Group Life Insurance
Most Canadians that are employed will have a chance to get life insurance through their employer at little cost to them.
But is group life insurance the best option? Let's dive into the advantages and disadvantages of having group life insurance.
What is Group Life Insurance?
Basic Group Life
Many employers offer free life insurance through their group plan as a benefit to their employees. Coverage amounts are typically lower and are usually calculated as a multiple of your annual salary or a flat amount.
The coverage is generally guaranteed meaning you do not need to answer any health questions or take a medical exam to qualify.
Supplemental Group Life
Most employer group plans will have the option to purchase additional life insurance known as supplemental life insurance. The amount you can apply for varies from company to company but can usually reach up to five times your annual salary. The higher amounts usually involve filling out a health questionnaire.
Advantages and Disadvantages of Group Life Insurance
Here are three of the main advantages of having insurance through a group plan held by your employer:
- Price: The basic amount of group life insurance is typically free and should always be accepted. This is an easy way for individuals to get covered for a small amount at no cost to them.
- Convenience: Group life insurance is relatively easy to sign up for and accept. You usually fill out the paperwork as part of the hiring documents and the HR department within your company can answer any questions you may have.
- Guaranteed: Most basic group life insurance is guaranteed meaning that anyone can qualify regardless of any adverse health conditions they may have. Usually, supplemental group life insurance will also allow you to buy up to a certain amount of coverage without providing additional information about your health.
Here are three of the main disadvantages of having insurance through a group plan held by your employer:
- Portability: In most cases, your coverage is tied to your job and if you leave then you may not be able to bring it with you. In some cases, you can transfer your group plan into a personal plan but the price may increase significantly depending on your age and health.
- Limited Selection: Group life insurance is a type of term life insurance that will last as long as you're with the employer. If you wanted a different type of insurance, or you wanted a term that lasted longer than your employment then group life insurance may not be the best option.
- Reduced Coverage: You may not be able to get as much coverage as you need from your group life insurance plan. Because of their reduced amounts, it's probably best to ensure you have the right amount of coverage through a traditional life insurance plan.Use our Recommendation Quiz to find out how much insurance you may need.
Is Group Life Insurance right for me?
We recommend always taking advantage of the free basic amount of group life insurance that is typically offered through your employer.
Compare prices between the supplemental group life insurance and traditional life insurance.
If the prices are similar or even if the traditional life insurance is only slightly more expensive, it's probably a better choice for the portability and other benefits that are provided.
If you're worried about any adverse health issues or other life habits that may impact your ability to qualify for traditional life insurance at standard rates, it may be more beneficial to purchase supplemental group life insurance.