Why Your Group Life Insurance Plan May Not Be Enough

Many companies offer a group life insurance plan as part of their benefits package to employees. There are some excellent advantages and some significant downsides to group plans, and in this post, we’ll examine where group plans may fall short and what steps to take to secure the coverage that makes sense for your life.

A group life insurance policy is owned by an employer, and they typically pay for most if not all premiums. Group policy premiums are negotiated for a wide pool of individuals with varying ages and states of health and typically do not require a physical exam to be eligible for some coverage. As long as you remain with the company, you can be assured of coverage.  A group plan can be a bargain, especially if it’s a part of your benefits package, but it may not be wise to rely solely on your group plan for all your life insurance needs.

Group Plan Benefits

  • Affordable – Often provided at very little to no cost to employees.
  • Convenient – Your company has already done all the research and negotiation, and all you’re required to do is sign up and designate a beneficiary.
  • Guaranteed coverage – Typically, no physical exam is necessary to determine minimum eligibility.


Drawbacks of Group Plans

  • Not enough coverage – Group plans typically offer only one to three times your yearly salary as the maximum death benefit. Some experts recommend covering up to 10 times your yearly salary depending on your and your family’s long-term needs.
  • Policy is not portable – The policy is linked to your employment, so if your circumstances change—perhaps a disability or career shift—you’ll be left without coverage.
  • Price variance – Because a group policy is meant to cover a wider range of ages and stages of health, some folks, especially if they’re relatively young and healthy, may find that a private life insurance policy is less expensive than their employer’s offering. Conversely, if they’re older or have some health issues, they may find better rates through supplementing within their group plan.
  • Not enough coverage for spouse – Group plans often won’t include your spouse, or if they are covered, their maximum benefit is typically a lot lower than an employee benefit.

If you currently have an employer-provided group plan, now is an excellent time to review the policy and see if it meets your long-term needs. If you’re planning on staying with your company until you retire and rates are reasonable, it may make sense to add supplemental coverage through your group plan. Or you may want to add an additional policy that you’ll own no matter where life takes you in the future.

Next Steps:

  • Determine how much coverage you need – this blog post can help you get started
  • Know your options – check out this Life Insurance 101 post to learn more about each type of life insurance.
  • Review your current benefits.
  • Discuss adding supplemental coverage within your group plan with your company’s HR dept.
  • Speak to an educated agent who can answer all your questions, provide quotes for comparison, and help you craft the plan that makes the most sense for your life.

Additional links and resources




Crystal Clark is a full-time animal lover and change maker.