A Group Plan and an Individual Contract: What a Household Actually Owns

A household with coverage at work and a contract of its own usually believes it holds two things. In one important sense it holds one and a half, because the coverage at work is attached to the job rather than to the person, and the day the job ends is the day most people find that out. There is a door out of that, it is time limited, and almost nobody uses it.

What ends when the job ends

The regulator describes group life plainly: it is term insurance, in effect for the duration of participation in the group plan, and it usually ends if you change jobs or you retire.

That is the structural difference between the two things a household holds. An individual contract continues as long as its premiums are paid. Group coverage continues as long as a person is in the group.

Which means a household that is adequately covered on paper can become uncovered on a Friday afternoon, through a decision that had nothing to do with insurance.

It also means the amount of coverage a household has is a moving number nobody is tracking. A promotion changes it. A change of employer changes it. Retirement usually ends it.

The conversion right, which is the most valuable thing on this page

Immediately before leaving employment, there is usually a right to convert group life insurance into individual life insurance. The regulator calls it the conversion privilege.

And here is the sentence to remember: when you convert group life insurance into individual life insurance, you do not have to have a health check to prove that you are insurable.

Read what that is worth to the right person. Somebody whose health has changed since they were hired, who would be declined or heavily rated on a fresh application, can obtain an individual contract without being examined at all. For that person it may be the only insurable capacity they will ever have again.

The option is available up to age sixty five. The premium is established based on age, so it could be higher than the group rate was, and the insurance amount may be lower.

The trap is in the words IMMEDIATELY BEFORE. This is a right that exists in a window around leaving, not afterwards, and the window closes while a person is dealing with everything else that happens when a job ends. It is the single most commonly wasted right in group insurance.

One honest limit. The regulator describes this for group LIFE. Nothing in the official material consulted says that group disability or group health coverage converts, and this page does not claim they do. A person leaving a job should assume those simply stop, and ask.

Who pays the premium decides who is taxed

This is the part that surprises households at the worst moment, and the rule is symmetrical in a way that feels unfair until you see the logic.

For a group sickness or accident plan, meaning disability coverage: where the EMPLOYEE pays all of the premiums, the benefit is not taxable. Where the EMPLOYER pays all or part, the benefit is taxable.

The regulator says the same thing from the employee’s side: if your employer, union or professional association pays a portion of the premiums, you usually have to pay income tax on the money you receive while disabled.

So an employer paying the disability premium is providing a benefit whose value shrinks at exactly the moment it is used. A household budgeting on the stated monthly amount of an employer paid plan is budgeting on a gross figure.

The premium side runs the other way for some coverages. Employer paid group term life premiums ARE a taxable benefit to the employee, reported on the annual slip. Premiums for a plan offered to an individual employee rather than a group are also a taxable benefit. But premiums an employer pays to a private health services plan are NOT a taxable benefit, subject to conditions about what the plan covers and who is eligible.

And Quebec treats some of this differently: group insurance contributions appear as taxable benefits on the provincial slip. The same arrangement can therefore be treated one way federally and another provincially, which is a question for an accountant rather than this page. Revenu Quebec does state one useful thing directly: a top up payment under a plan funded solely by employee contributions is a non taxable benefit.

When two plans cover the same person

For health and dental, the industry association publishes how coordination works, with the caveat that its page is not for legal reference.

Three points are worth knowing. The order of payment between plans is based on the person’s eligibility status, meaning active full time employee, active part time employee, or retiree, and NOT on which plan is more generous. Individual plans are generally considered secondary to group plans. And the combined payments from all plans cannot exceed all of the eligible expense, and in some cases may be less than the amount actually charged.

That last clause is the one that disappoints people. Two plans do not mean two payments. They mean one payment assembled from two sources, capped at the eligible expense, which may itself be less than the bill.

For life and for disability income across a group and an individual contract, no official source consulted addresses coordination, so this page makes no claim about it. What is published, and covered elsewhere on this site, is that a public disability benefit can reduce a private one through the offset clause in the contract. Between two private contracts, read both.

What to actually do, and the order to do it in

Find out, in writing, what the group plan pays and for how long. Not what the summary leaflet says. The booklet.

Find out whether the employer pays any part of the disability premium, because that answer decides whether the monthly figure you have in mind is what would arrive.

Find out whether the conversion privilege exists on the life coverage, what amount is convertible, and by when. Then write that deadline somewhere that is not a work email account, because a person who has left a job has usually lost access to it.

And if anybody in the household has a health history that would make a fresh application difficult, treat that conversion right as an asset rather than a formality, because for that person it is one.

What this practice can do here is narrow and useful: read the booklet and the contract side by side and say what they actually pay, who is taxed, and what survives a change of job. What it cannot do is change either document.

Where to read this at the source

The description of group life as term insurance for the duration of participation, the statement that it usually ends on a change of job or retirement, the conversion privilege with no health check, the age sixty five limit, the premium by age and possibly lower amount, and the point about tax on disability benefits where the employer pays a portion are published by the Autorite des marches financiers on its group insurance pages. The taxable benefit rules for group term life, group sickness or accident plans, non group plans and private health services plans, and the rule on when a disability benefit is taxable, are published by the Canada Revenue Agency in the taxable benefits chart and the employers’ guide to taxable benefits. The provincial slip treatment and the top up payment rule are published by Revenu Quebec. The coordination points are published by the Canadian Life and Health Insurance Association, which states that its page is not for legal reference.

Read on 30 September 2026, all free to consult. Three things are absent on purpose: any claim that group disability or group health converts; any statement about who legally owns a group certificate, because no official source consulted says; and the taxation of a benefit under an individually owned contract paid with after tax money, which could not be verified.

Frequently Asked Questions

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What happens to the plan itself when a person leaves is in group benefits when you leave a job. Who pays the premium and what the agency publishes is in who pays the premium, and the taxable benefit by benefit in group benefits and tax.