Is Workplace Group Life Insurance Enough?

Many Canadians feel secure knowing they have life insurance through work. Nearly two-thirds of Canadians with life insurance coverage get it through their employee benefits package. It seems like a smart, convenient solution that takes care of everything without extra cost or hassle.

But this sense of security may be misleading. Over half of Canadians with workplace life insurance have no additional personal coverage. Most workplace policies provide only one or two times your annual salary – Consider what that means for your family if something happens to you.

The reality is that workplace life insurance, while valuable, often leaves gaps in protection that could create financial hardship for the people who matter most to you.

We’ll walk you through how employer life insurance actually works, what it covers, and most importantly, why you might need more than what your workplace provides. Whether you’re single, supporting a family, or planning for the future, understanding these coverage gaps could make all the difference for your loved ones’ financial security.

What is group life insurance through work?

Group life insurance through work is exactly what it sounds like – one insurance policy that covers multiple employees. Your employer purchases this coverage and extends it to eligible staff members under a single contract.

Most Canadian employers offer group life insurance as part of their standard benefits package. It’s become a common workplace benefit from Halifax to Vancouver, and many employees count on it as their primary life insurance protection.

How does employer life insurance work?

Think of group life insurance as a bulk purchase. Your employer buys coverage for all eligible employees under one master contract. Most workplace plans operate as group term life insurance that renews each year, typically during open enrollment periods.

The cost structure makes group insurance particularly attractive. Employees usually pay very little, if anything at all. Many employers cover the full premium cost, while others share expenses through small payroll deductions. This arrangement makes group coverage significantly more affordable than buying individual policies.

Who is covered and when does it start?

You become eligible for group life insurance once you meet your employer’s requirements. These typically include:

• Working a minimum number of hours per week

• Completing a probationary period of employment

The application process is refreshingly simple. Unlike traditional individual life insurance policies that require medical exams and detailed health questionnaires, group coverage is generally available to all eligible employees without medical underwriting. This proves especially valuable for those Canadians with health concerns.

Once you’re eligible, enrollment is typically automatic. Coverage usually begins on your eligibility date if you complete the paperwork within 60 days. If you miss this window, you may need to provide evidence of insurability.

Common coverage limits in Canadian workplaces

Most workplace policies follow one of two approaches for coverage amounts:

• A multiple of your annual salary (usually 1-2 times your yearly earnings)

• A fixed amount for all employees

Some companies offer different benefit levels based on your role. Executives might receive coverage equal to twice their salary, while other employees get a standard fixed amount.

There’s an important limitation to keep in mind. Coverage typically decreases when you reach age 65 and ends completely at age 70 or when you retire. Most critically, group life insurance ends when your employment terminates.

This last point makes group coverage unsuitable as your only life insurance protection for long-term financial planning.

Why group life insurance may not be enough

Group life insurance through work sounds convenient, but it comes with serious limitations that could leave your family financially vulnerable. Before you assume your workplace coverage is sufficient, consider these significant gaps.

Coverage ends when you leave your job

This is the biggest problem with employer life insurance.

When your employment ends—whether you change jobs, get made redundant, or retire—your coverage stops immediately. If you work in Toronto’s competitive job market or Montreal’s dynamic industries, this creates substantial risk between positions. Some policies let you convert to individual coverage, but these options often come with much higher premiums and may require new health assessments.

What happens if you develop health problems while you’re covered at work? You might not be able to get individual coverage later at an affordable rate.

Limited payout may not meet your needs

Most workplace policies provide only one or two times your annual salary. If you earn $60,000 a year, that’s $60,000 to $120,000 in coverage. Consider whether that would be enough for your family.

Do you have a mortgage? What about childcare costs, university fees, or other debts? Financial experts typically recommend 7-10 times your annual salary as a starting point for adequate protection. For families in Canada, workplace coverage often falls drastically short.

Lack of customisation and add-ons

Group life insurance assumes every employee needs identical coverage. But your needs aren’t identical to your colleagues’ needs.

A 25-year-old single person in Winnipeg has different requirements than a 45-year-old parent in Edmonton with a mortgage and three children. Most workplace plans offer limited options for beneficiaries or additional coverage like critical illness protection. You can’t adjust the coverage to fit your specific situation.

