Is Group Life Insurance Through Work Enough?
In Canada, nearly two-thirds of the people covered by life insurance get it as part of employer-provided life insurance benefits
Life insurance is essential whenever you have financial obligations or big dreams that rely on your income. In Canada, nearly two-thirds of the people covered by life insurance get it as part of employer-provided life insurance benefits (source). So how do these plans work? Should you get life insurance through work? And is it worth it? That’s what we’re going to explore here, and in the frequently asked questions at the end of this article.
What is group life insurance and how does it work?
Employers offer group benefits to entice the best employees to join the company and stay for the long term. To do this, they partner with insurance providers to offer low-cost or no-cost term life insurance and other living benefits, such as critical illness and disability insurance. Because the insurance provider is serving a large group of individuals, it’s easier for them to offer:
1. Basic coverage
Group life insurance payouts are typically based on a multiple of your salary. For example, it could equal one, two, or five years of pay. These plans can also be customized to include riders (i.e., coverage that gets added on to an insurance policy to provide additional payouts under specific circumstances) that help you fine-tune your policy.
2. Easy enrollment
Employers make it very easy to sign up for group insurance plans. And, you’ll typically have access to a group administrator who can answer all of your questions.
3. Affordable options
Group plans can be a low-cost way to get insurance coverage because the providers offer volume discounts and employers typically pay part (or all) of the premiums (i.e., the amount you pay for an insurance policy).
So with all these great advantages, group life insurance looks like a good deal compared to not having any life insurance at all. But is it better than having an individual life insurance policy that you control, no matter where you work or how often you change jobs?
Let’s find out.
What is individual life insurance?
An individual life insurance policy is something you buy from a licensed agent on your own. It has nothing to do with your employer. When you die, your policy pays a tax-free death benefit (i.e., a payment made to designated family members or other loved ones after you die) to your beneficiaries (i.e., the persons you choose to receive your life insurance payment in the event of your death). The money is theirs to use as they see fit. It could go towards:
- Replacing income you would earn between the time of your death and retirement
- Paying off your mortgage or other debts
- Investing in the future
Find out: How much life insurance do you need
But if you only have coverage through work, and you quit or lose your job, the benefits would disappear and you’d find yourself applying for life insurance coverage at an older age when it could cost much more.
Here’s how individual life insurance differs from group life insurance
Personalized coverage
Group plans tend to offer a one-size-fits-all solution with limits on how much coverage you can purchase. When you buy an individual plan, your advisor works with you to fine-tune your coverage based on your financial obligations and your hopes for the future, including paying for a second property or giving your kids a leg up.
Portability
Group plan coverage expires when you quit or lose your job. Your individual life insurance policy goes where you go. You can switch employers at any time and not worry about how it will affect your coverage or how much you pay.
Flexibility
Group plans rarely include insurance options that help you build wealth, whereas individual life insurance providers offer a wider range of options and customization. In addition to term life insurance policies that provide coverage for a specified period, typically ranging from 10 to 30 years, you can explore permanent coverage like whole life insurance that never expires.
Medical underwriting
Group life insurance premiums are not based on the age or health status of individuals, so it’s unlikely you’ll be asked to take a medical test to get your coverage. This seems convenient but a medical exam – part of the application for an individual policy – could be required if your employer offers customized critical illness insurance as part of the company plan.
Value
The cost of group life insurance is calculated on the size and demographics of the group, not each individual. This, along with your employer’s contribution to the premiums, can result in a relatively low cost. But remember: “Price is what you pay. Value is what you receive.” Customizing your own plan could result in significant wealth-building opportunities and tax savings that outweigh up-front savings.
To sum up, individual life insurance offers greater flexibility, higher coverage options, and long-term security – but at a higher cost. Group life insurance can provide a solid baseline of coverage at a low cost, but it may not be sufficient for those who want the flexibility to change jobs or those with more complex financial needs. For many Canadians, having some coverage at work and additional protection in an individual term life insurance or whole life insurance plan makes the most sense.
Here’s a summary of the pros and cons of group life insurance:
| Affordability Most employers cover some or all of the cost, making this a very affordable option. | Limited coverage High-income earners may not be able to secure adequate coverage. |
| Easy access Sign-up is easy and the plan is administered by a team of experts. | Limited flexibility Group plans cannot be customized to the same degree as individual, tailored policies. |
| Meeting basic needs Loved ones receive enough cash to handle final expenses and manage debt. | Tied to your employer Once you leave the company, your coverage under your employer’s group plan will end. |
| No medical exam Your age and health are not the most significant factors in setting the price of coverage. | Lower claims approval rate It’s important to disclose any pre-existing medical conditions during the application process to ensure you claim won’t be denied. |
With an understanding of the pros and cons of group life insurance plans, you can begin to assess your needs and compare your options.
Comparing group life insurance vs. individual life insurance
If you signed up for your employer’s group life insurance plan, you may never take the time to review your coverage and see if it’s keeping up with your changing needs.
With that in mind, it’s a good idea to dust off your company plan and review it with a Serenia Life advisor. Here are some of the things we can discuss and the steps we can take to make sure you have the right type and amount of coverage to meet your needs no matter how or where you earn a living in the years to come.
1. How much life insurance do you really need?
Life insurance is meant to replace your income, so that your loved ones can carry on without financial hardship. If you’re midway through your working years, have lots of financial obligations plus big plans for your children, you might need more than what a group plan can offer. Find out how much life insurance you need.
2. Do you need living benefits?
Living benefits pay out if you can’t work due to an accident, disability, or the diagnosis of a critical or terminal illness. They provide financial relief in surprisingly common situations, and many people go back to work, grateful they didn’t have to cash in their investments or sell assets to cover bills.
