Group life insurance vs. individual life insurance

Group life insurance vs. individual life insurance

Many companies offer group life insurance to their employees as part of their benefits package. While group life insurance is a valuable part of a protection strategy, it may not be fully covering you like you thought, and, often at a higher cost.

Group life insurance vs. individual life insurance

Comparison of group life insurance and individual life insurance
Group life insurance Individual life insurance
Portability Depends on plan Yes
Cash value Typically, no Depends on product chosen
Pricing based upon health No Yes
Maximum face amount limit Yes Yes1
Guaranteed premiums No Depends on product chosen
Employer paid Sometimes No
Subject to underwriting No2 Yes


Group life insurance can be beneficial because it features:

  • Income tax-free death benefit.
  • Minimal or no medical underwriting.
  • The potential to add additional coverage for dependents.

However, it can be a one-size-fits-all type of policy. Depending on the plan, the amount of coverage may be fixed, you probably can't choose the insurer and the type of policy is limited. You typically get the same policy as any co-worker in your company. The differences with an individual life insurance policy are that you purchase a policy designed for your needs and budget from a company of your choice.

Working with your financial professional, you can apply for individual life insurance protection that gives you the amount of coverage necessary to help protect your family.

While both types of insurance have their benefits, it is also important to understand the differences.


With group life insurance, you don’t “own” your policy. If you were to resign or become terminated from the company, the group life insurance policy may not go with you. Once employment is terminated, typically so is the insurance.

With an individual life insurance policy, you are the owner. If you transfer jobs or retire, the life insurance can continue as long as the premium is paid.

Cash value

Group plans typically do not build equity in the form of cash value. Depending on the type of individual life insurance policy owned, you may have the potential to build cash value. Permanent life insurance such as universal life and whole life have the potential to build significant cash value. Cash value can be accessed, through loans and withdrawals3, for an emergency or any other purpose you have in mind.

Health-based pricing

One of the best benefits of group life insurance is minimal or no medical underwriting. However, this can be a double-edged sword. If not paid by your employer, you can pay the same premium whether you are in great health, not-so-great health or a smoker.

Most individual life insurance policies are medically underwritten. If you are in good health and a non-smoker, you will likely have a lower premium than a person who is not in good health and/or who smokes.

Maximum limit

Group life insurance often has a low set coverage amount, which may not adequately cover your life insurance needs. Depending on the plan, additional coverage may be available up to set plan limits.

Most individual life insurance carriers base their maximum coverage limits on a multiple of one's income. The amount will often exceed what is obtainable through a group plan.

Guaranteed premiums

Group life insurance premiums are typically based on company experience, and subject to potential increases (which can be passed on to the group participants). If the insurer raises the group premiums and passes the increase to the employees, the participants in the plan can be impacted.

Individual life insurance premiums may be guaranteed or flexible, depending on the plan chosen.

  • Term insurance offers a guaranteed premium for a defined time period. Once the period is up, the premium increases.
  • Universal life insurance has flexible premiums. You may need to increase premiums, or you may be able to decrease premiums as the underlying assumptions change over time.
  • Whole life insurance has a guaranteed level premium that never increases.

Review your coverage

Group life insurance can be beneficial and provides death benefit protection at attractive rates for those who may have health problems. But, understand the limitations of your group insurance plan.

Start the conversation with your financial professional to see how an individual life insurance can supplement your group life insurance coverage and provide the amount of coverage you need to help support your family.

1 Based upon the individual life insurer’s underwriting requirements and limits, which are often higher than group individual limits.

2 Additional group coverage may require underwriting depending on the plan.

3 Loans, and withdrawals, if taken, will reduce the death benefit. Loans and withdrawals from life insurance policies that are classified as modified endowment contracts may be subject to tax at the time that the loan or withdrawal is taken and, if taken prior to age 59½, a 10 percent federal tax penalty may apply. If tax-free loans are taken and the policy lapses, a taxable event may occur.

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Insurance products issued by The Ohio National Life Insurance Company and Ohio National Life Assurance Corporation, members of Constellation Insurance, Inc. family of companies. Guarantees are based upon the claims-paying ability of the issuer. Product, product features and rider availability vary by state. Issuers not licensed to conduct business in NY.