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Individual vs. group life insurance: Which is best for you?

May 28, 2021 5 Minute Read

Whether you’re starting a new job or it’s time for annual enrollment at work, life insurance is often part of your benefits package. So should you take it, or buy a policy on your own?

Group life insurance can offer you and your family affordable financial protection against the unexpected. In many cases, though, group life insurance might not offer enough protection. That’s where an individual policy comes in.

If you’re deciding whether you should invest in individual vs. group life insurance, the answer might actually be “both.” But how does group insurance differ from individual insurance? Here’s a closer look at how they stack up.

What is group life insurance coverage?

Group life insurance refers to any policy where you can apply and receive coverage as part of a group. Most people receive group life insurance through an employer, but it can also include coverage through an association, union, or other organization.

This type of coverage typically comes in one of two forms:

  • Basic group life insurance is a small life insurance policy that your employer may offer to you automatically as an employee benefit. Coverage often comes in predetermined amounts, ranging from $25,000 to a multiplier of your annual salary.
  • Supplemental group life insurance plans allow you to buy life insurance coverage up to three or four times your annual salary. It’s typically easy to get approved for coverage, although you may need to answer some health questions during the application process.

Group life insurance is an easy way to access life insurance, since your company has already done the research and chosen policy options for you. Basic life insurance is usually free or highly subsidized, so there are financial advantages to going this route, too.

However, group life also has some drawbacks, including lower coverage amounts and the inability to customize your policy. In addition, most companies won’t allow you to take the policy with you if you leave your job.

What is individual life insurance coverage?

Individual life insurance is different from group coverage in a few key ways. With an individual policy, the policyholder is usually the one who pays the premium and is the only person who may make changes to a policy. You can buy individual life insurance directly through a life insurance company or through an agency, like eFinancial. Working with an agency typically means access to more types of life insurance policies, which can make it easier to find a policy for your needs and budget.

There are plenty of benefits to individual life insurance, including greater customization and higher coverage amounts. Since your policy isn’t tied to your employer, you also don’t have to worry about losing your life insurance if you switch jobs.

While individual life insurance can be more expensive than group life, since it’s not subsidized, it’s still one of the most affordable ways to protect your family’s finances. In particular, term life can offer dependable coverage that’s affordable for most family budgets.

Should I buy group vs. individual life insurance?

If you have the option to receive group life for free through your job, it makes sense to take it. That said, it’s important to assess your overall needs to make sure you’re fully covered.

According to an industry study, about 40% of people believe that they need to buy life insurance or increase their coverage. Buying an individual policy to supplement your group coverage can help you provide the right-sized cushion for your family. It also means you won’t be stranded without coverage because of a job change.

When weighing your choices, here are a few questions to ask:

  • How much coverage do I need? Most employer plans top out at three to four times your annual salary, which can lead to being underinsured. Households with just a group life insurance plan have $225,000 less in coverage than they need on average. Experts recommend owning seven to 10 times your income in life insurance, but everyone’s needs are different. Our life insurance calculator can help you crunch the numbers for your own situation.
  • How much can I afford? Group life insurance is often attractive because it’s low or no cost. That said, life insurance is less expensive than people think. For example, a $250,000 term life insurance policy for a 30-year-old man in good health can cost as little as $160 per year. If cost is a big factor, term life insurance is the way to go for affordability.
  • How long do I need coverage? The longer you need life insurance coverage, the more risk there is in relying on group life insurance coverage alone. About 21% of millennials have changed jobs within the past year, according to a recent Gallup poll. You typically can’t take group life insurance with you if you change careers or get laid off, but an individual term life insurance policy will stay with you.

Still have questions or want more information about group term life insurance vs. individual?

We’re here to help. eFinancial works with top-rated life insurance companies to help you compare insurance quotes and find the right coverage for you and your family. Call us or start your quote online today.