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Understanding employer's group term life insurance and individual term life insurance
When it comes to securing the financial future of your loved ones, life insurance may be crucial consideration. Among the various options available, according to CLHIA 2023 statistics1, a group life insurance coverage is preferred by 35% Canadians and an individual term life coverage is preferred by 40% Canadians making both these plans popular choices. In this article, we’ll explore some of the similarities and differences for both these plans to help you make an informed choice.
What is employer's group term life insurance?
As the name suggests, employer’s group term life insurance is provided by many employers as part of their offered employment benefits package. The eligibility requirements for this type of plan vary by employer. Your enrollment starts once you’ve met the requirements.
Employer’s group term life insurance is a type of term life insurance that provides coverage for a “term” (a specific period of time). Generally, this term is for one year, and it can automatically renew each year with a company's open-enrollment process. Your employer owns the policy.
If you’re looking for personal coverage outside of work, you can choose an individual term life insurance plan.
What is an individual term life insurance?
Individual term life insurance is a policy you buy from an insurer. You own the coverage/policy and if you change employers, you continue to keep your coverage. The policy provides coverage for a specified period of time known as a term. This term or duration is pre-defined by the insurer, which is usually for 10, 20 or 100 years, and at the end of the term, it can automatically renew.
Both employer's group and individual life insurance provide financial protection for your loved ones in the event you pass away, subject to policy exclusions. If the terms of the policy are met, a lump-sum, tax-free benefit is paid out to your designated beneficiaries.
Understanding the differences: what is the difference between employer's group and individual term life insurance?
Coverage and product flexibility
Who can choose the coverage and duration of the policy?
Employer's group term life insurance |
Individual term life insurance |
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As employer's group insurance plans are owned and determined by your employer, you are not able to select your group life insurance policy. Coverage amounts are often capped by the employer at one or two times your annual income unless you choose to apply for extra coverage. Some employers offer a supplemental group term life coverage which may require a medical exam and incur higher premiums for more coverage. |
Individual term life insurance plans let you choose several aspects of your coverage that best suits your needs, including the - coverage amount - payment options such as credit cards or pre-authorized debit - premium payment frequency and - the duration of your policy |
Premiums
Who pays for the premium?
Employer's group term life insurance |
Individual term life insurance |
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Typically, the premiums for employer's group life insurance are fully paid by your employer as part of your benefits package. If you've opted for additional coverage amount as mentioned above, you could be required to contribute towards the additional premium amount. Your premiums may increase during your employment based on your age and salary that is determined at the start of each year. |
The premium for an individual term life insurance is paid by you, as you’re the policy owner. You must pay your premiums to maintain your coverage. Your premiums usually are fixed for the duration of your term, which means the premium won’t change during that time. If your policy is renewed or you convert your term policy to a permanent policy, you will pay higher premiums to reflect your age at the time of renewal or conversion. |
Cost
Are both these plans cost-effective?
Employer's group term life insurance |
Individual term life insurance |
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The employer's group term life policies are often more affordable as the risk is shared among the group of employees under a single contract and the premiums in most cases are paid by the employer. |
Premiums can vary based on different factors such as, age, sex, health, lifestyle, amount of coverage you choose and more. Although the cost may be higher than employer's group term life insurance, the rates are locked in for the entire term of the policy (can be chosen from options offered by the insurer) which is usually longer than employer's group term life insurance (typically 1 year). |
Medical exams
Are medical exams or health questionnaire required?
Employer's group term life insurance |
Individual term life insurance |
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If your employer deems you eligible, you’re approved. Medical exams or health questionnaires are not always required for employer's group term life insurance unless you choose to apply for extra coverage. |
For individual term life insurance plans, you may need to take a medical exam. This depends on your answers to the health questionnaire in your application, the term selected, amount you apply for and your age. |
Portability of coverage
Are both policies portable?
Employer's group term life insurance |
Individual term life insurance |
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Employer's group term life insurance is tied to employment which means often the coverage ends when your employment ends or terminates. |
Individual term life insurance is not tied to your employment, and you own the policy which means the coverage remains with you for the term selected. |
Conversion options
Can the life insurance policy be converted?
Employer's group term life insurance |
Individual term life insurance |
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Although most employer's group term plans may not be portable, some employers allow you to convert your policy, which means you can switch your coverage to an individual policy without having to go through medical exam or health questions. However, as your previous group rates may no longer apply, this can lead to increased costs depending on your specific needs. |
For individual term life plans, the policy remains with the life insurance policy owner. With the plans that TD Insurance offers, such as the TD 10-Year Term Life Insurance or TD 20-Year Term Life Insurance, you may be able to convert to lifetime coverage with TD Term 100 Lifetime coverage before the age of 69. This provides you with lifetime coverage, where premiums are adjusted to your new plan and age and guaranteed not to change. |
Group life insurance offers valuable coverage from your employer, providing financial security for your loved ones in case you pass away. However, your group coverage is set at a certain amount and this amount may not be enough for your financial needs. Transitions such as job changes or retirement can also affect how much coverage you require. The flexibility and tailored coverage of an individual term life insurance plan can provide your loved ones with sufficient financial protection should you pass away.
A combination of both types of life insurance through work and individual plan could offer a balance of affordability and coverage depending on your needs.
Understanding your specific situation is important to determine how much individual term life insurance you may need and ensure you are properly covered.
If you would like to learn more speak to a licensed TD Life Insurance advisor at 1-888-788-0839 or visit our website to know more about TD Term Life Insurance.
1Source for CLHIA statistics https://www.clhia.ca/web/CLHIA_LP4W_LND_Webstation.nsf/resources/Factbook_2/$file/FACT+BOOK+2023+ENGLISH.pdf
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TD Term Life Insurance plans are individual life insurance plans underwritten by TD Life Insurance Company. See Insurance Policy for coverage details, including limitations and exclusions.
The content on this page is for general information purposes only and does not constitute legal, financial or insurance advice. Speak to a life licensed professional advisor regarding your specific situation. The information contained herein, is subject to change without notice.