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Group Life vs Term Life Insurance: Is Coverage Through Work Enough?

Dec 1, 2022 | Insurance, Life Insurance

Finding the right insurance plan is vital. When it comes to life insurance, you want to ensure that your plan will help and protect your family if anything unfortunate happens to you. While you may receive life insurance as a group plan through your employer, this may not be your best option. 

When it comes to group vs term life insurance, there are several factors to consider. If you have a large family to care for or don’t plan on staying with your current employer, another option might better suit you. 

We’ll detail how they work and examine the pros and cons of each type of life insurance. Because the ideal life insurance plan varies for each person, the final verdict comes down to your personal and financial situation.

Group Life Insurance

Many companies offer group life insurance to their employees as a benefit. Instead of every employee setting up their own life insurance plan, the employer has a single contract that covers all eligible employees. Group life insurance is a relatively common option, covering around half of all Canadian households. 

Your employer negotiates with an insurance provider to create a policy covering every eligible employee. Your company pays the premiums so that you pay far less or nothing at all, which is why group life insurance is a work benefit. In the event of your death, the insurance provider provides a payout, typically one to two times your annual salary, to your beneficiaries. 

Because you receive group life insurance through your employer, you will lose the plan if you leave your job. While you may be able to purchase your own individual insurance plan through the provider, it can be a challenging and expensive process, and finding a new insurance plan is often the better option. In fact, companies like Manulife have plans such as Follow Me specifically tailored for those who have recently retired or have lost their jobs to have continued coverage. To give you a better idea about whether group life insurance is the plan for you, let’s take a look at its pros and cons: 

Pros of Group Life Insurance

  • Compared to other life insurance options, group life insurance is inexpensive. Depending on how much of the plan your employer covers, you’ll have little to no expenses for a group insurance plan.
  • As long as your employer offers group life insurance and you are eligible for work benefits, you are automatically covered once you begin your job.
  • You typically won’t be subject to medical underwriting with a group life insurance plan. That means you’ll have the same coverage regardless of age and medical conditions.
  • Because you have automatic group life insurance coverage through your employer, you don’t have to choose between that plan and another life insurance option. Instead, you can purchase another small policy separate from your work benefit to ensure complete coverage.

Cons of Group Life Insurance

  • Group life insurance plans generally offer little coverage. Your beneficiaries will receive a payout of one to two times your annual salary as a death benefit, which usually caps at a specific dollar amount.
  • If you leave your job, you’ll lose your group life insurance coverage and need to pay for a new policy.
  • Even if you have full life insurance coverage through your own policy, you’ll have to pay part of the monthly group life insurance premiums if your employer requires it.

Term Life Insurance

Unlike group life insurance, which is one standard policy for all employees, term life insurance is customizable based on your situation and needs. Term life insurance allows you to negotiate with an insurance provider and structure a policy that works for you and your family. You purchase a term life insurance policy on your own, separate from your employer’s group life insurance.

You apply for term life insurance either through an insurance provider, or a broker. You provide them with your information, such as your age, medical conditions, and health history, then you choose how much coverage you want to buy and how long you want the term life insurance policy to last. In fact, the process of comparing term life insurance quotes has gotten easier as companies like Insurdinary have developed online assessments tools that not only allow you to determine how much life insurance you will need, but also provide side by side quotes and the ability to purchase the product immediately.

The quote will include your monthly premiums, or how much you’ll have to pay each month to maintain the insurance policy. Let’s look at the pros and cons of buying a term life insurance policy:

Pros of Term Life Insurance

  • Term life insurance allows you to customize your policy to fit your needs. Term life insurance is a good option if you need more coverage to protect your family in the case of your death.
  • Unlike group life insurance, term life insurance won’t expire if you leave your job. As long as you continue to pay monthly premiums, you can typically buy coverage for up to 30 years. If you want a lifelong plan, consider permanent life insurance.
  • You can pair a term life insurance policy with your employer’s group life insurance. If you only need a small policy to cover what your group life insurance doesn’t, you can structure your policy to fill in the gaps.

Cons of Term Life Insurance

  • Term life insurance is more expensive than group life insurance. You’ll have to pay the premiums yourself to continue receiving coverage.
  • The insurance company may charge higher premiums for your term life insurance policy if you have a questionable health history or ongoing medical conditions

Comparing Group and Term Life Insurance

It’s helpful to think of group life insurance as a good starting point. While it offers some coverage and may ultimately be enough for some people, others need more coverage. For such people, adding on a term life insurance policy to cover expenses that their group life insurance policy doesn’t is the best option. 

So, when considering group v. term life insurance, how do you know if one is enough? Let’s further discuss some times when group life insurance is enough coverage and when you might need more coverage through a term life insurance policy.

Is Group Life Insurance Enough for Me?

In some situations, group life insurance may be enough. If you are single without a partner or kids, your beneficiaries may not need a large payout. The same may be true if you have a partner and kids, and your partner has the means to support the family in case of your death. Such a situation likely means you have few financial obligations and low debt, so your partner wouldn’t have high expenses to cover after you die.

In most situations, however, those with a partner and kids need more coverage than a group life insurance policy offers. Consider fixed expenses (those that won’t change if you pass away), such as mortgage payments and property taxes. If such expenses make up 30% of your current monthly payment, that’s 30% that your partner will have to cover on their own. 

In the case of your death, other expenses will decrease, but only slightly. Your partner will need to pay for food, transportation, clothing, and additional costs on their income alone, and the one to two times annual salary payout from your group life insurance won’t be enough to help. If you have kids and debt, expenses increase, and you’ll likely need a term life insurance policy.

Group vs Term Life Insurance: The Verdict

Take a look at your personal and financial situation. Are you single with no dependents, few expenses, and low debt? If so, a group life insurance policy through your employer might be enough to cover your needs.

Do you have a partner and kids? Do you have significant debt or other costly expenses? If so, a term life insurance policy, whether it’s on top of your group life insurance or on its own, is probably necessary to provide the coverage you require.

Consider your and your family’s current situation as well as future expenses. To be safe, you may want to buy a policy that covers more than you think you need.

Conclusion: Get a Free Life Insurance Quote Today!

Once you’ve decided whether group life insurance is enough or you need additional coverage through term life insurance, your next step is finding the best policy. Rather than researching numerous insurance providers and applying for a quote at each one, you can compare multiple life insurance plans at once with Alliance Income Services Corporation. Simply provide the information you need about different life insurance policies and instantly compare them to find the most affordable rate. You can speak to an agent at any time to discuss your needs.

The ideal life insurance policy will protect those you love in the unfortunate case of your death, ensuring that your family is in a stable financial situation. Finding that ideal policy may seem challenging. Whether you need group vs term life insurance, we compare life insurance policy rates from multiple Canadian providers to find you the best offer. Simply request a quote, fill out the form, and find your ideal life insurance plan in minutes.

Fill out our quote form to receive your free life insurance quote today!


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