In some cases, you may have the option to either purchase a life insurance policy on your own or get one through your employer. In either case, you will be faced with a challenge: The difference between individual and group life insurance? And which is the best for you?
Generally, employers offer group life insurance policies that either cover the premium or are provided as an optional benefit that can be deducted from your paycheck. By contrast, individual life insurance is the policy you buy on your own and not added to your employment status. In this article, we’ll look at the difference between individual and group life insurance and which is the best option for your need.
What is Individual Life Insurance?
This is an individual insurance policy that you own. This policy is created based on your financial goals and health. The premium rate is mostly determined by your age at the time of enrollment. While the premiums are usually higher initially, they do not increase or reduce due to your age. Unlike a group life insurance plan, this plan gives you total control, so whenever you change jobs or retire, you can take it with you.
If you don’t have pre-existing conditions, you can receive a lower premium. Even if you have a higher premium than what you would pay for extra coverage through your employer, your life policy’s beneficiaries will be insured for more money upon your death, and you can have peace of mind knowing that your life insurance policy is not going anywhere.
Also, your life insurance company can’t cancel your policy unless you stop paying the monthly or you cancel by yourself. However, you will need to pass a medical exam before you qualify for enrollment.
What is Group Life Insurance?
This policy is owned by your employer, so you don’t have to pay. This is a good option for everyone, especially those that are single and don’t have any debt or major payments. Unlike individual life insurance, you don’t have to provide medical records or go through a medical exam to qualify for coverage with a group life policy. So, any preexisting conditions won’t have an impact on your premium.
However, if you have people that depend on you, your needs will be significantly different. These people may need to pay off student loans or your mortgage loans or live on the money from your life insurance policy. You may also need to use the money to cover a new health insurance plan if your employer previously covers you. If you want to use a group life insurance plan to properly provide coverage for your beneficiaries, you would need to pay an additional monthly premium.
With a group life insurance plan, your monthly premium also tends to be higher because you don’t need to undergo a medical exam. You also need to renew this contract every five years. In addition, if you ever leave your place of work, you can’t take your group life policy along with you. And this leaves you and your beneficiaries totally unprotected until you get a new job.
Keep in mind that group life insurance is not a guarantee but a benefit. So. If your employer needs to make budget cuts, your policy could be terminated, even if you have been paying for additional coverage.
Which Life Insurance Policy is Best for You?
Life insurance can be a powerful and flexible financial tool that can meet several objectives, from leaving a legacy to providing financial security and building assets. Most insurance experts believe that group insurance should be used as part of your overall life insurance plan but not as their main source of coverage.
The benefits of purchasing an individual life insurance plan can be helpful to your overall financial well-being. It is vital to review your life insurance requirements, not only the amount of coverage for your need, but you also need to consider the time you will need the insurance. Besides, you can hardly remain employed with the same company forever. So, you may likely have inconsistent life insurance coverage when you rely solely on group life insurance.
Deciding whether to purchase an individual or group life insurance plan is a personal decision that should be based on your budget, employment condition, and the finances of your beneficiaries. If you are still trying to figure out which life insurance plan to choose, you may want to contact an insurance expert for assistance.