Advantages of Group Term Life Insurance
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Advantages of Group Term Life Insurance
Group term life insurance has many advantages over individual term life insurance. Because an entire group is insured, the insurance company can spread its risk over a large number of people, so it charges a much lower rate to the employer than it would charge to an individual. When you purchase an individual life insurance policy, whether that policy is term or whole life, you generally must undergo a physical and answer questions about the current state of your health and any health conditions you have experienced in the past. If you have a chronic health condition or have suffered from one in the past, the insurance company may refuse to insure you as an individual. Under group life insurance policies, employees don’t have to submit to physicals or answer questions about the state of their health, so individuals are generally able to obtain group life insurance benefits more easily and cheaply than an individual life insurance policy.
Things To Know
- The insurance company can spread its risk over a large number of people and thus charge a much lower rate.
- With a group policy, your employer selects the features and benefits that are most beneficial.
Disadvantages
There are some disadvantages of group insurance over individual insurance. With a group policy, your employer selects the features and benefits that are most beneficial, and you have no say in the amount of insurance you’ll get. When you select an individual term policy, you can look at a number of insurers and select a policy offered by a company that is financially strong with the benefits and exact amount of insurance you want. With an individual policy, you pay the entire premium; with a group policy, your employer may pick up the entire tab or at least part of the tab, leaving you with a smaller insurance payment, which you can usually opt to have taken out of your paycheck.
Converting to an individual policy
Some employers offer employees who are leaving their employment the opportunity to convert their group policy to an individual policy. While the rates may not be as favorable as they were when you were an employee, these rates are usually much lower than traditional individual policy rates, and you usually can convert the policy without undergoing a physical or answering questions about your health. This can be a good option if you have a health condition that makes it impossible or difficult for you to get individual life insurance. Your employer may also offer you the option to purchase insurance at the group rate for your family members, again at the group rate and without a physical. This is another opportunity for you to take advantage of an employee benefit and save money over what you’d have to pay for individual insurance policies for your family members. However, group term life insurance may not always be cheaper than individual term life insurance, so check the rates offered through your company’s provider against individual policies to make sure you get the greatest amount of coverage for the best rate. If you are very healthy and young, it may be cheaper to get additional insurance on your own rather than through your employer.