What Is The Difference Between Term And Group Term Life Insurance?

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Term life insurance covers a policyholder for a set amount of time, while group term life insurance is a policy offered to a group, often by an employer, organization, or trade union, often at no cost to the employee. This article discusses the pros and cons of both types of policies.

Table: Pros and Cons of Group Term Life Insurance and Voluntary Term Life Insurance

Pros of Group Term Life Insurance Cons of Group Term Life Insurance
Cost; baseline policies are often free Low payout; coverage is typically on the low side
Availability; there’s usually no medical exam or other strict requirements Lack of choice; a single policy is typically selected by your employer to cover all members
Simple application; often employees just check a box or sign a form Non-portable; if you leave your job, you lose your coverage
Coverage when you need it; families have some coverage in the event their main source of income is lost
Pros of Voluntary Term Life Insurance Cons of Voluntary Term Life Insurance
Low cost; premiums are normally more affordable than for individual policies due to the employer’s group discount Limitations; employees are limited to a single insurance company
No medical exam; no medical exam is required for less coverage Short-term solution; employees who don’t plan on staying with their company long-term may be better served by an individual policy
Simplicity; employees just need to select the level of coverage they want
More-complete coverage; because you can choose your level of coverage, payout benefits could cover loved ones completely in case of the policyholder’s death
Portability; if you leave your job, you might be able to keep your coverage, but your premiums may rise significantly

Group term life insurance is typically free through your employer, while voluntary term is an optional benefit the employee can purchase at a reduced rate. Also, voluntary term insurance usually offers different levels of coverage, while group is provided at one level for all employees. However, group policies can have limitations that make them less comprehensive than individual policies.

It’s important to note that coverage amounts for both group term and voluntary term life insurance tend to be much smaller than what experts recommend. You’ll need to use the insurance carrier chosen by your employer and, if you leave your job, you’ll lose the policy. Retirees likely have the opportunity to continue paying for their life insurance. Before you retire, explore your options, comparing cost and benefits.

Ultimately, it’s important to carefully consider your options and determine which type of life insurance policy is best suited for your needs.

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