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Making changes to your life insurance during open enrollment may seem overwhelming. We understand how easy it is to just renew what you have and move on. But this year, it’d be worth your time to take a closer look.

To help, we highlighted the basic differences between your life insurance options as well as included the pros and cons of each.

First things first. Always take advantage of basic group coverage. This is either paid by your employer or very inexpensive.

However, your basic group coverage is rarely enough. Typically, this amount is for one or two times your salary up to a certain maximum, often $50,000. To adequately secure your family’s financial future, you need more life insurance coverage.

How to get the right amount of coverage

These are two common ways to supplement your group coverage:

  • Buy additional coverage called voluntary life insurance through work
  • Purchase your own individual term life insurance policy

There are three very important things you need to know about these options.

Voluntary life insurance (through work):

  1. Rates continually go up, especially after 40
  2. Coverage is contingent on employment
  3. Coverage amount is limited (it still may not be enough)

Individual term life insurance:

  1. Rates are locked and won’t increase
  2. Coverage follows you from job to job
  3. Coverage can be customized to fit your needs and budget

For a more detailed understanding of your life insurance options, here are the pros and cons of basic group life insurance, voluntary life insurance, and individual term life insurance.

Type of Life Insurance Pros Cons
Group Life Insurance Policy
  • Often no cost to employee or at least very minimal cost
  • Employee doesn’t need to provide any evidence of insurability – coverage is guaranteed
  • Small coverage amount
  • Can only enroll during certain times
  • You lose coverage if your employer cancels your group life insurance benefits or if you leave your job
  • Coverage usually ends at a certain age (typically 70 to 75)
Voluntary Life Insurance Policy
  • Can buy up to certain amount without providing evidence of insurability – coverage is guaranteed
  • Option to purchase higher amounts of coverage with evidence of insurability
  • May be able to be converted to another policy if your employer cancels your group life insurance benefits or if you leave your job
  • Often have the option to have policy premiums paid with automatic paycheck deductions (post-tax dollars)
  • Can only enroll during certain times
  • Premiums are fixed and increases as you age
  • No choice in type of life insurance (i.e. term, whole, or universal life insurance)
  • You lose coverage if your employer cancels your group life insurance benefits or if you leave your job
  • If convertible to new policy, continuation isn’t automatic and rates likely increase with new policy
  • Coverage usually ends at a certain age (typically 70 to 75)
Individual Term Life Insurance Policy
  • Not limited to an enrollment period – can buy whenever
  • Individually-owned so it can’t be canceled if employer drops coverage or you leave your job
  • Typically more affordable over the life of the policy compared to voluntary life insurance
  • Fixed premiums – won’t go up with age or medical issues
  • Can purchase as much coverage as you need up to your maximum insurability limit (a very large amount most people won’t hit)
  • Usually convertible to a permanent policy if your coverage needs change
  • Need to provide evidence of insurability, which may include a medical exam
  • Coverage is not guaranteed

 

If you want the right amount of coverage that stays with you and has a rate that won’t increase, an individual term life insurance policy will fit your needs perfectly.

You don’t need to choose either/or. You can keep your group coverage through work and still own an individual term life insurance policy.

If you’d like more information about this, check out our guide on buying life insurance during open enrollment.

Ready to see what you’d pay for term life insurance?

Take our quoting tool below for a test drive.

 

About the writer

Headshot of Natasha Cornelius, a life insurance writer, for Quotacy, Inc.

Greg Lewerer

Director of Creative Strategy

Greg is Quotacy’s Director of Creative Strategy. He has an eclectic past from working on movie scripts to creating ad campaigns for major brands. His love of creative solutions drove him to strategy, and he now uses his powers to help families protect their loved ones. Outside of work, Greg spends his time off the grid hunting, fishing, camping, biking, hiking, and walking his dogs.