3. What are your career plans?
Few Canadians expect to spend their entire working life with one employer. And group plans are often unavailable for contract workers, regardless of their pay scale. An individual life insurance plan can create predictable, stable coverage for as long as you want it.
4. What can you afford?
Choosing a whole life insurance policy that earns dividends might mean you can save less in your retirement plan and transfer wealth tax-free. Your advisor can help you run the numbers.
5. Should you be considering your health?
A medical exam works in your favour when you’re in good health because insurance providers can offer you better rates on most types of policies. It also documents any issues up front, like pre-existing conditions, so there’s little chance a claim could be denied. These convenient in-home tests are well worth the effort when they lead to savings and airtight coverage.
Is group life insurance worth it?
If your employer offers some level of group coverage at a low or no cost, it’s probably worth signing up. But don’t stop there. Step back and take a look at the role life insurance is going to play throughout your working life, as you change jobs, get older, and take on more financial responsibility. Weigh the advantage of paying less for coverage now versus having to replace it later at a much higher cost if you switch jobs.
Here are two important questions to ask yourself – and we can help you with the answers.
“Should I get life insurance through work?”
If your employer offers no-cost life insurance coverage, it’s probably a good deal but you can’t take it with you when you leave. Think about group coverage as one component of an overall plan, not a one-stop solution for life.
“When should I consider additional coverage?”
Balancing group insurance with individual coverage is part of the family insurance planning process, and this is the type of thing a licensed advisor does best. It’s never too early to put your own long-term plan in place.
Why choose Serenia Life for additional life insurance coverage?
Our goal has always been to provide Canadians with the right type and amount of life insurance coverage. As a member-based organization, Serenia Life not only provides reliable and stable policies but also fosters a spirit of community by sharing its profits through outreach, fundraising, and supporting causes that matter to our members.
Here’s why Serenia Life members trust us with their financial security:
Financial stability
Serenia Life has an impressive Life Insurance Capital Adequacy Test (LICAT) number of 216%. This reflects our consistent ability to manage financial risk for close to a century.
Claims history
Claims history reflects the percentage of claims that it has paid out to its customers. Serenia Life has a claims history that consistently exceeds 99.9%1.
Community impact
We share a portion of our profits through community outreach, fundraising, and supporting causes that matter to Canadians.
Member benefits
We provide members with access to a growing collection of benefits that make a positive impact on their lives and the lives of others, such as:
- $2,500 post-secondary scholarships
- Up to $600 towards fundraising events, and up to $400 to cover volunteer-related expenses in Canada
- Financial support when you hire a lawyer to draft or update your will
- And much more!
View a full list of our member benefits.
Let us help
If your employer provides group insurance benefits, combining it with individual coverage is a good long-term decision. You’ll be allowing yourself to manage your career – and choose where you work – without the risk of losing vital financial protection. We can complete a needs assessment and recommend the best path forward. Book a no-obligation call with a Serenia Life advisor today.
Frequently Asked Questions
How much coverage can you get through group life insurance vs. individual life insurance?
Group life insurance (offered through an employer) typically provides limited coverage — often one to two times your salary. Individual life insurance, which you buy on your own, can offer much higher coverage amounts based on your needs and financial situation.
How much does individual life insurance cost compared to group insurance?
Group insurance is usually cheaper because your employer helps cover the cost. However, it may not be enough coverage, and you lose it if you leave your job. Individual life insurance costs more, but offers better protection and stays with you no matter where you work.
What is the difference between term life insurance and permanent life insurance?
Term life insurance covers you for a set period (e.g., 10, 20, or 30 years) and is more affordable. Permanent life insurance lasts your entire life and builds cash value, but it costs more.
How do I choose the right amount of coverage for my individual life insurance policy?
A common guideline is the ’10 times your annual salary’ rule, but your needs can also depend on debts (mortgage, loans), dependents, and future expenses. A life insurance calculator can help you find the right amount for you.
Is it possible to convert my group life insurance to an individual policy if I leave my job?
Yes, some group policies allow conversion to an individual plan, but it may cost more. Check with your insurer before leaving your job.
Can I add extra coverage or riders to an individual life insurance policy?
Yes, many policies let you add riders for extra benefits, like critical illness coverage, disability benefits, or child coverage.
Can you borrow against group life insurance?
No, group life insurance doesn’t have a cash value to borrow from. Only certain permanent individual life policies allow this.
What member benefits does Serenia Life offer, and how do they compare to other insurance providers?
Serenia Life offers unique member benefits, including free digital wills, $2,500 post-secondary scholarships, and funding for volunteer work. Unlike some insurers that only focus on coverage, Serenia Life’s Member Benefits program is valued at more than $4,000 and help members support their family, their community, and the causes they care about.
Are Serenia Life’s scholarships and other member benefits available to everyone, or only specific groups of people?
These benefits are available to Serenia Life policyholders and their eligible family members. Specific programs may have additional requirements, so check the details when applying. For example, the scholarship program is a one-time benefit that is open to student members pursuing a college diploma, undergrad, or graduate degree.
How can I get a quote for life insurance through Serenia Life?
You can easily get a personalized quote online using our life insurance quote tool. (Note that it is always best to speak with a licensed advisor in addition to using our online tools.)
Is there any way to calculate the right amount of life insurance for my personal needs?
Yes! Use our life insurance calculator to determine the right coverage based on your financial obligations and future goals. (Note that it is always best to speak with a licensed advisor in addition to using our online tools.)
