As part of a benefits package, many employers offer group life insurance to their workers. While it’s typically a low-cost and valuable part of your family’s financial protection, it may not cover all your needs.
A voluntary or individual life insurance policy can be tailored to meet your needs. But is one really better than the other?
Group Life Insurance Policies
Group life insurance is when a contract covers an entire group of people. Typically, the policyholder is the employer, and it covers their employees. The employer, not the employee, owns the policy, and the employee is issued a certificate of coverage.Because the insurance is lumped into a group, it is often offered at a reduced cost than policies purchased individually. Sometimes, it’s offered to an employee at no cost.
Group life insurance policies are always term. A term policy provides coverage for a specific period.
Coverage Amounts for Group Life Insurance Policies
Employers determine the choices when determining their group life insurance coverage amounts.According to Mass Mutual, one way is by using a multiple of salary. This is the most common method. The policy might offer a death benefit equal to one to three times the employee’s base salary.
Another way used to determine coverage amount is by the level or rank of the employee. For example, executives might receive higher coverage levels compared to managers or other staff.
There are also group policies that provide a flat amount of coverage for all employees regardless of position or salary.
Voluntary or Personal Life Insurance Policies?
Personal life insurance, also known as individual life insurance, is purchased by an individual. It’s used to provide financial protection for the individual’s beneficiaries. Individual life insurance policies aren’t provided by an organization.According to Northwestern Mutual, individual policies can be term, whole life, or universal life. Both whole life and universal life build cash value. Term life does not build cash value.
An employee may choose to purchase a personal life insurance policy to customize a policy to fit their specific needs and circumstances.
Coverage Amounts for Individual Life Insurance Policies
According to Gerber Life, the maximum life insurance face value depends on factors like age and income. Companies set caps for how much coverage they will sell an individual. Some insurance companies offer policies that go over one million dollars.According to Policygenius, most people can qualify for a maximum benefit between 10 and 30 times their annual income, depending on their age.
Portability for Individual and Group Life Insurance Policies
One advantage to owning an individual policy is that as long as you pay the premiums, it is in effect. If you have a 30-year term, it’s in effect for 30 years. And if you have a whole-life policy, it remains in effect regardless of where you work.But a group life insurance policy has employment-based stipulations. Some employer-provided life insurance policies typically terminate once an employee leaves their job.
But according to Progressive, some employer policies are portable after you leave the job. These policies let you pay for the same coverage via a renewable term life policy. Some may allow you to convert your coverage into a permanent individual life insurance policy when you leave. Moving a life insurance policy after termination typically needs to take place within 30 to 60 days of leaving a job.
Medical Underwriting for Group and Individual Life Insurance
One significant benefit of group life insurance is that minimal or no medical underwriting is required. But this can work against you. For example, even if you don’t use tobacco and are in good health, you will be paying the same as someone who does use it and is unhealthy. But if you’re receiving your group life insurance at no charge, it may not matter to you.Most individual life insurance policies are medically underwritten. However, there are some individual policies called “guaranteed issue” that don’t underwrite. According to Progressive, these policies offer much lower coverage amounts than traditional life insurance due to their lower eligibility requirements.
If you are a non-tobacco user with an individual policy, you'll typically pay lower premiums than a tobacco user.
Guaranteed Life Insurance Premiums
According to the CM&F Group, group life insurance premiums are subject to potential increases. They are based on the company’s experience and market factors. Because of this, if you are paying for your policy through work, you aren’t guaranteed that the premium will remain the same year to year.With an individual life insurance premium, you are guaranteed the same premium for the length of the term period you select.
Differences Between Group and Individual Life Insurance
It’s important to understand the nuances between group life and individual life insurance. This can help you evaluate the value of your employee benefits package. It will also help you determine how to customize your life insurance.Group life is more cost-effective, with basic coverage that is easy to manage. But individual life insurance can be customized, provides comprehensive protection, and follows you through life.
The Epoch Times copyright © 2025. The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.
