When purchasing term insurance should you purchase it through your Company’s group Insurance Plan or should you purchase a personally owned policy?
Many people will purchase Optional Life Insurance through their Group Plan at work because it is ‘convenient’ and they think it is a ‘good deal’. But is it really? How do Optional Group Life Insurance and your own personally owned Term Life Insurance policy compare?
With Group Life you do not benefit from the professional advice of a licensed life insurance broker/agent.
The actual underwriting for Group Life Insurance is much less flexible than that for individually owned policies. The applicant for Group Life Insurance is either approved or declined. The underwriting for individually owned policies is more flexible. In difficult situations the underwriters can often make an offer involving a temporary or permanent extra premium and, alternatively in some cases due to the applicant’s excellent health history a preferred (reduced) premium may be offered.
Do you want the policy owned by your Employer or by you? Can the policy be cancelled by your Employer or Insurance Company or only by you? Do you want the coverage to automatically cease at termination of employment or retirement or does it make more sense to be able to keep the coverage? Remember too that you cannot assume you can simply purchase new replacement coverage in the future if you lose your Group Coverage—you may have had a change in health and may not qualify. The Group Life coverage may be convertible to another plan but only at time of termination of employment or retirement and there is often a limit as to how much can be converted whereas a personally owned plan can be fully convertible at any time up to a predetermined conversion age (typically between ages 65 and 75 depending on the plan).
The premiums for Optional Group Life are not guaranteed and premiums usually increase in pre-determined 5 year age bands (e.g. A 49 year old will have a cost increase next year and again at age 55). A personally owned policy has guaranteed premiums which typically will increase every 10 or 20 years from the policy issue date. And depending on the province the premiums for Optional Group Life insurance are subject to Sales Tax (no Sales Tax is applied to individually owned policies). And the premiums for the Optional Group Life are often more expensive than those for personally owned policies.
In summary the Personally Owned Term Life Insurance policy gives ownership and control to you! The cost is fully guaranteed and competitive. You stay in control!