Work Insured vs Self Insured
Overview
Answering the question of whether or not to opt for self-provided life insurance or to continue with work-provided, aka “Group” coverage may indeed be a deeply personal decision for many individuals. However, it is not necessarily a complex one. For starters, you can have both group coverage and self-provided coverage at the same time. There are several important factors to consider in this decision-making process, many of which we will explore in detail here. As always, consulting with an experienced insurance agent, such as us, to discuss your specific needs and circumstances can provide deeper insights that can help you determine whether self-coverage would be a beneficial option for you!
Do I have to choose between Group Insurance or Self Provided?
The short and clear answer to this question is “No!” You can have both Group Coverage from work and Self-provided life insurance, and both will still pay out their benefits! Unlike Health coverage, which operates on a “Pro Rata” basis or coverage that involves dividing and allocating amounts in proportionality, Life insurance operates differently as it “Stacks.” This means that individuals can hold multiple policies, and in the event of a death, all these policies will pay out their respective benefits.
Life insurance traditionally functions on the principle of “indemnification”, which refers to the idea of providing compensation for a loss in an effort to restore the individual to a whole state. Since it is impossible for anyone to accurately assign a definitive price on life, all life insurance policies are structured in a way that they will pay out, regardless of the total number of policies held or the varying companies that provide them, provided that the premiums are kept current and paid on time.
How does Group Insurance work?
Group insurance provides coverage for a group of people, such as employees or association members, under one policy. It can differ among employers and insurance companies, but typically offers around $50,000 in benefits without extras like child riders or living benefits. Coverage ends if you leave the job for any reason, and may also not continue if you move to another state. The main advantage is that coverage cannot be denied, and costs are often a bit lower or may be fully paid by the employer. Often these policies are retained when a person retires with their employer as a benefit however, this is commonly provided at a further reduction in death benefits.
Employers negotiate the policy terms with the insurer and offer the plan to their employees or members. The policy cost is shared, with the employer usually covering part of or all of the premium. The big advantage here is group plans typically cover all pre-existing conditions but death benefits are capped and may be based on your salary.
Group coverage is a great choice for those who can't get life insurance on their own or find it too be outside of their budget. For those wanting to protect their mortgage, leave behind generational wealth, or even ensure stability for single income households, additional self-insured coverage will likely be the better option.
Work Provided Life Insurance
Pros and Cons
Pros
Cons
• Coverage amounts are typically capped at lower amounts. Usually $50,000 or less.
• Group life insurance is often not portable. This means if you leave your job, you may not be able to take the policy with you.
• Limited Choice: Most Group plans are only with one company
• Convenience
• Premiums are usually covered or subsidized
• Can’t be denied
Self Provided Life Insurance
Pro and Cons
Pros
Cons
• Can find much higher coverage amounts
• Coverage will be with you no matter the job or state you are in
• You have the power of choice to choose what company you are with as well as choose between term and whole life
• Flexibility to add living benefits and benefits for children as you see fit
• Will have to actively find coverage (Can be limited by working with a reputable agent)
• Premiums will likely be slightly higher than a subsidized group plan
• Can be denied for certain health issues