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Group Life Insurance

Although it is declining in numbers, you should take advantage of your employer-offered group life insurance.  Although, one still needs a private policy to make sure you are not underinsured. 


What is group term life insurance?

what is group life insurance policyIn basic group life insurance, the owner or the policyholder or the insurance is the group itself. Each member of the plan will receive a certificate as proof of membership to the policy.

Employers often offer this type of life insurance coverage as an additional benefit for their employees. Some may give it for free or as an optional benefit.

Besides employers, other groups that can offer a group life policy are trade groups, associations, and organizations. These associations can offer a group life policy to their members as a perk of being part of the group.

It is available for all regardless of age, with very few health questions involved. A group policy can be either term life or whole life; it just depends on the group.

How does group life insurance work?

Group life insurance is a type of life insurance policy offered by an employer or other organization to its employees or members. The policy covers a group of people rather than just one individual. The employer or organization typically pays the premiums for the procedure, and the coverage amount is usually based on the employee’s salary or a set amount. If an employee covered by the policy dies, the death benefit is paid out to the employee’s beneficiaries. Group life insurance is often less expensive than individual life insurance policies and may not require a medical exam.

how does group term life insurance work

When should you get employer provided group term life insurance

employer provided life insuranceWhen it’s offered for free

If it is being offered to you as a free benefit, then take it. Any benefits offered that is for free is good, especially if it is life insurance. There is no valid reason not to take it. 

 Inexpensive Supplemental Coverage

Although group life insurance is good if offered for free, it is still wise to get an individual life insurance policy. A group life plan is good as supplemental to an existing personal life insurance plan. 

 Moreover, claims are spread out for all the policy members, so the coverage cost is very low for each member of the group. Getting into a group life plan may or may not be a wise financial strategy. If you are in googd health, it may be better and cheaper to acquire individual life insurance than buying group life insurance. 

Individuals not qualifying for Standard Life Insurance

For people under 50 years old and are not qualified for any individual life coverage, then a group life plan might be the only way to get insured. Most of the time, people with health issues apply for a group life plan since there are only a few health questions to deal with.

Also, most insurers are very lenient when it comes to health issues for group life plans. One may consider applying for this type of policy if you have health issues such as:

  • Cancer
  • Immune diseases
  • Bi-Polar/Schizophrenia
  • Diabetes
  • Heart ailments

How much does life insurance cost?

how much does life insurance cost

Pros and cons of getting supplemental group life insurance

pros and cons of group life insuranceThere are advantages and disadvantages to a group life policy, just like any other life insurance type. It is essential to become aware of the pros and cons right before deciding that it is the right one for you.

1. Often Cheaper than Traditional Life Plans:

The risk for insurers is shallow as the plan is spread out among the group plan members. That is why it is affordable and is offered for free by employers and other private group institutions.

2. Easy Qualification Process:

One can easily qualify for a group life policy. During the interview, an applicant should answer a few health questions. However, there are some companies or plans without health questions ask. Therefore, comprehensive coverage may ask you several questions to verify your risks.

3. Faster Approval

The application form is just one or two pages and will be activated once processed by the insurance provider. The processing time depends on the group plan and the insurer issuing the certificate for the plan members. For online applications, the policy is effective after signing the application form.

4. Day 1 Coverage

One of the best things about group policy is that there is no waiting period to implement the coverage fully. The total amount is available to its beneficiaries on day 1. There is a two-year waiting time for the full coverage amount to be available in the final expense whole life.

5. No Medical Exam Needed:

Undergoing medical examination is an additional cost for insurance companies. Therefore, for small group life plans, insurers’ risk is minimal, so an exam is not required. Usually, the application is the only qualification that you should do.

6. No Financial Background Check:

When the amount of coverage is small, insurers will not run a financial background check for each group life plan member. Aside from medical exams, doing a risk assessment is an additional cost for insurers. However, if the group plan decided to increase the coverage, an insurance provider may need to do a financial background check.

7. No Height and Weight Requirements:

A typical life insurance policy has a standard chart with height and weight information by each applicant. This information is one of the determining factors for the cost of the policy. While in group plans, it does not have any health classes. The height and weight information are not needed.

