With open enrollment season coming up, you might be wondering about the differences between group term life insurance and individual term life insurance. The good news is that it’s pretty straightforward — here’s everything you need to know to make an informed decision about your benefits selection.
Group term life insurance | Individual term life insurance |
|---|---|
✅One policy that covers a group of people ✅Usually offered through an employer or trade organization ✅Usually free or heavily subsidized ❌Coverage typically ends when you leave your job ❌Limited coverage amounts | ✅One policy that covers one person ✅Coverage is not dependent on your employer or employment status ✅Financial protection that lasts for a fixed period of time (often 10 to 30 years) ❌You pay for your policy independently |
What are the pros & cons of group term life insurance?
Group term life insurance, also called employer-provided life insurance, is often offered as a benefit you can opt into during open enrollment. It’s typically free or heavily subsidized, which is the main perk of this type of coverage.
Group term life insurance is usually limited to one to two times your annual salary in coverage. Many financial planners recommend having a benchmark of 10 to 15 times your salary in coverage, especially if you have significant financial responsibilities like children, a spouse, or a mortgage. This way, your loved ones will be able to maintain their quality of life for a significant period of time in a worst-case scenario.
Another drawback to group term life insurance is that it’s typically not transferable if you were to leave your employer. In some cases, you might be able to convert it into a private policy, but these options are typically very limited. In many cases, it may end up being more expensive than if you had purchased an individual policy ahead of time.
What are the pros & cons of individual term life insurance?
An individual term life insurance policy is often very affordable — a 30 year-old could pay between $23 and $30 per month for $500,000 of coverage lasting 20 years. Plus, once your policy is in effect, you don’t risk losing coverage if you were to change jobs or get laid off. Your policy will remain active as long as you keep paying the premiums.
You’ll need to apply on your own, outside of work, and your rates will depend on your age, gender, health, and other factors. The process can be a bit confusing to navigate, but working with an independent broker like Policygenius can make it much easier to compare and understand your options.
Life insurance rates increase every year you wait to apply, since we all get riskier to insure as we age. But once you buy your individual term policy, your rates are guaranteed to stay the same for your entire term length (most often 10 to 30 years).
Learn more >>> Average life insurance rates by age
Should I opt into group coverage during open enrollment?
It never hurts to opt in, especially if your employer is offering you free coverage. We recommend shopping around for an individual term life policy, and supplementing that coverage with your employer-provided benefits. This way, you know you’ll have protection in place no matter what life throws your way.
If you’re not sure which combination of group versus individual life insurance is right for you, you can connect with a Policygenius expert for personalized advice.
Learn more >>> Types of life insurance
