Home Know Your Money Individual Life Insurance vs. Group Life Insurance: Everything You Need To Know

Individual Life Insurance vs. Group Life Insurance: Everything You Need To Know

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Are you still confused with individual life insurance vs. group life insurance? We’ll help you point out the differences.


Individual life insurance refers to the insurance that individuals buy for themselves or others. The type of insurance that individuals can buy varies, from term life insurance to permanent life insurance (including whole life insurance, universal life insurance, variable insurance, and so on). 

Meanwhile, group life insurance is the insurance that companies offer to their groups of employees. To be specific, companies will buy a group insurance package from an insurance company. When an employee signs a full-time contract with a company, they will include the employee in their group life insurance. The employee will then receive a certificate of insurance (COI) that confirms their coverage. 

Group life insurance is a kind of term life insurance because the policy is in force as long as the employee works for the company. When the employee leaves the company, the policy ends.

How does each type of insurance work?

To fully understand how individual life insurance and group life insurance work, let’s talk about parties involved in an insurance policy. These include the policyholder, the beneficiary, the insured, the insurer, and the payor.

  • Policyholder: the one who owns the policy. If you buy insurance under your name, you are the policyholder.
  • Beneficiary: the one that receives the death benefit of the policyholder in life insurance
  • The insured: the person whose death will lead to the payment of the death benefit
  • The insurer: the insurance company/ agent that pays for the death benefit of the insured
  • Payor: the person who pays for the policy. This can be the policyholder and/or the insured.

Once you’ve got a gist of parties that take part in an insurance plan, let’s look at how individual life insurance and group life insurance work with the table below:

Individual life insuranceGroup life insurance
UnderwritingIndividuals need to show evidence of their insurability through the underwriting process. If they suffer from serious diseases such as cancer, their application may be denied.
In some cases, individuals can apply for a non-medical requirement insurance policy. However, they have to pay for higher rates with a more limited coverage.
There is no medical requirement.
PayorThe payor can be the policyholders or their family members. For example, parents can be the payor for their child’s life insuranceThe insured’s company will pay almost or all the premium cost.
Premium rateThe insurer will take into consideration several factors to decide the rate. These factors include age, gender, health class rate, driving records and so on.The premium rate will be decided by the company. Everyone in a company shares the same premium rates.
Guaranteed premiumThis depends on the type of insurance that the individual buys. For term life insurance, individuals enjoy a fixed premium within their term. When the term ends, they may have to pay for higher premium rates if they want to renew their policy. For whole life insurance, policyholders benefit from fixed premium rates for universal life insurance, individuals pay a required amount of premium within the first few years. After that, they can choose how much premium they want to pay within a guaranteed period.There is no guarantee on the premium. If the insurer decides to increase the rate, the company will also have to pay more accordingly.
Maximum CoverageThe maximum coverage of individual life insurance is higher than that of group life insurance.
Individuals can choose the coverage amount that is affordable for them at the time of purchase. Thereafter, they can either choose or reduce the amount of coverage, which will, of course, change their death benefit and premium.
The maximum coverage is often limited and thus may not meet the needs of individuals. 
In many cases, employees with group life insurance also purchase additional individual life insurance to cover for their needs.
Cash ValueThis depends on the type of policy that individuals buy. Term life insurance has no cash value. Permanent life insurance (such as whole life insurance or universal life insurance) entails a cash value. Since group life insurance is a kind of term life insurance, there is no cash value included in the policy.

Comparing the pros and cons of individual life insurance vs. group life insurance

Since no policy is perfect, each type of insurance has its pros and cons. By comparing these two types of policy, we hope that you can have a clearer understanding of them.

A massive perk of individual life insurance is that it is more flexible than group life insurance. This is because individuals are free to choose their favorite insurer and coverage; they can adjust their coverage later and have more authority when dealing with the insurer. By contrast, companies often decide all of these for group life insurance, and thus, employees have little say in the matter. As said above, some people must purchase additional individual life insurance since the insurance offered by their company is not sufficient for their needs.

Another advantage of individual life insurance over group life insurance is ownership. As regards individual life insurance, individuals can decide when their policy ends. For example, as long as the policyholders pay for the premium, they will enjoy lifelong protection from their whole life insurance. Yet, with group life insurance, when the employees leave the companies, they will lose their protection. Should an accident happen to them before they find a new company, they will not receive any insurance.

Of course, group life insurance is not a bad option at all. Unlike individual life insurance, you don’t have to worry about your premium since your employer will take care of it. Besides, you can benefit from the protection regardless of your health status. Whether you smoke or not will not be a problem when it comes to group life insurance.

To sum up, group life insurance and individual life insurance benefit policyholders in different ways. If you still have any questions in mind, don’t hesitate to contact us for further information.

Frequently Asked Questions

I already have group life insurance. Should I buy individual life insurance?

We’d advise you to do so if your finances allow. Right now, 44% of Canadian purchase individual life insurance. Group life insurance is offered with your work contract, but it has many limitations. One biggest shortcoming of group life insurance is that when you leave your job, your insurance terminates. Group life insurance also has low coverage, which may not meet your demands.
By having an individual insurance plan of your own, you are independent of your employers. This way, you feel more secure and prepared for your future.

What is the best individual life insurance?

Unfortunately, there’s no one-size-fits-all plan. The “best” or the “ideal” individual life insurance is defined based on your needs and financial capability. There are many types of insurance, and the most basic forms are term life insurance and whole life insurance. You can always talk to your insurer or agent to customize the plan to your needs.
On our websites, there are many articles on different types of insurance that you can look at for further reference.

Can you recommend to me where to purchase an individual insurance plan?

The top ten insurance companies in Canada in 2021 include Manulife, Sun Life, Canada Life, Desjardins, iA Financial Group, RBC Insurance, BMO Insurance, Empire Life, Equitable Life, Canada Protection Plan.
In this article, you can have a brief overview of each company. If you need to talk to someone with expertise, don’t hesitate to contact us. We will try our best to help you find the best product for you.

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