If you’re in the workforce, there’s a good chance that your employer provides group life insurance for you.
About 85% of companies in the US offer a group life insurance product to their employees.
And group life insurance is an excellent benefit!
Group life insurance policies can help provide your family’s needs in the case of an unexpected death!
But is it enough coverage for your family? Is a group life insurance policy the only life insurance coverage you need?
At Baily Insurance, we work with businesses to provide their employees with exceptional group life insurance products. We also help our clients with individual life insurance policies. And we get questions about both of these life insurance products all the time!
The two most fundamental questions we get about group life insurance are:
#1 How is group life insurance different from an individual life insurance policy?
#2 Will my group life insurance policy be enough for my family?
In this article, you’ll learn the differences between group and individual life insurance products. You’ll also get insight into whether your group life insurance policy through work is enough to protect those you love the most.
Let’s get started.
#1 How is group life insurance different from an individual life insurance policy?
If you’re employed, there’s a pretty good chance that your employer offers life insurance as part of your benefits package.
It’s estimated that about 85% of employers provide their employees with group life insurance.
Sometimes the employer pays for this product. Other times, the employer offers the product at a group rate, and their employees can opt in or out.
So what are the differences between a group life insurance policy and an individual life insurance policy?
Let’s take a few minutes to compare and contrast:
- Individual Life Insurance
- Group Life Insurance
- Voluntary Group Life Insurance
#1 Individual Life Insurance Policy
An individual life insurance policy is a policy that you purchase on your own through an insurance agency.
Medically Underwritten
Individual life insurance policies are medically underwritten. This means that you, the insurance company, will analyze your past medical history, current medications, a required medical examination, and required medical tests.
After analyzing your current health, the insurance company will set your premium amount. They may also refuse to sell you a policy.
The insurance company bases your policy on your health status when you buy an individual life insurance policy.
Whole, Term, or Universal
When you buy an individual life insurance policy, you choose what kind of policy you want to purchase: whole, term, or universal life insurance.
Your life circumstance factors into which type of policy you should purchase.
Whole Life
A whole life policy has a set premium amount for the duration of your life. So, if your premium is $1,200 a year, that premium will be locked in for the rest of your life. As long as you keep your policy, you will never be required to pay more for the policy.
Whole life policies also acquire interest. After a set period of years, you can often receive the interest from your policy.
Whole life insurance policies are the most expensive kind of life insurance.
Term Life
A term life policy is purchased for a set amount of years – usually 10, 20, or 30 years. At the end of that term, your policy ends, and you will not receive anything. Term life policies are less expensive than whole life policies.
Term life insurance is most often purchased as a protection for your family. Term life will provide for your loved ones if you pass away unexpectedly.
Universal Life
Universal life insurance policies are not widely purchased today. Universal life insurance is a hybrid of whole and term life.
Like a term life insurance policy, universal life insurance does not have “locked-in” rates.
Like a whole life policy, universal life insurance accrues interest.
Universal life insurance typically costs more than term life insurance but less than whole life insurance.
#2 Group Life Insurance
Group life insurance is life insurance offered as part of your employee benefits package. With group life insurance, your employer pays the premium of your policy.
Your employer also determines the type of policy they will provide for their employees.
Not Medically Underwritten
Group life insurance policies are not medically underwritten.
This is great news for individuals who have pre-existing or serious medical issues.
For instance, if you have a history of cancer, you may not qualify for an individual life insurance policy. But, if you are offered group life insurance through your work, you will receive the benefit of that life insurance policy.
Less Coverage
A significant downside to group life insurance is that the policies often offer less coverage than an individual policy.
Typically, a group life insurance policy will pay out a multiple of your salary (1x, 1.5x, etc.). Whereas with an individual life insurance policy, you determine how much the policy will pay out.
This means that in the case of your unexpected death, your beneficiaries will not receive as much as they would receive from an individual policy.
On the upside, your family will receive something. This policy will give them some monetary benefit to help them with the costs associated with your death and the loss of your income.
Not Transferable
The other downside to group life insurance is that the while a group life policy is sometimes transferable, it will likely cost more if you convert it to an individual life insurance policy.
If you leave your employer and take another job or retire, your policy will most likely end when you leave that job.
No Choice
With group life insurance, you will not have any choices with your policy. The policy is set solely by the employer.
#3 Voluntary Group Life Insurance
One final life insurance option is voluntary group life insurance.
Voluntary group life insurance is life insurance offered by the employer but paid for by the employee. With voluntary life insurance, you can choose to opt in or opt out.
Not Medically Underwritten
Because voluntary group life is a group life insurance product, your policy will not be medically underwritten up to a guaranteed issue amount. After that guaranteed amount, the insurance company may ask for further underwriting information. All eligible employees at your place of employment have the option of buying a policy.
