Group vs. individual life insurance: what's the difference?

This answer is about Life insurance.

How group life insurance works

Under employer group life, the employer holds a master contract and offers coverage to eligible employees. Basic coverage (often 1× salary) is usually paid by the employer; supplemental coverage above that is paid by the employee via payroll deduction. Enrollment is typically 'guaranteed issue' up to a limit — no medical exam required — with medical underwriting only above that limit.

How individual life insurance works

An individual policy is a contract between you and the insurer. Premiums are based on your age, health, tobacco use, and coverage type (term or permanent). Once issued, the policy is yours regardless of your job, subject only to paying premiums.

Portability at job change

Most group life plans include a conversion privilege: within a set window after leaving the job, you can convert your group coverage to an individual permanent policy without new medical underwriting — usually at a much higher premium. Some plans also allow you to 'port' the coverage as group term with the insurer, again typically at higher rates.

Why group life is usually not enough

• Amount: 1× salary rarely covers income replacement, debts, and dependents' future needs.
• Portability: coverage generally ends when the job ends, right when many people need it most.
• Employer control: the employer can change or cancel the plan.

How to layer coverage

A common approach is to use employer group life as a base layer, then buy an individual term policy sized to your needs analysis (see how much life insurance do I need?). Because group coverage isn't portable, having an individual policy in place before you change jobs — or your health changes — is important.