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Group vs. individual life insurance: Key differences
Group life insurance coverage is a common workplace benefit that many Canadians don’t even realize they have. It can provide a basic level of financial protection for you and your loved ones if the worst were to happen.
While both group life insurance and individual term life insurance pay out a tax-free lump sum to your loved ones if you pass away, there are a number of key differences between them.
Group life insurance is a valuable benefit and a good starting point. However, it’s not designed to be a comprehensive, long-term solution. Its one-size-fits-all approach may not align with your family’s needs or unique financial responsibilities.
Why group life insurance may not be enough
Workplace group life insurance is provided by an employer to eligible employees as part of a benefits package. Enrollment is usually straightforward for basic coverage. It’s often employer-paid or subsidized, making it an attractive perk. But here’s why relying solely on this group policy might leave you financially vulnerable:
Limited coverage: Group coverage amounts are usually based on multiples of your salary (for example, 1-2 times your annual salary.) But most Canadian financial experts recommend 7-10 times your annual salary as a starting point for life insurance coverage. Think about all your financial obligations—loans or debts, ongoing living expenses—who would carry these costs if you were to pass away?
Less customizable: Group policies are designed for a broad group of people, meaning they aren’t tailored to your individual circumstances. Major life events like buying a home, getting married, or having children significantly increase your financial responsibilities and need for protection. A workplace policy may not keep pace with these changes.
Limited portability: In most cases, group life coverage ends when your employment does, be it from a career change, job loss, or retirement. In today’s dynamic job market, where people rarely stay with the same employer for their entire career, this can leave you without protection during a period of transition. You may have the ability to convert your group coverage to an individual policy, up to a certain coverage amount. But rates at the time of conversion are often more expensive than typical market rates.
How to assess your coverage needs
A recent study by Blue Cross revealed that a shocking 50% of Canadian households wouldn't be able to maintain their current lifestyle for even one year if the primary earner passed away. Having enough coverage is crucial to protect your family’s future, allowing them to reach the goals you had planned for without financial hardship.
Here are some factors to consider when evaluating your coverage needs:
- How many financial dependents you have (children, aging parents, pets, etc.)
- Your mortgage balance
- Any outstanding debts (car loans, credit cards, personal loans)
- An estimate of your family’s current living expenses
- Any anticipated future expenses (funeral costs or final expenses, your children’s education, your partner’s living expenses in retirement, etc.)
- Your level of savings
This is why employer-provided life insurance coverage of 1-2 times your annual salary may not offer enough protection. For many Canadians, it makes sense to own multiple life insurance policies to ensure you have the coverage you need.
How to supplement with additional coverage
Even with workplace group life insurance in place, you might find yourself needing additional life insurance coverage. There are several ways that you can increase your existing protection:
Add optional coverage through your workplace
Your employer may offer supplemental coverage options, such as optional life insurance, to enhance your basic coverage. While this can be a convenient way to increase your protection, it does come with limitations. Unless the coverage is portable, it remains tied to your employment and ends if you leave your job.
Some group plans also provide a conversion option, which allows you to change your group coverage into an individual policy if your employment ends. However, these converted policies often come with restrictions on the amount of coverage available and may be more expensive than individual policies you could purchase on your own.
Buy an individual term life policy
An individual term life insurance policy is often the most flexible and robust option, because it’s fully customizable to your specific needs. You choose the exact coverage amount and term length to ensure your loved ones are fully protected. Since the policy is yours, it's completely portable and stays with you through any career shifts. With term life insurance, you get long-term coverage that fills any gaps left by workplace benefits. It’s protection that truly keeps pace with your life.
Get additional term life insurance with Blue Cross Life
Applying for additional life insurance coverage is simple with Blue Cross Life. Our digital application process allows you to get a policy in three easy steps, all without leaving your home.
Step 1: Get your personalized rate
Pick the term length and coverage amount that suits your needs. Answer a few quick questions to get a free, no-obligation term life insurance quote.
Step 2: Find out if you’re approved instantly
Tell us more about yourself and complete your application in under 20 minutes. Many eligible applicants are approved right away.
Step 3: Get coverage as soon as you’re ready
Accept your coverage, make your first payment, and you’re done! Breathe easier knowing your loved ones have a financial safety net to depend on.
And if you need any support or advice along the way, our team of expert insurance advisors are here to help.