BeamaLife Blog

Employees often think that insurance offered by their employers is cheaper than purchasing individual plans. Certain types of insurance are cheaper when purchased through a group plan including Health, Disability, Long-Term Care and, in some cases, Life Insurance.  If your employer provides free insurance, you should certainly accept it. However, if you are in good health and are paying for life insurance coverage through your employer (most likely through payroll deduction), you may be paying too much and could save up to 60% on your term life insurance by purchasing an individual policy.

Group life coverage, like most things in life, has its positives and negatives. Often available in multiples of your annual salary (2X, 4X etc.) it may seem like the best and most convenient option, unfortunately, it may not be the most cost-efficient and the great way to have insurance for long time. Group policies are based on the general statistics of the overall employment pool of the company and do not consider an individual’s personal health. In a group policy, everyone is combined into one category regardless of key factors (health history, gender, etc.) As a result, individuals in good health are often paying more than they need to for coverage and individuals in poor health are paying less than they should.

Individual term insurance policies, on the other hand, are underwritten to assess the applicant’s individual health circumstances. That means individual coverage for those non-smokers with good habits and above average health can cost considerably less than group coverage, most of the times up to 60 percent less.
According to life insurance industry statistics, the overall cost of new group life coverage remained virtually unchanged during the last decade. In contrast, the average premiums for an individual term life policy have dropped approximately 50%. An individual with an annual income of $100,000 who needs coverage equal to 7 to 10 times their income level may end up paying nearly $500 to $700 more per year if they insure themselves through a group policy.

Another point to consider is that most group term costs increase as an individual enters the next age group (35, 40, 45, 50, etc.) and the prices are not guaranteed, they can be increased. Coverage via a group plan may not be portable should employment terminate, and the cost to convert from the existing group policy to an individual permanent insurance plan can be substantial. Additionally, your coverage usually ends when you retire from the company. Once that happens, you will have to apply for an individual life insurance policy at age 62 or 65 and your age and existing health conditions may increase the risk of being turned down for a policy.

Individual term coverage premiums can be guaranteed to remain level for varying lengths of time; they can be purchased for level premium periods guaranteed for 10, 20 even 30 years. For these reasons, it’s smart to obtain your own life insurance policy in addition to or in place of the coverage offered by your employer.
So, if you are in good health, don’t pay more for your insurance to offset the cost of people who aren’t in as great a shape.