Group Life Insurance vs. Individual Life Insurance

Group life insurance is an employer-sponsored life insurance policy offered as part of your benefits package through work. It’s quick and easy to qualify for and receive coverage, but it may be less flexible, and you can’t take it with you if you leave the company. On other hand, individual life insurance is a policy you can get privately from an insurer. It offers more flexibility, but can cost more and may be harder to qualify for. In this article, we’ll dive into the main differences between individual and group life insurance that can help  you decide if you want to get a policy at or outside of work.

Application and medical exam

Group life insurance is easy to apply for. Usually, you’ll fill out a form at work with some basic information about yourself and your desired coverage amount. These policies are also often guaranteed issue, meaning you can get coverage fast without a medical exam or health questionnaire.

Individual policies, on the other hand, often require more information and may make you take a medical exam. But keep in mind that some smaller individual life policies, like final expense insurance and guaranteed-issue life policies, may not require a medical exam.

Portability

You typically can’t take your group life insurance policy with you if you leave your job. This may mean it’s not your best choice if your career plans involve a job change anytime soon.

On the other hand, individual policies stay with you regardless of your job. As long as you keep up on your premiums, coverage continues. That makes individual policies a useful option if you plan on changing jobs soon or if you don’t have group life insurance coverage available through work.

Cost

Group life insurance rates may increase every year. They might start out low, but decades into your career, you might be paying a lot more in premiums.

Many individual policies allow you to lock in your premiums once you buy the policy. For instance, if you purchased a 20-year term policy at age 25, you’ll be able to pay the same low premiums when you’re 40 years old. So, you could potentially pay less in total premiums over the term of the individual policy without sacrificing the coverage you need.

Cash value

Individual permanent life policies, like whole life insurance, put part of each premium into a tax-deferred cash value growth component that earns interest. You can later withdraw from or borrow against the cash value when it grows large enough or surrender the policy to receive the cash value. Group life insurance policies typically don’t offer cash value, so you can’t use them to build wealth over time.

Should I get group life insurance or individual life insurance?

Both group and individual life insurance come with advantages, but the right life policy for you depends on your budget, financial goals, and career plans. Group life insurance can work well if you don’t need as much coverage and don’t plan on changing your employer in the long term. It’s quick and easy to qualify for and receive coverage since it’s in your benefits package, and you won’t have to worry about losing coverage if you’re staying with the company.

But if you’re thinking of moving jobs or you’re self-employed and have a more complex financial plan, an individual policy might suit you better. With individual life insurance, you may have far more options for coverage amounts and terms, and you can take it with you wherever you go. Plus, you can get a policy with cash value if you want built-in savings. Ultimately, consider your budget for premiums, evaluate your financial plan, and consider whether you’ll change jobs soon to help you decide if group or individual life insurance is your best option.