Individual Or Group Life Insurance? What Are Your Real Options?

So many offers for insurance! Auto and home insurance, Medicare supplemental plans, group life and disability—we are bombarded with clever ads on television, direct mail to our homes, Internet advertising.

For life insurance, you may be receiving offers from your college alumni association or your auto club, or any number of other groups you belong to. Do you have the time and patience to sort these out to know what is right for you?

Today I want to focus on these types of group life insurance offerings and compare them to individual policies. The association policies differ from the options for group term life insurance that many companies offer their employees for a certain amount of coverage. If your particular circumstances—such as your health or employment situation—are not ideal for purchasing individual life insurance policies at this time, the option through your employer can make sense for you at an affordable rate.

While there are limitations to what kind of coverage is available, these may not come into play until you leave the group or company. Even then, these policies often provide an opportunity for you to continue coverage on a permanent basis. These circumstances from your employer can be a good situation for you.

The group life offerings provided by an association or through a paid membership are quite another matter! In most cases, the options are more restrictive than what you can qualify for on an individual basis (which does not require you to go through an employer, membership, or an association as your policy is issued directly with the insurance company). Your costs and coverage limits may differ significantly based on what the association has agreed to with the insurer.

Here is a quick example: A man or a woman through one association can apply and be approved for $25,000 of term life insurance at age 55 for $9.64 per month. However, that premium will increase to $15.46 per month five years later at age 60, and by the time they reach age 70 ten years after they purchased the policy, the same $25,000 will be $22.83 per month. The rate increases are built into the policy and the association does not provide any other options or amounts. You are stuck with the $25,000 policy.

Instead, assuming good health, the same $25,000 can be purchased as an individual policy for 15 years all the way up to 30 years level premium (premium remains the same) for $21.00 to $35 per month when calculated using the rates for males. Women will pay less than men. Premiums can be lower for larger amounts of coverage purchased and with better health—such as being a non-smoker—than a basic quote can provide.

A person purchasing an individual term also has the right to convert that term policy to a permanent policy which the company offers at that time, without health considerations, prior to age 70.

Call me to help design your own personal plan. Unlike with a group insurance policy through an association, we can also work together for comprehensive coverage. I will make sure you understand all your options, and I promise you that if the group plan is better for you, I will advise you to purchase it.

Looking forward to hearing from you!