Group Life Conversion Option

Posted on February 14, 2010 and updated August 22, 2013 in Group Benefits, Insurance Types, Life Insurance Canada News 3 min read

Most employee benefit plans  provide group life coverage, which allows the applicant to convert their group plan, without a medical evaluation, to an individual life plan upon the termination of their employment. This can be a good value to applicants who have serious health issues, such as a history of cancer, stroke or heart disease, which can make individual coverage difficult to attain.

The insurance company does buffer itself by charging a much higher premium on group life conversion. This extra premium is meant to mitigate its risk that the applicant may not be in good health at the time they convert their coverage. Be aware that most group conversion plans are priced 50 to 100% higher than equivalent individual life insurance coverage. There are also limitations on the face amounts and the type of plans group life policies can be converted to. Most group plans have a maximum conversion amount of two times the employee’s salary up to $200,000.

LSM Insurance President Chantal Marr points out many clients are shocked at how expensive it is for an employee to keep his group life coverage.  Many employees are use to paying $30 or $40 a month for their group life coverage.  To convert a $100,000 of coverage at retirement to a Whole Life Plan is often over $500 a month.  This is a major sticker shock for people and many employees simply let the coverage go.

A couple of points to consider if the employee is in good health he/she could convert the coverage and at the same time submit a regular application if they are approved for the regular plan they can cancel the converted group life coverage.  Chantal also points out to look into your life insurance options prior to retirement.  If you like the idea of having Permanent insurance the cost of a plan is substantially lower at 45 than at 65.  Some Permanent plans can also be paid up in a limited number of years so you can have the policy paid up i.e. no future payments at retirement.

The premiums and options among companies offering group conversion options can differ so be sure you work with a broker who is familiar with these options.  You want to make sure your broker gets the application in the right hands as group life conversions are usually processed in a different area than regular life insurance applications. 

The wording and requirements for group conversions differ from company to company, so it is crucial your broker is familiar with your insurance carriers group conversion guidelines.

For more details, you can contact us at 1-866-899-4849, or you can get a term life quote by visiting our Instant Quote Calculator.

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