Group Life Insurance: Covering Your Immediate Family?

Group life insurance is a type of insurance offered by an employer or large-scale entity, such as an association or labor organization, to its workers or members. It is typically inexpensive and may even be free for certain employees. It is also common for a group life insurance policy to have membership requirements, such as being a full-time employee. So temporary workers or seasonal employees may not have the option of participating. The specifics of how a group life insurance policy works depend on whether it is a term, whole, or universal life policy. While group life insurance may be free or inexpensive for employees or members, its cost to the company or organization may vary according to where it is located, the number of people enrolled, and the amount of coverage they will each receive.

Group life insurance: What is it?

Group life insurance is a type of insurance plan purchased by an employer or large-scale entity, such as an association or labor organization, to cover a group of people. It is typically offered as an employment benefit or membership perk at little to no cost to the insured individuals. It is a single contract that provides coverage to a group, usually those who work for the same company.

Group life insurance is a common employee benefit, with roughly two-thirds of Americans relying on it. It is relatively inexpensive compared to individual life insurance, and it is easy to qualify for as there is usually no medical exam required. The employer owns the policy and coverage is guaranteed, although it is usually only valid for as long as the employee is at the company.

The purpose of group life insurance is to provide financial support to the family of an employee or member who dies while being part of the group. It provides a death benefit to the insured's beneficiaries.

The standard amount of coverage is often tied to the covered employee's annual salary, with premiums based on the insured's age. Employers typically pay most or all premiums for basic coverage, with additional amounts offered for an extra premium paid by the employee.

How does group life insurance work?

Group life insurance is a type of term life insurance plan purchased by an employer or large-scale entity, such as an association or labor organization, to cover a group of people. It is offered as an employment benefit or membership perk at little to no cost to the insured individuals.

Group life insurance is a single contract that provides coverage to a group of people, typically those who work for the same company. The employer owns the policy, which covers the employees. The beneficiaries of the insured will get a payout if the insured passes away while covered by group insurance.

The typical group policy is for term life insurance, which is renewable each year with a company's open enrollment process. This is in contrast to whole life insurance, which provides coverage regardless of when you die and has higher premiums and death benefits.

With group life insurance, the employer or organization purchasing the policy retains the master contract. Employees who elect coverage through the group policy usually receive a certificate of coverage, which is needed if they leave the company and terminate their coverage. Coverage is generally only valid for as long as a member is part of the group.

Group life insurance is a common employee benefit that provides a death benefit to the insured's beneficiaries if they die while part of the organization. The purpose is to provide financial support to the families of such employees.

What are the pros and cons?

Group life insurance is a type of term life insurance plan purchased by an employer or large-scale entity, such as an association or labor organization, for its workers or members. It is often offered as an employment benefit or membership perk at little or no cost to the insured individuals.

Pros

• Group life insurance is generally less expensive than individual life insurance because employers typically pay all or most of the cost.
• It is often easier to qualify for group life insurance as there is usually no medical exam required.
• Group life insurance is easy to get as employees can usually sign up during onboarding or open enrollment.
• May be able to add coverage for a spouse and/or dependent.
• Coverage is guaranteed.
• Premiums are covered by the employer or through payroll deduction.

Cons

• If you leave your job, you will often lose coverage unless your policy is "portable", which means you continue to buy the group life insurance at your own cost.
• The death benefit of a group life insurance policy is usually lower than that of an individual policy.
• Most group life insurance policies don't have cash value, which means you can't borrow against them as you can with permanent life insurance.
• The employer controls the policy and its terms, so your premiums can increase based on decisions made by your employer.
• Coverage amount may be limited.

Can you add supplemental insurance?

Group life insurance is a type of insurance that is offered by an employer or another large-scale entity, such as an association or labor organization, to its workers or members. It is typically inexpensive and sometimes even free for certain employees. It is also common for group life insurance to have a relatively low coverage amount.

Group life insurance is often offered as a basic package with the option to add supplemental insurance. This basic package is usually guaranteed issue, meaning you can't be denied coverage based on health status. Basic group life insurance is also typically free up to a certain amount, and anything beyond that amount can be purchased as supplemental insurance.

Supplemental insurance, also known as voluntary insurance, is any amount of additional coverage purchased through an employer. It is important to note that the premiums for supplemental insurance are typically higher because the insurer has very little information about the health of the insured. Therefore, they may require "evidence of insurability" if a large amount of coverage is desired. This can include answering health questions, allowing the insurer to review medical records, or submitting to a medical exam.

Supplemental insurance can be purchased for oneself, one's spouse, or one's children. It is recommended for those who are older or have health issues that would make it difficult to get affordable insurance elsewhere. However, if one is relatively healthy and can qualify for reasonable rates outside of their employer, it is generally not recommended to purchase supplemental insurance, as it is often more expensive than other options.

In summary, supplemental insurance can be added to a basic group life insurance policy, but it is important to consider the costs and benefits before doing so, as it may be more advantageous to seek alternative insurance options.

What happens when you leave your job?

When you leave your job, you lose your group life insurance coverage. However, there are a few options to retain some form of coverage:

Cancelling or Lapsing the Policy

You can choose to do nothing and allow your group life insurance coverage to lapse. Most group life insurance coverage will automatically terminate at the end of the month following your departure from the company.

Porting the Policy

If your policy is portable, you may be able to keep your coverage by paying the premiums directly to the insurance company instead of going through your employer. This option may result in higher rates than your original premium. Some policies may also need to be renewed annually at a higher premium.

Converting the Policy

You may be able to convert your group term life insurance into an individual, whole life insurance policy. This option will also result in higher rates, as conversion premiums tend to be more expensive.

Buying a Private Policy

You can also choose to buy a private life insurance policy. This option provides consistent coverage, as it is not tied to your employment. It may also be cheaper than porting or converting your group coverage, depending on your health. However, you may need to undergo a medical exam as part of the application process, and there may be a waiting period of up to six weeks for approval.

Frequently asked questions