Workplace life insurance is enough only if its current death benefit and continuation rules fit the financial gap your death would leave. A salary multiple shown in a benefits portal does not answer that by itself.
To prepare this guide, our editorial team reviewed the Financial Consumer Agency of Canada’s life-insurance guide, the Financial Services Regulatory Authority of Ontario’s group-life explanation, the Canadian Life and Health Insurance Association’s current group-insurance guideline, and FCAC’s guidance on buying and maintaining insurance.
Is My Workplace Group Life Insurance Enough?
Check the terms of your group policy. How will benefits change or terminate if you leave the company, work less, take a leave of absence, retire or reach the maximum age allowed under the plan?
Figure out how much life insurance your survivors would need to replace income and caregiving, cover debt and pay one-time expenses. Subtract assets and other insurance that would still be in force.
If there’s a meaningful difference, consider purchasing supplemental group coverage or an individual policy.
Read More: Estimate Your Total Life Insurance Need
What Is Employer-Sponsored Group Life Insurance?
FSRA says employees in a group plan receive a certificate as evidence of coverage.
One contract provides insurance to eligible members. Premiums are calculated for the group rather than as they are for individual coverage.
Basic Coverage
Determine whether the benefit is a specific amount or a multiple of certain earnings. If it is based on earnings, identify which earnings are included and whether amounts are rounded. Find out whether benefits decrease at certain ages. Look for accidental-death benefits and determine whether they are part of the life benefit or separate.
Group Policy
You control certain decisions relating to the plan, including optional coverage and naming beneficiaries. However, your employer or plan sponsor controls the insurance contract, including decisions about the insurance company and plan terms. Find out how you would be notified about plan changes.
When Coverage Ends
Coverage usually ends when employment ends. Confirm your last day of coverage and whether you can convert or continue it. A new job does not necessarily mean coverage will start right away, so check when your new benefits begin.
Limited Customization
Coverage amounts are typically the same for all participants in a basic employee benefits package. Some benefit plans allow employees to buy additional coverage or insure a spouse. Larger amounts may require proof of good health.
When reviewing optional coverage, compare rates, age-related cost increases and what happens to the insurance when you leave the plan.
Evidence of Insurability
Large groups can often obtain basic coverage without medical exams, but eligibility rules, coverage amounts and evidence requirements vary. Read these provisions carefully.
Always answer a medical questionnaire completely when a plan requires medical information.
Calculate Your Workplace Coverage Gap
| Step | Amount to enter |
|---|---|
| 1. Income and unpaid work | Annual household support or replacement-care costs multiplied by the number of years |
| 2. Debts and one-time costs | Mortgage or rent, other debts, final expenses and legal expenses |
| 3. Goals | Education, dependant support or a specific bequest |
| 4. Available resources | Subtract liquid savings, survivor resources and current individual coverage |
| 5. Workplace benefit | Subtract only the group amount confirmed by the current certificate |
| 6. Result | The remaining amount is the gap to compare with your budget and policy options |
Repeat this worksheet for each person who earns income or provides valuable childcare or other support. Don’t include disability, critical-illness or accidental-death benefits because none is the same as a life insurance benefit.
Read More: Read Why Life Insurance Can Be Important
When Individual Coverage May Be Needed
The biggest differences between group and individual coverage are portability—meaning you’re not tied to a group, association or employer—and individual underwriting, which can affect approval and final cost.
Individual coverage may be useful if:
- There is a gap in your workplace benefits.
- The workplace plan ends before your need for coverage does.
- Optional group rates exceed your budget.
- The plan does not offer the ownership or policy options you want.
Read More: Compare Term and Whole Life Insurance
What to Compare Before Buying Additional Coverage
Existing Coverage
Get certificates for basic and optional life insurance, spousal coverage and any existing individual policies. Check the insured people, policy owners, coverage amounts, premium payers, beneficiaries, termination dates and ages at which benefits are reduced.
Health Status
Underwriting decisions vary from person to person based on individual health.
Simplified-issue or guaranteed-issue policies may be more expensive, provide fewer benefits or include waiting-period provisions. Carefully review the policy terms.
Do not lapse current insurance until the replacement insurance has been issued and accepted.
Budget
Could you keep the policy if you lost your job, went on parental leave or otherwise experienced a reduction in income? A smaller policy that you keep in force could provide more for your family than a larger one you don’t.
Upcoming Life Changes
Review coverage gaps when buying a house, having a dependant, becoming self-employed, reducing your hours or retiring. Update your beneficiaries when your estate or family changes. Consequences for beneficiaries and estates vary by circumstance and province.
Read More: Use the Life Insurance Coverage Review Guide