Group Life Insurance

There 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.

Pros:
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.

Cons:
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.