your life stage and priorities, whether you’re topping up group coverage that you have through work, or starting fresh.
Individual term life insurance
An individual term life plan can help you get the right amount of coverage to protect your loved ones, and may give you access to savings and preferred rates. It offers more customization, flexibility and longevity. With individual term life plans, you, and not your employer, own your coverage. That protection stays with you for as long as your premiums are paid, vs. group coverage which ends when employment does.
Your rates are based on various factors including your age, health.
One of the great things about individual term life insurance is that your rate is locked in for the term length, whether that’s 5, 10, 20 or even 100 years. You’ll never be on the receiving end of a surprise rate increase which can happen with group plans. No one likes surprises like that! And even though your rates are locked in, you can still cancel your plan at any time if you want to.
Individual term life insurance plans can help provide the right amount of coverage to help protect your family, with CAA that could include a range from $50,000 to $1 million vs. a low multiple of your salary with a group plan, which won’t go very far in protecting your family these days.
Here’s a snapshot of how individual term life insurance compares to group plans:
Individual Term Life Insurance
Your coverage is customized to you.
Your rates are locked in for the length of the term and will not increase.
Your term life insurance plan is portable.
Your coverage is owned by you.
You may have access to preferred rates and savings.
Your coverage is made for a group of people.
Plans are renewed annually and rates can be increased.
Your coverage stops if you leave your job.
Your coverage is owned by your employer.
Does not offer preferred rates or savings.