What is better for you: Group Insurance or Individual Coverage?
What is better for you: Group Insurance or Individual Coverage
?
For many employees in Canada today there are attractive benefits through their group life insuranceplans to purchase additional coverage. These plans offer additional coverage at very low premiums compared to purchasing an individual policy. As a consumer you should understand the differences between having coverage through your group benefit plan at work, and purchasing an individually owned policy. Both seem to offer additional life insurance coverage, so what is the difference?
Lack of Ownership
A group insurance policy is owned by the company and not you (the life being insured). Employees are certificate holders, and are allowed to participate in the group only while they remain with the company. When you leave the company, you may be offered a 30-day conversion privilegeto buy a very limited selection of products through the group insurance company, without providing medical evidence. These conversion policies are typically different from individually purchased policies, and may cost considerably more.
Increasing Premiums
A group life insurance contract is usually banded into five year age groups. As you age within your group plan premiums will go up every five years. If you stay with the company long-term, the cheap premium you had in your 20s could become a very expensive policy into your 50s and 60s. In an individual policy, you can lock in your premiums for 10, 20, 30 years or for life, which guarantees no premium increases for that locked-in period.
Group-wide premium increases or cancellation
A group insurance policy is not a solid contract, whereas personally owned insurance is. This means the insurance company has the right to modify or cancel the policy on an annual basis. If they experienced high claim rates, the entire group's premiums might increase or the policy could be cancelled outright by the insurance company. Also, the employer who is providing the benefit of a group life contract might find itself unable to afford the policy and cancel the entire group to save its costs. Individual life insurance policies are in force, as originally set out by you, as long as you wish to keep the policy and premiums are paid.
No preferred rates or riders on Group insurance plans
If you are in exceptionally good health, and would qualify for preferred rates on your individual insurance plan, you would not get those rates within a Group contract. A person qualifying for preferred rates (up to 30% discount off standard insurance rates) may find an individual policy is less expensive than their group plan. In addition there are many optional riders and benefitsthat can be attached to an individual policy to enhance its value to the owner. Group insurance plans are stripped down, basic forms of life insurance with no optional riders or enhanced benefits.
When employers began offering group benefit plans to their employees it was NEVER intended that these plans would replace personal planning. Since insurance is a key component of group benefits (including extended medical, dental, life and even critical illness insurance), employees have come to rely on these benefits. Your group coverage, especially the life insurance portion, should be seen as supplemental insurance to your own personal planning.
Owning a personal life insurance policy will give you portable ownership wherever you go in life. It can offer unique riders and benefits to enhance its value for your specific family or business situation. You are protected from the loss of your policy due to insurance company or employer decisions, because it is an independent contract that you own.
If you have a group benefit plan it is worth reviewing it with a licensed insurance professional. At Life Guard Insurance we can help you understand your group plan, all the benefits you have within it, and how best to use it to augment your own personal planning. Please feel free to contact us for a free, no-obligation review of your group plan.
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