Why Personal Insurance is Better Than Group Insurance for Canadians

For about half of all employed workers in Canada today their employer provides an attractive group insurance plan that offers life insurance coverage. Group insurance life coverage is usually much less expensive than purchasing your own policy.  If you are covered by an employee group insurance plan for life insurance, you need to understand the difference between your employer’s plan and personal life insurance. Both protect you from the financial loss of a premature death, so what’s the big difference?

Group Insurance vs. Personal Life Insurance in Canada

Group Insurance = No Personal Ownership

A group insurance policy is owned by your employer, not you even though you are the one insured. Employees are certificate holders, and can only hold their certificate as a member of the group so long as they are employed by the company.  When your employment terminates you will be offered a 30-day conversion option to buy a life insurance product from the same company that holds the group insurance for your employer. You can get this coverage without providing medical evidence, but your choices of life insurance policies are VERY limited. Life insurance policies offered at the time of conversion from a member of a group insurance plan to personal coverage are different than what you can buy directly from a life insurance broker, and often much more expensive.

Group Insurance = Increasing Premiums

The life insurance portion of your group insurance policy is usually banded into five year age groups. As you age your group insurance premiums for life insurance will go up every five years.  If you are employed by your company long-term, the cheap premiums you had in your 20s will become a very expensive policy into your 50s and 60s. With an individual life insurance policy, you can lock in your premiums for 10, 20, 30 years or for life, and have the security of guaranteed premiums for your term number of years of for life..

Group Insurance = group wide premium increases or cancellation

A group insurance policy is not a guaranteed contract, unlike personally life insurance, which is.  The insurance company has the right to increase premiums or cancel the policy every year at renewal.  If your group insurance plan has very high claim rates, premiums will increase or the policy could be cancelled outright by the insurance company.  Also, your employer who is providing the group insurance plan might find itself unable to afford the policy and cancel the entire group to save costs. Individual life insurance policies are guaranteed as originally purchased and designed by you and your life insurance broker, as long as you wish to keep the policy and pay your premiums.

Group Insurance = No preferred rates or optional riders

If you are in good health you might qualify for preferred rates on your individual life insurance plan. A person qualifying for preferred rates (up to 30% discount off standard insurance rates) may find an individual policy is less expensive than their group insurance plan. Group insurance policies do not offer preferred underwriting, as all members of the group are considered equal. You could also add many optional riders and benefits to your personal life insurance policy to enhance its value vs. plain vanilla life insurance offered through the group. Group insurance plans are stripped down, basic forms of life insurance with none of the optional riders and benefits you get on a personal policy.

When group insurance plans were first sponsored by employers for the benefit of their employees it was NEVER intended that group insurance would replace personal planning. Life insurance is a required component of all group insurance policies (which could also include extended medical, prescription drugs, dental, accidental death and even critical illness insurance) and employees have come to rely on the life insurance benefits.  Your group coverage, especially the life insurance coverage should be considered supplemental insurance to your own personal life insurance planning.

Owning a personal life insurance policy will give you flexibility and control of your coverage. You can add beneficial riders to enhance its value for your unique family or business situation.  And no one can take you policy away from you – not your employer or the insurance company, because it is a guaranteed contract that you own.

If you have group life insurance it’s worth reviewing it with a life insurance broker. Life Guard Insurance we can help you understand your group insurance plan, the benefits it includes, and how to use it to augment your personal insurance plan.  Feel free to contact Life Guard Insurance for a free, no-obligation review of your group insurance plan today.

The article was written by Mitch Reynolds+. If you found this article interesting or it made you think, please feel free to share your comments below. Liking us on Facebook, giving us a +1 on Google or Tweeting this article about group insurance vs. personal life insurance would also be very much appreciated.

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