What’s the difference between a group life insurance policy and an individual policy?

UPDATED: Jul 16, 2012

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UPDATED: Jul 16, 2012Fact Checked

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Asked July 16, 2012

1 Answer

Group life insurance and Individual life insurance have some major differences. The first one may be related to the cost, because purchasing a group life policy is usually much less expensive than buying an individual life insurance policy. The counterpoint to this fact is that group life is typically only available in relatively small amounts, such as $100,000 or less. If you are trying to decide one would be best for you, take a look at how the two compare, and choose the one that offers you and your family the most benefit.

Policy Administration
Under group life insurance, the policy is written for the entire group, and members are provided with details of what the coverage means to them as individuals. Instead of receiving a copy of the primary policy, you may receive a certificate of enrollment or other documents which outline your rights and obligations, but you will have little or no control over the details of how the policy is handled. The benefit of this is that you pay lower rates than if you had purchased policy individually, and most group life insurance policies are guaranteed coverage beneficial for those who may not qualify for an individual life policy. Finally, your premiums may be automatically deducted from your pay, relieving you of the responsibility of keeping up with when premiums are due and taking the time to make them.

Guaranteed Coverage
Guaranteed life insurance, such as you would get through a group life insurance policy, is typically only available in relatively small amounts, such as limits of around $100,000 or so. Most policies will allow you to increase the amount beyond this limit, but to do so you will have to undergo the medical exam and answer questions regarding your health, things that are not usually required with guaranteed coverage.

Group Coverage Status Changes
Many group policies allow you to increase the amount of coverage for specific family status changes. One scenario might be getting married or divorced, where the coverage could be increased to include your spouse in the first instance or reduced to eliminate spousal coverage in the second. The death of a spouse would be included in this scenario, as would the birth or adoption of a child into the family. Changes in your employment status could also affect your insurance status, including getting promoted or demoted, retirement, changing your employment status from full to part time, or a change in company policy regarding your employment benefits.

Policy Portability or Conversion
Group policies typically include provisions for converting from group coverage to individual coverage, or carrying the coverage with you when you change jobs. In most cases, conversion and portability will entail a medical exam or other applications processes, and you could be denied coverage if you do not meet the minimum requirements. Bear in mind, also, that you would be responsible for paying the full premiums after conversion, including any portion of the premiums that had previously been paid by your employer, or discounts that had been given to the group as a whole.

Answered July 16, 2012 by Anonymous

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