Group Life Insurance

While group life insurance is a good perk provided through your employer or any other large-scale organization, it may not provide enough coverage.  This type of life insurance may be affordable and even free. It’s generally offered by large employers as a benefit for their employees – very common all over the nation.  

Group life insurance is a single contract for life insurance that extends to a group of individuals. If you purchase a group life insurance policy whether through an insurance company on a wholesale basis, it helps secure much lower costs than when purchased on an individual basis. Group life insurance is generally offered with no out-of-pocket costs involved. If you want more advance coverage, you may elect to have a portion of the premium payment deducted from your paycheck. You will have to register your beneficiaries before the policy comes into effect, and the beneficiaries can be changed at any time.

If you purchased group life insurance, your employer or the organization where you and the other members purchased your policy retains the master contract. Employees that elect coverage through the group policy may receive a certificate of coverage, which is later shown to the insurer in case the person leaves the company or coverage is terminated.

Group life insurance currently represents over half of life policies in the USA with coverage extended to 108 million people. Approximately 102 million people opt for an individual policy.

Conditions of Coverage

Group life insurance usually comes with specific conditions. Some organizations may require members to participate for some time before they are granted coverage. For example, an employee may need to pass a probationary period prior to being granted health or life insurance benefits.

As previously mentioned, while the premiums for group life insurance are much lower, the death benefit will also be much lower. Group life insurance policies usually have an average coverage amount of $20,000 to $50,000 or the uninsured individual’s annual salary.  

Also, coverage will last as long as the member is in the group. If the member leaves, coverage will end.  For instance, the employee is covered if he remains working for his or her company. However, if the employer’s insurance contract ends or the person is fired or resigns, coverage will also end.

Pro and Cons

The major appeal of group life insurance is affordability. Group members won’t have to pay much or may not have to pay at all. Premiums are deducted from their paychecks on a weekly or monthly basis. Also, it’s easy to qualify for one of these policies – they don’t even require a medical exam.  

However, group insurance only offers basic coverage, so it may not fulfill your needs. Experts suggest you purchase a separate policy to supplement it. Also, the employer will control the policy. If you decide to switch jobs or your employer decides to terminate group life insurance, coverage will stop.

The good news is that the added premium purchased is portable between jobs. Keep in mind, extra coverage will require you to answer a medical questionnaire but a physical exam is not required, which could be a great option if you have a health issue or find it difficult to qualify for individual coverage.  

Group life insurance coverage will end if you are terminated or leave the job or organization. You have the option to convert your life insurance to an individual one, but it comes with higher premiums. Group term life insurance can be renewed each year with monthly premiums paid either partially or entirely.  Whole life insurance, on the other hand, provides better coverage than term life but premiums are higher.  

Get started with life insurance today.

Sources
  • https://www.investopedia.com/terms/g/group-life-insurance.asp

  • https://www.investopedia.com/terms/g/group-term-life-insurance.asp

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