This also means that the amount you pay for your policy is a standard amount that every employee who opts in will pay. Your premium amount is set without your medical status being a factor.
The insurance company can not deny you a voluntary group life insurance policy because of your health status, up to the guaranteed issue amount. This can greatly benefit individuals who might not otherwise qualify for an individual life insurance policy.
More choice
Unlike traditional group life insurance, voluntary group life insurance products sometimes offer choice to the employee.
Some voluntary group life products give the buyer various payout options, term limits, or the choice between term or whole life insurance.
At the same time, the insurance company will put limitations on your choices. For instance, you may be able to choose between $50,000 or $100,000 of life insurance but won’t be able to increase those amounts if you would like a higher payout.
You may even be able to purchase a higher amount but will need to submit to medical underwriting.
Transferable
Another perk of voluntary group life insurance is that the product can often be transferred to an individual life insurance policy if you take a new job, are furloughed or fired, or retire.
If you transfer your policy to an individual life insurance policy, your premium could be more expensive, but you will still maintain your coverage.
Less Expensive
Voluntary group life insurance will often cost less than purchasing an individual policy. Essentially, when you buy voluntary group life insurance, you are getting a group discount.
#2 Will my Group Life Insurance policy be enough for my family?
If your employer offers group life insurance, this is an essential question you need to ask yourself. Will your group life insurance policy be enough? Will it adequately cover your family?
First of all, I want to encourage you that group life insurance is an excellent benefit for your family. If something happens to you, your family will have coverage from your group health policy.
At the same time, you need to evaluate three things when determining if your group life insurance policy is adequate.
Will my policy pay enough to cover lost income and debts?
Often group life insurance products only pay out a fixed amount of $20,000, $50,000, or one to two times the policyholder’s salary.
If your family relies on your income or has outstanding debts, the loss of your regular income may create an enormous burden on them.
To determine if your policy will pay enough, ask yourself the following questions:
- What benefit amount will your policy pay?
- What amount of money does my family need each month to cover their expenses?
- How much outstanding debt will your family have to cover?
- How will your family meet their needs without your income?
- How long will your family need to rely on your benefit amount?
Many people find that their group life policy will not cover their family’s needs.
If that’s the case for you, you can meet with a life insurance agent to inquire about purchasing an individual life insurance policy. This can help guarantee your family will have enough to cover their needs.
This added coverage can afford your family the ability to remain in the same home, keep their transportation, stay in college, etc.
Will I be able to purchase or afford individual life insurance if my current job comes to an end?
Many group life insurance policies do not transfer to you when you leave a job. And if you are older when you leave a position or have a medical condition, you may find it challenging to purchase an individual policy.
Age as a factor
As you get older, individual life insurance policies cost more. If you lose your job at 50, will you be able to afford to purchase an individual life policy? If you buy a policy at a younger age, your premium will be less expensive.
If you purchase a whole life policy when you are young, in your 20s or 30s, you will lock in a much better rate than if you buy that policy when you are in your 40s, 50s, or 60s.
Health as a factor
Another reality for many as they age is the onset of medical conditions. If you lose your group life insurance policy after developing a medical condition, you will have to pay a higher premium for your individual policy.
Taking this into consideration, it’s always best to put an individual life insurance policy in place when you are young and healthy. This is the best way to ensure you get an affordable price on your individual life insurance policy.
I want my family to be taken care of if something tragic happens. What should I do next?
If you need life insurance, don’t wait another minute to get your policy in place. A quick call to an independent insurance agent can get the ball rolling.
Your agent will help you assess which type of life insurance policy meets the needs of your life situation.
Getting life insurance in place is not as speedy as getting homeowners insurance or a car insurance policy. Your agent will need to ask you many questions as they work on your application.
After filling out the application, your agent will give you a preliminary quote. This is not your final quote. Before the insurance company settles on your final premium, they will require a basic physical examination.
Typically, the insurance company will send a medical professional to your home, work, or other chosen location to do the examination. The professional will also ask a series of questions about your medical history.
Soon after, you will receive a final quote for your insurance policy.
Getting Life Insurance Through Baily Insurance
If you live in Pennsylvania, Ohio, or West Virginia and need a life insurance policy, our agency would be happy to assist you.
We’ve been in the insurance business for more than 140 years! And we’ve been selling life insurance policies throughout our history.
Our team is committed to educating our clients about their insurance products. We know that insurance can be confusing, so we want to make sure our clients fully understand what they are purchasing and how it will protect them.
It’s no different with life insurance. We value being your trusted advisor.
We will help you settle on the life insurance product to protect your family best. We will help you determine the amount of coverage you need to ensure your family can maintain their lifestyle if something tragic happens.
If you’re ready to get your life insurance policy started, please give us a call at 724-627-6121 or let us know by filling out the form below.
