Physicians often have the option of purchasing or signing up for group life insurance coverage through their employers or professional associations.
Similar to group disability plans, group life coverage is typically cheaper than an individual policy and easier to obtain because it does not require underwriting.
Participating in a group life insurance plan is a good way to supplement your coverage at a reasonable cost. But you should also own an individual policy to ensure that you have adequate coverage in the event you need it.
Below are four reasons why you should not rely solely on group life insurance:
Group plans are not meant to fulfill all of your insurance needs. They are designed to provide a worthwhile benefit, either to employees or group members.
Group life insurance policies are guaranteed issue, which means anybody who signs up and pays the premium can get coverage. As mentioned, there is no underwriting. Since insurers don’t want to take on the risk of providing $1 million policies to people they have not underwritten for risk, group policy death benefits are typically capped.
The maximum is usually a base amount for all participants, such as $100,000, or in the case of employer policies you can sometimes sign up for a maximum based on your salary (e.g. 3x your current income).
Depending on the needs of your surviving family, your life insurance may need to be 10 times to 15 times your current income.
So while your group plan can supplement your coverage, it likely will not fully cover you.
Individual life insurance policies offer several built-in and optional features that can enhance your insurance coverage. While many of these add-ons are automatically included, others are available as riders that you can pay extra for to customize your policy for your needs and preferences.
There are riders that can accelerate your death benefit in the event you become terminally ill, offer the ability to add coverage at later dates, or provide benefits in the event you become disabled.
While some group plans might pay an extra benefit for accidental deaths, most do not offer the many choices of riders provided by individual plans.
Life insurance issued through a group plan is contingent on being employed by the company or a member of the organization sponsoring the plan. If that changes, you lose your coverage.
There is also usually an annual renewal process for group plans and there is no guarantee that the employer, organization or even the insurance company will renew the group coverage. And at any time, your rates can increase under group insurance.
Individual life policies cannot be changed as long as you own the policy and pay the premium. This includes the premium amount and death benefit. The insurer cannot cancel the policy, either, as long as you pay your premiums.
Most people starting out in life consider a group life insurance policy more than adequate for their current needs. After all, people in the early stages of their careers may not have a spouse or dependents, or even a mortgage that would need to be paid off. The thinking goes that you can settle for a minimum group policy now, then upgrade to an individual policy as your needs change.
Like with physician disability insurance, life insurance is always more affordable the younger you are when you apply. Therefore, it’s never going to be more affordable than it will be right now. Plus, if you buy a term or whole life policy, that premium amount will remain the same for as long as you own the policy.
Also keep in mind what will happen if you are diagnosed with cancer or other serious illness between now and the time you’re ready for an individual policy. Your insurance will cost considerably more because a chronic illness brings more risk of death.
So even if you don’t have an immediate need for insurance, it may still be worth considering a policy now knowing the need may arise down the road.
Joel Palmer is a writer and personal finance expert who focuses on the mortgage, insurance, financial services, and technology industries. He spent the first 10 years of his career as a business and financial reporter.