How does group life insurance compare to individual life insurance?

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What are the differences between group life insurance and individual life cover? This handy guide will help employees understand exactly what they're getting from their employer's life insurance policy.

Group life insurance is commonly provided by employers as an employee benefit. It provides a lump sum benefit to the employee’s family should they die while employed by the company. Sometimes the benefit can be paid as a pension, but you should check with your employer to see what they provide.

Life insurance is life insurance, right? Well pretty much. The benefit is very similar to an individual life insurance policy that you may decide to buy directly from another insurance company. But there are some general similarities and differences.

  • If you die, a lump sum or pension benefit will be paid to your beneficiaries. The core purpose of the insurance is the same.
  • You are covered regardless of the cause of death. Under a group life policy there are normally no exclusions, and you don’t have to be at work to be covered, as long as you remain employed by the company. Some individual policies do apply some exclusions, such as suicide, for a specified period.
  • The policy is held in trust so it doesn’t form part of your estate so is not subject to inheritance tax on the benefit. Not all individual policies are set up in trust. Group life insurance is always set up in a trust.

  • Cover is linked to your employment, if you leave the company the cover stops. Cover also stops when you reach the maximum age, normally state pension age or 75, depending on what your employer has chosen.
  • You will normally be covered automatically, with no medical questions. Unless you join outside of the normal rules of the scheme, or have a large insured benefit, most employees are covered without completing any medical questions.
  • Your employer pays the premium not you. They will also handle all administration and make the insurance company aware that you have joined the company or if any of your details change, including your salary.
  • Your employer is the policyholder not you. That means they will make a claim on your family’s behalf and liaise with us to arrange payment.
  • The level of cover is usually linked to your salary and cannot normally be changed. Unless your employer provides a flexible benefits scheme where you can flex your cover up and down, you can’t change the level of cover to suit your circumstances. The most common benefit is 4x your annual salary, so as your salary changes your benefit will change, but you can’t otherwise change the level of benefit.


These are the main differences between group life insurance and individual life insurance but policies do vary. If you’re weighing up which option would suit your needs best, before making any decisions you should review the terms and conditions of both policies and consult with a professional financial adviser.