Securing your family’s financial future with life insurance can ensure they are taken care of in the event of your sudden death. In Bermuda, there are two types available to us—group life and individual life; but most of us don’t understand how they work.
Individual Life Insurance
An individual policy is a personal plan that you apply for on your own, which you or a family member would own. To secure individual coverage, you’ll be required to take some form of medical exam. You’ll also have to grant permission to the insurance company to investigate your medical, criminal, and driving history to ensure you’re not at high risk of death.
There is no limit to the amount of coverage you may purchase under an individual plan, which means you can buy as much coverage as you can afford. The premiums are based on your health, age, job, and several other factors—the less risk you pose to the insurer, the more coverage you’ll be able to purchase for a lower premium.
Once your individual coverage is approved, your premium amount will not increase throughout the duration of the policy. Your coverage will remain in force as long as the premiums are paid. The plan can only be canceled by the insurance company if you do not keep up with the premium payments.
Group Life Insurance
This coverage is offered by some employers as a part of their employee benefits program when you start a new job. Term life insurance is the most common form of group insurance but companies can offer other types as well.
Unlike with an individual plan, a group term plan would be owned by your employer and the coverage will only be available to you while you work for them. The enrolment process is fairly hassle-free, since most group plans only require you to fill out a form with general information like your date of birth and gender.
Group life insurance is usually offered on a guaranteed-issue basis, which means no health questions, no paramedical exam, etc. The amount of coverage available under a group plan is determined by your employer and, typically, these plans carry low death benefits, which is usually not enough to cover your family’s needs when you die.
The premiums for group coverage are usually lower than those of an individual policy, but they will either steadily increase over time, or they will increase dramatically once you reach a certain age. Because the premium payments are usually deducted straight from your paycheck through payroll deductions—you’ll hardly feel the financial impact of paying these premiums monthly.
Many people enroll in group life insurance and then forget about it. They figure they’re all set, and that their group plan will always be there for them. However, if this is your thinking, you might be doing yourself and your family a disservice—your group coverage will usually be terminated if you quit or lose your job; and can be canceled by either your employer or the issuing insurance company for any number of reasons, which highlights the uncertainty surrounding the coverage under a group plan.
Furthermore, although group insurance is an affordable and easy way to enroll in life insurance, these policies may only pay an amount equal to one or two years’ salary, which may or may not be enough to cover your family’s needs. You also may not be able to take your group coverage with you if you were to change jobs.
Life insurance is a good way to financially secure your loved ones, but there are major differences between group and individual coverage, as detailed above. It’s important to understand these differences in order to develop a sound financial plan for you and your family. Due to the limitations with group life insurance, I recommend that, even if you’re covered under a group plan, you purchase an individual policy to ensure your family is not severely impacted by your sudden death.
To find out more about how you and your family can benefit from Life insurance, contact Damir Armstrong—a Life Insurance Sales Agent at Freisenbruch-Meyer—via email at firstname.lastname@example.org, or give him a call at 294-4616.
75 Front Street, Hamilton