1. Possibility of losing the coverage:

There is a higher chance of losing the coverage if you leave the company you are working with or lose your membership with an institution. Also, if the company chooses to drop the benefit, then the policy will close.

2. You’re not the policy owner:
The company or association is the ultimate policyholder. Therefore, they hold the master policy, and certificates are only issued to the group life plan member. A certificate is valid proof of you being part of the group policy. However, you are still not the primary owner.

3. Premium could Increase:

If it is not a guaranteed premium and the policy experiences many claims, it may increase anytime. Another factor is if the group policy is in a “banded term.” This term increases the premium every five years.

4. Coverage may decrease:

For guaranteed premiums, then the coverage can decrease over time. As a member of the group policy ages, then the risk of the insurer increases. Once a member reaches the age of 60, the coverage may start to decline.

5. Lesser Coverage than Traditional Life Insurance:
It is straightforward to qualify for a group life plan. Individual life policies have an underwriting process that makes it tedious. Since health concerns are not an issue with group life, the insurer lowers the risks by giving lower coverage.

6. Lack of Customer Service Support:

The master policyholder takes care of the other services like an update of billing and beneficiary changes. Therefore, the member of the group may experience prolonged service. Problems might arise, especially if the administrator is not a licensed insurance agent.

Types of Group Life Insurance

Employer-provided group term life insurance

term life insurance ratesGroup term life insurance is a common part of employee benefit packages. Many employers provide, at no cost, a base amount of coverage as well as an opportunity for the employee to purchase additional coverage through payroll deductions.

The insurance plan may also offer employees the option to buy coverage for their spouses and children.

source: investopedia 

What is group whole life insurance

what is group whole life insuranceGroup whole life insurance not only do you get protection for your lifetime, but you also have the ability to build cash value as you go. Giving yourself and your loved ones a gift of love. You get to decide how much coverage and who to cover.

Principal group life insurance

Principal Group Life Insurance is a group life insurance program offered by Principal to give employees and employers coverage for specified employee death benefits. This policy provides defined benefit amounts and fixed payments passed on to the employee’s beneficiaries in the event of their death. Additionally, there are typically optional riders such as accidental death and dismemberment, catastrophic illness or disability rider, or dependent life insurance coverage for those with dependents.

Unum group life insurance

Unum Group offers group life insurance policies that can protect employees and their families with financial security in the event of death or disability. Unum provides coverage that includes options such as accidental death and dismemberment, family income benefit, survivor’s loss protection and more. The costs associated with an Unum life insurance policy depend on the type and amount of coverage you choose.

Benefits of group life insurance

Group life insurance offers several benefits, including lower premiums than individual policies, no medical exams required, and coverage for pre-existing conditions. It also provides a sense of security for employees and their families and can be a valuable tool for attracting and retaining talent in the workplace.

Group variable universal life insurance

Group variable universal life insurance (GVUL) is a type of permanent life insurance offered as an employee benefit. It provides death benefit protection and cash value accumulation within one policy, allowing beneficiaries to access funds if needed. GVUL offers flexible premiums, competitive rates and the ability to invest in a portfolio of variable third-party mutual funds for potential growth opportunities.

Frequently Asked Questions

What is the difference between life insurance and group life insurance?

Life insurance is a policy that individual purchases to provide financial protection for their loved ones in the event of their death. On the other hand, group life insurance is typically offered by an employer as part of a benefits package and covers a group of employees. Group life insurance may have lower premiums and may not require a medical exam, but the coverage amount is usually limited and may not be enough for an individual's needs.

Is group-term life insurance a good idea?

Group-term life insurance can be a good idea for some people, especially if it is offered through their employer and they have a family to support. However, some may have better options, as it typically offers lower coverage amounts and may not be portable if you leave your job. It's essential to weigh the pros and cons and consider your needs before deciding if group-term life insurance is right for you.

How long does my group term life insurance last?

The length of your group term life insurance coverage will depend on the terms of your policy. Some policies may last for a specific number of years, while others may last until a certain age or until you leave your job. It's important to review your policy documents or speak with your insurance provider to understand the length of your coverage.

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Group Life Insurance

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