Group Life Insurance

One benefit employers, associations, and other large groups can provide their members is group life insurance.

This can make an employment or organization’s offerings more attractive for new employees.

Understanding what group life insurance is and what makes it different from other forms of insurance requires a little more information.

What is Group Life Insurance?

Basically, a group life insurance policy is a contract between an organization, business or association (hence it’s group insurance designation) and an insurance provider.

The organization, business or association can then offer this benefit of life insurance coverage to its members or employees.

Group life insurance policies account for more than half of all life insurance policies written.

This is a benefit which should be taken advantage of even if it doesn’t provide significant coverage—additional coverage can be purchased privately by the policyholder if it is needed.

What Can it Cover?

Group life insurance policies provide death benefits when a policyholder dies.

While the amount will most likely be limited, it is still less expensive than attempting to purchase coverage individually, and commonly would afford a proper funeral or burial. This is why it is often offered as a free benefit from employers.

Employers may require workers to be on the job for a period of time before they actually receive this type of coverage. However, to receive the coverage, members typically won’t have to have a medical exam.

What Does it Not Cover?

Group life insurance is basic coverage, and likely would need to be supplemented with additional coverage.

Sometimes the coverage amount will be based on the member’s annual salary. Other policies may only provide $20,000-50,000. This means the death benefits would not be enough to care for a family.

If an employee changes jobs, in many cases, the policy is not portable, and coverage ends.

If it is, then it can be changed to an individual policy but premiums may change and the insured must make arrangements to keep the premiums up to date since they were previously payroll deducted. If a person is uninsurable for any reason, they may opt to continue the policy if given the option.

Are There Policy Limits?

The typical employer group life policy is term life insurance.

If an employee leaves the company, they might not receive the same benefits at their new job.

The real limitation is that the coverage amount is often too small to protect a family. Older workers with health issues may continue at the same job because it’s more difficult to acquire coverage on their own.

Group life insurance policies are most suitable for individuals who stay with the same company for long periods of time.

It’s a convenient benefit to have but as people change jobs more frequently today, it should not be the only coverage that a person has.