Individual vs. Employer Life Insurance Comparison

Richard Camerota
Assistant Vice President, Corporate Executive Benefits
August 13th, 2019

Individual vs. Employer Life Insurance Comparison

Employee access to life insurance through work continues to decline, with only 48 percent of employers offering life insurance to their workers.  This is a 23 percent decline from 20061, according to LIMRA, an insurance industry research organization based in Windsor, Connecticut.

Even If you already have a life insurance policy through work, you may not have nearly enough coverage. You also risk losing your insurance and paying higher premiums than you might need to. You may want to consider purchasing an individual life insurance policy.

Employer Life Insurance Benefits Aren’t Guaranteed

When your employer is subsidizing your coverage, you have less control over it than you might want over something as important as life insurance.

Group plans can be changed, reduced, or dropped. The coverage often isn’t portable if you change jobs or get laid off. And these aren’t the only uncertainties that come with group coverage. For example, the cost of group coverage – the premiums you pay – is not guaranteed and the annual cost may increase over time.

You Might Not Get the Best Policy Rate

According to LIMRA, most consumers estimate the cost of coverage to be more than three times its actual cost.¹ Factors that affect your life insurance premiums include age, health, driving record, and credit history. If you’re in very good health, you may receive a preferred rate on an individual policy.

Group policies, by contrast, are not underwritten at basic coverage levels and do not exclude anyone, so they may be much more expensive. If you qualify for a preferred rate, you may be able to buy an individual life insurance policy that has several times the death benefit as your group coverage for the same annual cost. If you have significant health issues, a group policy may be your only option as group policies offer coverage to those who may otherwise be uninsurable.

Benefits of a Group Life Insurance Policy May Be Limited

Many group policies offer small benefits of $25,000 to $100,000. Typical group life insurance coverage through a company offers a benefit of one times your salary, with the option to buy more. While you may be able to purchase a limited amount of additional coverage that you pay for out of pocket beyond what your employer offers as a free benefit, for a total of three to four times your annual salary, total coverage still might not be nearly enough, especially if you are supporting a family.

If you’re single, however, or if you’re married but your spouse works too and you don’t have or plan to have kids, that benefit might be sufficient.

Speaking of spouses, if you insure your spouse through your employer’s life insurance, he or she may be underinsured, too. If your spouse stays home with the kids, for example, how much money would it take to pay someone to replace them as a caregiver until the kids are grown so you can continue to work?

Individual life insurance can be a great complement to or substitute for any life insurance you’re eligible for through work. It’s a bit more involved to apply, since you’ll have to go through medical underwriting, but it may the best way to make sure you have as much coverage as you need, to lock in your premiums, and to make sure you’re still covered even if you stop working for your current employer.



1LIMRA, “Facts about Life 2018. Facts from LIMRA: Life Insurance Awareness Month,”September 2018. FY1085 CRN202111-239851