SOLE PRACTITIONERS
AND SMALL FIRMS

Disadvantages of group insurance

Limited protection

A typical group insurance policy is intended to provide basic financial protection. Life insurance amounts are often well below most people’s requirements and any long term disability protection may be very restrictive in the actual benefit it offers. Such policies, unless supplemented with personally owned protection, could leave you and your family inadequately protected.

 

Coverage is not tailored to your individual needs

Employer-sponsored insurance is a fixed “off-the-rack” design intended to meet the basic needs of the average employee. You may have a few options to choose from, but the overall plan design is fixed by the employer and insurer. As a result, the benefits you receive may have little in common with your actual needs.

 

Your coverage terminates if you leave your job.

If you leave or are terminated from your employer you typically cannot take your group insurance benefits with you. As a result, you risk being without benefits and unable to replace them if you are no longer healthy. Some group plans do allow you to convert a portion of your benefits, but there may be severe limitations.

 

Coverage may end when you retire or reach a specific age

Most people will lose coverage when they retire or continue to work past a certain age. As a result, you could lose your insurance protection just when you need it most.

 

Your employer can change or terminate the insurance coverage

A group insurance contract is between your employer and an insurer. Therefore, your employer or the insurer has the ability to change, reduce or even eliminate your group insurance benefits without your consent. Reductions or cancellation of benefits often occur when employers need to reduce operating costs or offset large premium increases due to heavy claims usage. Poor claims history could also result in an insurer’s refusal to renew the insurance or ask for extremely large increases in rates.

While employer-sponsored benefits are a valued source of financial protection for millions of Canadians, they often create a false sense of security. When it comes to protecting yourself and your family, you should consider supplementing your group coverage with additional insurance. Most personally owned insurance offers significant advantages over an employer provided plan.