Not suitable for long-term financial planning

Perhaps most importantly, you can’t build your financial security around something you don’t control.

Your employer or insurance company can modify or discontinue the plan at their discretion. Premiums can increase. Coverage can decrease. Benefits can change. You have no say in these decisions, yet they affect your family’s financial protection.

For long-term financial planning, you need coverage that stays with you regardless of where you work or what your employer decides to do with their benefits package.

Your personal life insurance options

Workplace insurance gives you a foundation, but personal coverage fills the gaps that could leave your family struggling. You have several options that work differently than group policies.

Term life insurance

Term life insurance covers you for a specific period – usually 10, 15, 20, or 30 years. Your premiums stay the same throughout that term, which makes budgeting straightforward.

This type works well if you need coverage for temporary situations. Perhaps you want protection until your mortgage is paid off or until your children finish university. If you pass away during the term, your beneficiaries receive the full death benefit.

When the term ends, you can often renew your policy (though premiums will be higher based on your current age) or convert to permanent coverage without a medical exam.

Permanent life insurance

Permanent life insurance covers you for your entire life, as long as you pay the premiums. This includes whole life, universal life, and term-100 policies.

These policies cost more than term insurance because they’re guaranteed to pay out eventually. But many permanent policies also build cash value that you can borrow against or withdraw during your lifetime. Think of it as forced savings that grows tax-free.

If you’re looking for lifelong protection and want the investment component, permanent insurance might suit your needs.

Simplified and no-medical life insurance

What if you have health problems that make traditional life insurance difficult to get? Simplified issue life insurance requires no medical exam – just a few health questions on the application. You can often get approved quickly, sometimes the same day.

For those with serious health conditions, guaranteed issue life insurance asks no health questions at all. Coverage is limited (usually up to $50,000), and there’s typically a waiting period before full benefits kick in.

Combining group and personal coverage

Many Canadians use both workplace and personal insurance to create layered protection. Your group policy provides basic coverage at little or no cost. Personal insurance fills the gaps and stays with you regardless of job changes.

Consider your total needs, then subtract what your workplace provides. The difference is what you might want to cover with personal insurance.

How to choose what’s right for you

Start with your financial obligations. Add up your mortgage, debts, and annual expenses your family would need covered. Include funeral costs and any special needs like children’s education.

Your age and health affect both your options and costs. If you’re young and healthy, you’ll get better rates on traditional policies. If you have health concerns, simplified issue insurance might be your best option.

Remember that your needs change over time. What works today might not be enough in five years, or you might need less coverage as your mortgage gets paid down.

Workplace life insurance provides a solid foundation, but it shouldn’t be your only protection. Understanding when you need more coverage is essential for your family’s financial security.

Your insurance needs depend entirely on your situation. A young professional with minimal debts might find workplace coverage sufficient for now. But if you have a mortgage, children, or other dependents relying on your income, you’ll likely need additional protection.

When evaluating your current coverage, consider these key factors:

• Your total financial obligations, including mortgage payments and debts

• How long your family would need financial support

• Whether you have health conditions that make individual coverage more expensive

• How stable your current employment is

The best approach combines workplace and personal coverage rather than choosing one over the other. Your employer insurance provides basic protection at low cost. Personal coverage fills the gaps and stays with you regardless of job changes.

Your insurance needs will change as your life evolves. Review your coverage annually and especially after major events like marriage, having children, or buying a home. What works today may not provide adequate protection five years from now.

If you’re unsure about how much coverage you need or what type of policy suits your situation, speaking with an insurance broker such as Maple Bay can clarify your options. They can help you understand exactly what your workplace policy covers and recommend personal coverage to complement it.

The goal is peace of mind knowing your loved ones will be financially protected, no matter what happens.

Why Maple Bay?

At Maple Bay, we understand the unique pressures facing individuals and families across Canada. We’re insurance brokers, which means we work for you – not any single insurance company (Read more about the importance of Insurance Brokers here). We’ll help you find coverage that fits your budget.

Contact us today to explore your life insurance options.