Group vs. Term Life Insurance: Which is Better?

Shawn Plummer

CEO, The Annuity Expert

Compare group life insurance provided by employers with term life insurance purchased privately on an individual basis.

Term life insurance

Term insurance lasts for a specific amount of time, called a term. You choose the amount of money paid out to your beneficiaries if you die before your term ends. If you die after your term ends, no death benefit is paid.

Life insurance premiums are typically 10-15 times less expensive than permanent life insurance. As a result, it is a reasonable option for many people.

A term life insurance policy may be a smart choice for individuals who want cost-effective coverage for a set period of time without the higher premiums associated with a cash value policy.

Employer-sponsored (group) life insurance

Group life insurance is a policy that covers a group of individuals or their employees under one contract. You may already be covered by a company-sponsored life insurance plan. However, because this sort of coverage only provides a fraction of the coverage you require, many people buy an individual term life insurance policy to supplement their work’s benefits.

Group vs. Term Life Insurance: Pros and Cons

Group Life Insurance Pros

  • Convenient– Sign up at work, premiums get deducted from your paycheck
  • Guaranteed coverage – No questions, no tests, no underwriting
  • Free – Generally free, regardless of age, health, etc. Spouses are included sometimes included.

Group Life Insurance Pros

  • Work-Related Restrictions – Coverage typically requires “active” working status. If you become ill and unemployed before dying, the insurance may not pay.
  • Not Portable – Can’t take the policy with you if you leave the employer. The next employer may not offer life insurance. You’ll have to apply for new coverage at an older age meaning more expensive in cost.

Term Life Insurance Pros

  • Potentially Lower Costs for Healthy – Coverage is dependent on your circumstances via medical underwriting. Healthy people will typically experience significantly lower premiums compared to “Supplemental” insurance. 
  • Level Premiums – Term policies lock in the premium for a fixed period. 
  • Portable – Since this policy is not connected to your employer, it is completely portable, providing you continuous coverage. 
  • No Work-Related Restrictions – This means that an “Individual” insurance policy is more likely to pay out benefits than employer-provided coverage. 
  • Multiple Options – Can choose from a large selection of term policies that offer various special features and riders that provide flexibility.

Term Life Insurance Cons

  • Underwriting process – Policies are, typically, fully underwritten, meaning that your policy will be based on your health and other factors. Therefore, there will be more questions than for the “Supplemental” insurance and may include some medical tests.

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Shawn Plummer

CEO, The Annuity Expert

I’m a licensed financial professional focusing on annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine.

The Annuity Expert is an online insurance agency servicing consumers across the United States. My goal is to help you take the guesswork out of retirement planning or find the best insurance coverage at the cheapest rates for you. 

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