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Life Insurance

Group or individual life insurance?

January 30, 2023

The benefits package at the company you work for includes group life insurance? That’s great! You now have term life insurance equal to one time your salary (or two times, if you were able to buy a second increment and took advantage of this option). You should note, however, that even though your group insurance can provide good basic life insurance—especially if your employer pays a portion of it—it may not be enough to cover your needs or help you achieve your goals.

In this article :

What is group insurance?

Group insurance is an insurance plan offered by some companies to their employees or members. Membership is mandatory when offered by your employer. The employee, although covered, does not own the contract but remains insured as long as they are part of the organization.

What do most group insurance plans cover?

Group insurance coverage varies from organization to organization. In addition to life insurance, they may include prescription drugs (because the program offered by Régie de l’assurance maladie du Québec [RAMQ] is only for those who do not have access to a private plan. As a result, all employees who have a group plan offered by their employer are required to join); disability (short-term and long-term); AD&D (accidental death and dismemberment); serious illness; dental care; travel insurance; and more.

What happens if I lose my job or change employers?

If you lose your job, change employers, become self-employed or retire, in the vast majority of cases you are no longer covered by your group insurance. However, you should be able to convert your group insurance to individual insurance without proof of health. The premium will be based on your age at that time. But another good solution to meet your life insurance needs would be to purchase individual life insurance, possibly at a lower cost, and without the risk of losing that coverage if your work situation changes (more info here).

For future retirees, it is also possible to convert all or part of your group life insurance to individual insurance, but premiums can increase significantly due to your age, health, etc. So it’s important to keep in mind that the younger you are when you purchase individual insurance, the lower the cost.

What is the difference between group and individual insurance?

Group life insurance is, in a way, term life insurance. However, there are some differences between the two options.

Group insurance Individual insurance
The organization is the policyholder and has control over any changes or cancellations. You are the policyholder.
The amount of insurance is always calculated as a multiple of your salary. You decide on the amount of insurance based on your personal needs and goals.
Premiums are based on group-wide factors and are subject to change. Premiums are set according to your factors and are guaranteed according to the policy chosen. They cannot be changed without your consent.
If you change jobs or retire, your insurance ends. You will no longer be insured. No matter how your employment situation changes, your coverage does not change.
Normally, you do not have to provide proof of health for the first increment of insurance. Normally, you must provide proof of health.
Sometimes, you have the option of adding your spouse and dependent children to your insurance coverage. Sometimes, you have the option of adding your spouse and dependent children to your insurance coverage.

Here are some differences that provide a clearer understanding:

But why not consider both?

Since your financial situation is likely different from that of your coworkers, it may be beneficial to assess your personal situation by analyzing your life insurance needs. We encourage you to contact a Matcha Insurance Financial Consultant for assistance, to properly determine your personal needs and goals and obtain additional information before adding increments to your group plan. This is because you could meet your life insurance needs with individual life insurance at a lower premium cost and without the risk of losing that coverage if you change jobs.

The following example illustrates this type of situation:

Maëlle, 31, has been working in a company for 5 years now. At the time she was hired, she enrolled in her employer’s group insurance plan. With her annual salary of $50,000, she therefore has $50,000 in coverage. Since she started, she has bought a house and had a child.

She recently had the opportunity to change jobs for a better salary. She will now earn $65,000. With all these changes in her life, she decides to do an analysis of her life insurance needs. She learns that in order to cover the loss of her income and pay her mortgage in the event of her death, she needs $300,000 in coverage. Her new employer offers her group insurance. She takes out $65,000, which is her annual salary, and her employer allows her to add an increment that would cover her for $130,000 in total.

As Maëlle does not want to take the risk of losing this coverage if she changes jobs in the future, she takes out $200,000 in individual insurance that will cover her up to age 80 for a monthly premium of $21.00 that will not change for the next 15 years.

As you can see, while group insurance offers good basic coverage, not relying solely on it as a form of protection is beneficial, because, in the long term, being able to rely on protection that truly meets your needs and those of your loved ones, in terms of cost and duration, is really wise.


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