Many who work for companies have employer group insurance policies that may provide disability insurance, dental coverage, supplementary health coverage, travel health coverage, eyeglass coverage, etc. Virtually all these plans also include group life insurance and most provide a certain basic amount of coverage at minimal cost to the employee. Your life insurance broker cannot compete with insurance which costs you nothing.

However, a number of such group plans also offer employees the option of purchasing additional life insurance coverage. Such group life insurance coverage may also be available to you through your professional association or through groups or clubs of which you are a member. Before buying such life insurance we strongly recommend that you compare the cost of such policies with an individually owned level term policy. Further, you should keep in mind that you can save money on your own life insurance by buying in bulk, in essence your own "grouped" policy coverage.

Example of Bulking Up (Grouping) Your Own Life Insurance

Suppose you decide that you need a total of $400,000 of life insurance. We will assume your group insurance at work gives $40,000 of coverage. We will also assume you have mortgage insurance for $75,000 and personal life insurance for $125,000. Therefore, you need an additional $160,000 You are now wondering whether or not to buy this extra life insurance coverage through a group plan at work, or whether you should be buying individual life insurance coverage.

For this comparison we will assume that you are a 40 year old nonsmoker and we will also assume that your $125,000 policy is 10 year term.

Using the Term Quoter software we make a comparison of 10 year level term for $125,000 of coverage and find that the least expensive policy is with the Continental Assurance Company for a total premium of $182.50 per year.

We again use the Term Quoter to compare the price of 10 year level term for $160,000 of coverage and find that the least expensive policy is again with the Continental Assurance Company for a total premium of $212.60 per year.

Most would now take the premium for $160,000 of coverage, $212.60, and compare that to the price of a group policy for $160,000. However, let's suppose you "group" or bulk up the two policies yourself. Once again, if purchased individually, the cost of the two policies is:

Continental Assurance Company $125,000 - $182.50
Continental Assurance Company $160,000 - $212.60

Total $285,000 - $395.10

Instead of comparing the cost of the second separate policy with the group coverage, let's compare the cost of the extra amount you would have to pay to increase your $125,000 policy to a total of $285,000. Using the Term Quoter software you compare the price of a $285,000 policy and find the least expensive policy is with Continental Assurance Company for a total premium of $320.10. Therefore what does it cost to "bulk up" or increase your coverage from $125,000 to $285,000?

Continental Assurance Company $285,000 - $320.10
Continental Assurance Company $125,000 - $182.50

Increase in Coverage and cost $160,000 - $137.60

$137.60 is what it will cost you to increase your own life insurance policy to include an extra $160,000 of insurance. Using this same principle we will compare the cost of adding $75,000 of insurance to your own policy, versus buying the group creditor life insurance (mortgage insurance) from the bank.

We again use the Term Quoter software and run a comparison for $360,000 of 10 year level term life insurance. The least expensive company is Continental Assurance Company with a premium of $384.60. Therefore the cost to add $75,000 of additional coverage is:

Continental Assurance Company $360,000 - $384.60
Continental Assurance Company $285,000 - $320.10

Increase in Coverage and cost $ 75,000 - $ 64.50

$64.50 is the extra annual premium you would compare to the bank insurance policy. Most who make comparisons in this way will find that they are much better of grouping their own coverage, than buying group life insurance.

However, beyond cost, there are still serious differences between individual life insurance and group policies:

Comparison - Individual Life versus Group Life

Individual Life Insurance

Group Life Insurance

You have your own contract.

You are part of a group contract.

You have a premium rate that is guaranteed in advance, the company cannot decide to change it.

The group policy premiums can be changed if the company decides to raise premiums for the group.

The insurance company cannot cancel your insurance, only you can.

The group contract can be cancelled by the issuing life company.

Your individual policy is fully portable. It is not connected to the group. If you change jobs or are no longer a member of the group, you will not lose the coverage.

The coverage will terminate if you leave your job or if you leave the group.
Conclusion

Even if the cost of individual life insurance coverage was higher than that offered through the group, portability, control, guarantees, etc., all make the individual policy superior to that offered by the group.

In addition, most consumers are usually pleasantly surprised to learn that you often end up paying higher prices for group insurance than what you would pay if you purchased an individual policy directly from a competitive life company.

Remember, try grouping your own individual life insurance costs.
 

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