Group life insurance is often provided as part of a complete employee benefits package. In fact, one of the primary attractions to many employers that offer benefits such as life insurance is the affordability of coverage.
Due to the fact that group life insurance plans cover a broad group of people, it is relatively inexpensive for each individual person. This is because the risks are spread out among a larger group of people. Therefore, the insurance company can afford to charge a lower premium than it would for each on an individual basis.
How Group Life is Different from Individual Coverage
Group life insurance differs from individual life insurance in that it covers an evolving group of individuals. As employees or members of the group change, the demographics of the group may also change, however, the rate and benefits generally remain the same.
Typically, the owner of a group life insurance policy is an employer or entity such as a labor organization. The policy covers the employees or members of the group. The employer or entity has the right to change or cancel the coverage at any time.
Life insurance under a group plan usually involves very little underwriting. Because of this, it is possible for individuals with poor health to receive group life insurance benefits. In fact, depending on the group, all eligible group participants may even be able to obtain coverage.
Each group participant is required to complete a short application form that usually consists of basic questions such as Social Security number, dependent information, and beneficiary designation. There are typically no medical questions, and in many instances, no actual medical underwriting takes place.
When group life insurance is provided through your employer, the company will usually pay for most or all of the premium. If the amount of your coverage exceeds $50,000, the portion of the premium that goes towards the first $50,000 amount of benefit is considered to be tax-free income to you, and is therefore deductible to your employer.
The cost of the premium for any additional amount of coverage that is paid for by your employer will typically show up on your annual W-2 form as taxable income. Overall, the premium cost for group life insurance is generally lower than for a comparable amount of individual life insurance coverage.
Who Can Be Covered on a Group Life Insurance Policy?
In a group life insurance plan, typically eligible employees and group members are allowed to be covered. In addition, employers will oftentimes also have the ability to cover the spouses, as well as the children, of eligible group members. Depending on state law, employer policy, and the individual insurance company, there are some cases where domestic partners will also be eligible to receive coverage.
Employers can generally choose who they want to be eligible for life insurance in a group plan. However, they may not simply decide which specific individuals may receive coverage. Rather, the employer must choose who is eligible based on a certain “class” of employees, such as all full-time individuals, or all managers and executives.
Most employers will also dictate a waiting period before an employee is allowed to participate in the plan. The waiting period is generally the time in which a new employee must work for the company before they are covered. Some common waiting periods are 30 days, 90 days, or waiting until the 1st of the month following the date that the new employee was hired at the company.
How Much Coverage Do You Have – And How Long Can You Keep It?
If you have group life insurance, it is likely that you have coverage that is equal to one or two times the amount of your salary. You may also have been offered the option of purchasing an additional amount of coverage in increments of either $5,000 or $10,000.
Group life insurance usually remains in force until your employment is terminated. Unfortunately, this means if you leave your employer, your family could also lose the financial security that your group life insurance coverage provided.
In some cases, your group life insurance policy may be converted over to an individual policy – however, the new premiums are typically much higher than what you were previously paying as a member of the group plan.
Keeping Coverage – and Your Family’s Peace of Mind – In Place
With this in mind, it is a good idea to have individual life insurance coverage in force regardless of whether or not you have a group plan through your employer. Although premiums for group life insurance are typically less than comparable individual coverage, the type and amount of benefits relied upon only through your group plan could leave loved ones without adequate funds at a time when they need them the most.
Your family’s financial needs aren’t “one-size-fits-all,” so your life insurance coverage shouldn’t be either. Rather, your plan should be specifically designed for you and those who you care about – not solely on what your employer provides.
You can compare rates using the quote tool on this page, or call us to get a quote for an individual life insurance policy at 888-552-6159.