In Western Canada’s competitive job market—from the industrial centres of Alberta to the professional firms of British Columbia—employers often enhance their core benefits with Voluntary Life Insurance (VLI). This optional coverage, paid for by the employee through simple payroll deduction, is a popular, cost-effective way to top up the basic Life Insurance benefit (typically one or two times salary) that the employer provides for free.
While VLI is a valuable, convenient perk, it only tells half the story of true financial security. For employees making long-term financial plans, it’s crucial to understand why supplementing or even replacing VLI with an Individual Private Life Insurance policy can be a far superior strategy for wealth protection and peace of mind.
The Appeal of Voluntary Group Life Insurance
Voluntary Life Insurance is undeniably attractive for three main reasons:
- Convenience: The application is easy, and premiums are automatically deducted from your paycheque.
- Accessibility: For lower coverage amounts (often called the Non-Evidence Maximum, or NEM), you typically don’t need a medical exam or extensive health history, making it ideal for those with pre-existing conditions who might struggle to get coverage elsewhere.
- Initial Cost: Premiums are often lower than individual coverage when you are young because the risk is spread across the entire employee group.
VLI serves a fantastic purpose as a convenient, immediate top-up to ensure a base level of protection for your loved ones. However, its convenience comes with significant trade-offs, particularly for healthy individuals planning for a long career.
The Power of Individual Private Life Insurance
While VLI is tied to your employment, an individual life insurance policy—whether Term or Permanent—is a personal contract owned entirely by you. This distinction creates a powerful advantage that every employee, especially those planning to change jobs, should consider.
1. Portability: Your Coverage Stays with You
This is the single most critical difference. Group VLI is almost always not portable. When you leave your employer (whether by changing jobs, getting laid off, or retiring), the coverage ends. You lose all the premiums you paid and have no coverage moving forward.
- The Private Advantage: Your personal Term or Permanent policy is yours. It travels with you for the entire duration of the term, regardless of where you work, or if you stop working entirely. In a dynamic Western Canadian job market where changing employers every few years is common, this security is invaluable.
2. Pricing and Coverage: Getting More for Your Money
For a healthy, non-smoking individual, the long-term cost of VLI can often exceed the cost of private coverage.
- The Private Advantage: An individual policy requires medical underwriting. Yes, this means a medical exam, bloodwork, and a longer application process. However, if you are in good health, the insurance company locks in a preferred rate based on your individual risk, not the blended rate of your entire workplace. This often results in you getting significantly more coverage (a higher face amount) for the same monthly premium, or the same amount of coverage for a lower long-term cost.
- The Private Advantage: You can buy coverage that is 8-10 times your salary, which is the amount many experts recommend. VLI often caps out at a lower multiple, restricting your ability to adequately protect a mortgage or provide for young children.
3. Guaranteed Rates and Control
Group rates are subject to change annually based on the claims experience and demographics of your employer’s group. You have no control over the pricing or the policy definitions.
- The Private Advantage: The premium for an individual Term Life policy is typically guaranteed and locked in for 10, 20, or 30 years. You control the policy, the beneficiary, and the term, providing predictability that group plans simply cannot offer.
Making the Right Choice for Your Financial Future
In the vast majority of cases, the recommended approach for any Western Canadian professional with significant financial obligations (a mortgage, dependents) is to use both group and private insurance:
| Strategy | When to Use It | Key Benefit |
| Voluntary Group Life | For an immediate, convenient, basic top-up, especially if you have a health concern. | Easy to enroll (minimal medical questions). |
| Individual Private Life | For long-term financial security, maximum coverage, and guaranteed rates. | Portability and higher coverage for the long run. |
While the required medical exam for a private policy might seem like an inconvenience, it is an investment in securing your family’s future at the best possible rate. Don’t let the convenience of a group plan blind you to the financial risks you take when you leave that coverage behind at your next job.