Your Group Life Insurance Policy Might be Limiting You


The following is a guest post from Liran Hirschkorn. If you would like to submit a guest post, please contact me.

A big perk for many employees is finding a job that offers life insurance through an employer based group plan or a similar. These policies can be great because they are often cheaper (or free) to the employee and usually don’t require a medical exam, which are added benefits if you are young, or have pre-existing conditions that would raise the cost of an individual term. However, there are also downsides to these group policies offered by an employer that may make you think twice about having one as your primary source of life insurance.

Constricting Terms and Benefits

Since group policies can include a large number of people they are often very limited when it comes to benefits, coverage, and options.

• Benefits: You’ll be hard pressed to find a group plan that is rich in benefits. Typically they’ll only over the basic plan, with some options to improve coverage if you’d like to follow up with them, but that’s it. There are rarely any riders, funeral expense, death from accident, or other benefits available in a group plan.

• Coverage: Many group life insurance policies that are offered through an employer are determined by your current salary. While the numbers vary, you can expect to find coverage between one and three times your base salary for a group policy. For most employees using a group policy, this will not be enough to support their family for an extended period of time. Group policies are also very limiting and if you need high risk life insurance or another specialty policy you’ll find yourself wanting more often than not with a group policy.

• Options: This is the biggest limiting factor in my opinion, and that is your lack of options. You’re stuck with whichever your employer chose and that’s it. No shopping around or comparing different group policies; what you see is what you get. You can’t just assume that your employer bought the best policy available either. They could mean well but could still be ignorant and provide a policy that will be difficult for your beneficiary to collect on or provides little help.

Shopping around for an individual term gives you the benefit of comparing multiple providers side by side, and leaves you access to choose the best policy for you. With group policies, what you see is what you get, and improvements to coverage are more limited than those in an individual plan.

Changing Jobs and Careers

An individual, term policy will stick with you for whatever the predetermined amount of time is not matter where you go or what job you have. This is not the case for an employer based group policy. If you change careers or jobs you could quickly find yourself without life insurance or with a new policy from a new employer that is drastically different or more limiting with your old one. Needless to say, an individual plan is more stable and can help to take the headache out of figuring out your life insurance after every job change. Plus, what happens to your group life insurance when you finally decide to retire?

Group policies can be a great option for those looking for cheap (or free) life insurance, people who have a preexisting condition that an individual policy wouldn’t cover, or a younger people who don’t feel like they need a life insurance policy yet but wouldn’t mind having one. There are other situations where a group policy can be beneficial as well, and this is why you need to look at all of your options before choosing to go with one policy over another.

Liran Hirschkorn is the founder of and is an expert in the insurance industry where we works hand in hand with the best life insurance companies.

Written By
Sydney White is a Texas-born stay at home mom who enjoys spending time with her family, bargain hunting and, of course, writing. She is currently the editor-in-chief of


  1. Pingback: Combatting common life insurance myths | The Insurance Blog
  2. We just did a 20-year term plan, which was fairly inexpensive. I’m sometimes torn about how worthwhile it is, but in general I’m glad it’s there.

    1. Thanks for the comment, Nick. My clients are often very surprised at how cheap some policies actually are. As for as being worthwhile, my rule of thumb is if it helps you to sleep easier at night it is worth it.

  3. I’ve been looking into getting my own insurance coverage as we are adding a new addition to our family soon. I have group life insurance through my employer which is 3 times my salary and additional supplemental life insurance through my union. As I work in government, I felt that the job was stable and that I might stay here the rest of my career so I didn’t get private life insurance. But, I’ll have to look into it because it might not be sufficient.

    1. Congratulations, Andrew! That’s fantastic news but yes, nothing makes you rethink every aspect of your finances (as well as every other part of your life!) like a child on the way. Best of luck to you and your family!

  4. I’m fortunate that I have group benefits at work that covers me for the most part up to 100%. There is life insurance in the package but I would never rely jut on that. We both have our own life insurance policies outside of work.

    1. Nice to see you here as well, CBB. It sounds like you have everything in order as far as your coverage is concerned. Congratulations on that as well. Many people go under or forgo insurance entirely because they don’t understand it.

  5. The great thing about group life is that if enough people sign up for the coverage you won’t have to do all the medical stuff to get the policy enforced. On the other hand. I’ve heard of these policies having some faulty rules with them such as only covering you only in the even you pass away at work. Sounds strange but I heard of this happening before.

    1. Chris, you’re right that it can be much easier to get on a group plan for lack of medical road blocks – and you’re also right that some are almost impossible to actually collect benefits from. Every policy is different and I don’t want to give you the idea that this is the norm, but you’ll often find the cheaper or more lax the policy is, the worse the coverage will be. Look out for language that starts to limit the benefits in any significant way. Taking the group policy to an independent broker is a great way to get the no frills, black and white outlook on exactly what it covers, and when it will cover. Thanks for reading and for your comment.

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