Group vs. Individual Life Insurance: What Are Your Options?

When your employer sends out open enrollment notices, it’s a short window of opportunity to review your benefits package and make necessary updates—this includes reviewing your group vs individual life insurance options.

Many employers offer life insurance as a benefit to their employees, often providing basic group life coverage at no additional cost. This coverage is usually guaranteed for most employees, but the amount is frequently modest, typically equal to your base salary. Opting into this basic group life insurance is an easy decision for most.

In addition to basic coverage, some employers can purchase supplemental group life insurance at a reasonable cost. This supplemental coverage usually offers a multiple of your salary (2x, 3x, or more) and may require a medical exam. The rates for supplemental life insurance through your employer are often more competitive than those in the open market, making it a cost-effective way to increase your coverage.

Understand the drawbacks

One downside of supplemental group life insurance is that your coverage may end if you leave your company. Some policies are portable, meaning you can take them with you, but the cost of life insurance tends to increase as you age. As a result, securing additional coverage outside of your employer’s plan later on could be much more expensive than what you’re paying while part of the group plan.

Another concern is that your next employer might not offer the same benefits package, which means you could lose the coverage entirely. This puts your beneficiaries at risk if something unexpected happens. To avoid this, it’s wise to consider purchasing an individual term life insurance policy. Term life insurance is typically affordable, especially if you secure it early in life while you’re healthy, and it provides protection that isn’t tied to your employment status.

How much is individual life insurance?

Individual life insurance offers both you and your beneficiaries financial security and peace of mind, making it a valuable option to consider, even if it’s slightly more expensive than a supplemental group policy. Choosing the right amount of coverage is key, not only because it protects your loved ones but also because it affects your overall costs.

When determining how much coverage you need, consider your income and expenses:

• Will your partner be able to cover the mortgage and other living expenses if something happens to you?
• If you have children, do you want to set aside funds for their future education?
• If you’re single, are there dependents or others you wish to support financially?

In the event of the unexpected, a life insurance payout can help your beneficiaries cover major expenses like education, mortgage payments, and maintaining their lifestyle. It’s important to discuss your options with a financial planner or life insurance agent to ensure you make the best decision for your situation.

We generally recommend life insurance for most individuals and families we work with. Deciding on the right coverage amount and planning for the premium costs is critical to safeguarding your loved ones and ensuring your financial plan stays on track for the future.

This content is provided for informational purposes only and should not be construed as individualized advice. For individualized advice, please consult with your adviser.