What is Group Life Insurance?

If you are thinking about taking a new job it is important to not only consider the annual salary, but also the benefit package that the company offers. One benefit that may be available to you is employer-provided life insurance. If you have debated about life insurance in the past or have some form of individual coverage now, you might be wondering what group life insurance is, if you need it and how it works.

What is Group Life Insurance?

Life insurance is a contract between an individual and an insurance provider that in the event of the individual’s death, their dependents, or beneficiaries, will be provided with a sum of money otherwise known as a death benefit.

Group life insurance is very similar to individual life insurance; however, it is purchased as a single contract by an employer or association such as a labor union and it extends coverage to all employees or members. Examples include the Federal Employees’ Group Life Insurance Program, which is available to all federal and postal employees. Group coverage is actually as common, or more popular, than individual insurance.

How Does Group Life Insurance Work?

Employers work with group life insurance companies to identify affordable premiums for a group policy. The premiums are typically paid for, partially or in total, by the employer and offered to employees as part of their benefits package. The employer is considered the policyholder and participating employees receive certificates of coverage.  

Will You Have Enough Coverage Through Group Life Insurance?

Companies will frequently offer a small amount of life insurance for free. Typical death benefits through a group life insurance policy are $20,000, $50,000 or one or two times your annual salary. You will likely have the option to add on additional coverage for an increased premium that can be deducted through your paycheck. 

Is it Worth it to Take Group Life Insurance?

The primary reason why you should consider group life insurance is it is often offered at no cost. Even if you have to pay for the coverage, it is still a worthy consideration because it offers unique benefits such as:

  • It is easy to qualify. Unlike individual coverage, group life insurance often does not involve any medical questions or testing.
  • Group coverage can be significantly more affordable even if you choose to add on additional coverage.
  • It is convenient to obtain and does not involve identifying companies and obtaining quotes.   

What Types of Group Life Insurance Are There?

Similar to individual policies, group term life insurance and group universal life insurance policies are available; however, the option that is available to you is dependent upon what your employer offers.

Term life insurance is a policy that protects you for a specific length of time. If you pass within the designated term then your beneficiaries will receive the death benefit. On the contrary, universal life insurance is a policy that provides lifetime coverage.

Are There Any Drawbacks to Group Life Insurance?

While there are many benefits to group life insurance there are some negative drawbacks of which you should be aware. Consider these scenarios as examples as to why you cannot solely rely on group life insurance:

  • If you leave your job, you will not continue to be covered and your future employer may not offer a life insurance option. Individual life insurance rates also increase as you age so it is better to invest in an individual policy while you are still young and healthy.
  • Since your employer owns the policy they can choose to terminate it anytime if they want to cut costs or eliminate the benefit.
  • Since the coverage can be minimal, it may not be enough to fully protect the financial future of your family.

While there are some shortcomings with group life insurance, it can be a great benefit to take advantage of through your employer or union. Contact your human resources department today to see if it is available to you. 

If you’re looking for a group life insurance policy, you’ve come to the right place. InsureOne offers affordable group life policies for businesses. Request a free group life insurance quote online or over the phone today by calling (800) 836-2240.