Group vs. Individual Insurance

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Many employees are enticed into buying optional group insurance to supplement their individual life insurance coverage. They often are misinformed into thinking that this optional group goverage will give them a lower rate and better value, but, the reality is, in most instance group coverage is actually more expensive than equivalent term life coverage without the added benefits of an individual life policy. Below we’ve outlined the difference between an optional group insurance policy and an individual life insurance plan:

  1. Group life policies generally go up in five-year increments. — Individual life insurance policies are available in 10, 20 or 30-year terms. This allows you to have a longer fixed rate than a group life policy.
  2. Group life policies can be adjusted on a group-wide basis and/or the coverage can be eliminated if the group has had a poor claims experience. — Individual policies are owned by the policyholder and provide a unilateral contract, i.e.the insurance company cannot cancel your coverage and can only adjust your rate as stipulated in the contract. The insured can cancel their coverage anytime. Optional group life coverage has a limited array of products. Individual contracts can be either term insurance or a permanent policy, where the coverage is with you for your lifetime and can generate a cash value.
  3. Optional life plans do not offer preferred rates. — Individual policies offer preferred rates if you are in very good health and have an excellent family health history. The difference between preferred and standard rates can be very significant, especially for term policies.

    A 40-year-old male non-smoker would pay $62.55 a month with Equitable Life for standard rates on a $500,000 Term 20 policy. The plan would cost $44.55 a month if the same applicant qualified for preferred rates.    

        See our full article on Preferred rates right here.

    4. Optional life plans do not offer riders and/or benefits — Individual policies can have a plethora of policy riders and benefits. One example is Manulife’s Children’s Term Rider, which allows the insured to add a rider that grants their children the right to upgrade their own coverage up to 25 times the original face amount without a medical. You can find further details on that plan here

If you have any questions, please don’t hesitate to call us at 1.866.899.4849 and you can get a free, online instant quote at our Term Life Instant Quote Page.

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  1. Daniel 03/24/2010 at 5:41 pm

    What would you recommend for an older (50+) individual (non-smoker) for modest sum (around 50,000 – I would like to purchase a small amount of life insurance for myself & possibly wife.


  2. LSM Insurance 03/24/2010 at 8:45 pm

    Hi Daniel,

    Thanks for the note. The best type of plan depends on your budget and if you want something on a Temporary basis i.e. 10 or 20 years or a Permanent plan.

  3. Rose 04/29/2013 at 9:39 am

    Can I convert my Empire group plan to a Permanent policy?

  4. LSM Insurance 04/29/2013 at 9:44 am

    You would have to check with your provider but group plans generally can not be converted to Permanent policies, except within 31 days of termination of employment. And group conversion options factor a buffer into the pricing.

  5. Lisa P 07/16/2013 at 5:15 pm

    How is $300,000 Term 5 I want to match it up with what my company is offering. Much apprec.

  6. LSM Insurance 07/16/2013 at 5:20 pm

    Hi Lisa, We will send you a separate. Not many carriers offer Term 5 plans so a Term 10 plan may provide lower premiums and a better value.

  7. hmanne 10/22/2013 at 2:31 pm

    I currently have a term policy in place for 250,000 with Sunlife and a combined 100,000 universal life + 100,000 Level term 20 Life Insurance with Industrial Alliance.
    My husband has a 250,000 Universal Life with Transamerica. Overall, we both have gone past the 2 year contestability period on all our life insurance policies. Recently, an agent from Primerica suggested we switch to a group polic for our family to lower our insurance policy fees (whuch they explained is billed yearly per individual policy). They suggested that my husband be the primary policy owner for 300,000 term 30 and I (the wife) be a rider for a lower coverage of 250,000 term 30 (since I explained to them that my rate is always pro-rated due to some stable health issue) and that our son also be included as a rider for 25,000 also term 30. They say they only have term insurance coz it is the only insurance that really makes sense. all the rest are just offered by agents to get higher commissions

    My question: Is it wise to get this family coverage with just one policy? they said the only difference with this group policy is that we will save on the policy fees, and of course a smaller coverage for me, but a slightly higher coverage for my husband.

  8. LSM Insurance 10/22/2013 at 4:10 pm

    Thanks for the note. The Primerica policy you are referring sounds like an individual muti-life policy – not a group policy which you get through your employer.

    I disagree with the agents statement “They say they only have term insurance coz it is the only insurance that really makes sense. all the rest are just offered by agents to get higher commissions”

    The right type of policy depends on your needs and your budget. Also keep in mind level cost Universal Life rates have gone up significantly in recent years sso your policies could be locked in at favorable rates.

    Multi life and individual life policies are very similar multi life do provide a saving of the policy fees keep in mind the insured must have the policy owner sign for any changes which can sometimes be an issue in the case of divorce.

  9. Reed 01/04/2014 at 12:53 pm

    Can I own a group policy even if I have two other policies. Should I cancel my other plans and keep my employer plan its cheaper

  10. LSM Insurance 01/04/2014 at 12:56 pm

    Hi Reed. You can keep both plans – you can have more than one life insurance policy. Individual policies have several benefits including guaranteed premiums not found in group policies

  11. LSM Insurance 01/04/2014 at 12:58 pm

    Hi Reed, You may also find some useful points on Group vs Individual life insurance link to

  12. Thomas B 04/08/2014 at 10:26 am

    Which is more expensive Group or Individual Life Ins. I’m 41 male NS good health. I’m covered with … for $600,000 now

  13. LSM Insurance 04/08/2014 at 2:58 pm

    Thanks Thomas. Group Insurance is often less initially but most plans are based on 5 year term plans. Whereas Individual can be longer Terms or Permanent plans. The premiums are guaranteed and you can maintain the coverage after you leave your company

  14. Sean Cooper, Financial Freelance Writer and Blogger 04/29/2014 at 4:04 pm

    Great article, Chantal! A lot of people make the mistake of assuming group life insurance is superior to individual without looking at the facts. I actually wrote a similar article on individual vs group disability insurance you would find interesting: link to

  15. LSM Insurance 04/29/2014 at 4:43 pm

    Thanks Sean – a big variable is the coverage does not stay with you if you switch employers , which happens much more frequently in today’s economy than years gone by.

  16. Gail Vaz-Oxlade 04/29/2014 at 4:47 pm

    Individual belongs to you; group insurance is only yours as long as you’re part of the group; can be expensive to replace later if you must.

  17. Jack Larmond 04/30/2014 at 1:03 pm

    The Biggest area overlooked is the “convertibility option” offered both in individual & Group Benefit Life Insurance policies. What is drastically different is the pricing!

    This pricing difference is usually not looked at until it is too late. Although group plans initally typically offer much better pricing than do individual plans, the biggest & most important difference to consider is what will happen when that employee leaves his/her employment or retires. Are they able to keep the life insurance plan at the same cost and take it with them? The answer is No!

    If that employee develops a health issue while employed it can them limit them from buying individual insurance at a reasonable rate or all together.

    If the insured leaves the company or retirees, the option to convert the group insurance is VERY expensive and in most cases unaffordable. If they had an individual plan, the option to convert a term 10 or term 20 to a lifetime policy is much more affordable.

    -Jack Larmond

  18. LSM Insurance 04/30/2014 at 3:01 pm

    Great point Jack on “If the insured leaves the company or retirees, the option to convert the group insurance is VERY expensive and in most cases unaffordable”

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