Having group life insurance for employees is a smart way to provide coverage for loved ones and ensure financial stability in case of an unexpected death. But before you include group life insurance in your benefits package, there are a few things you need to know.
This blog will cover the basics of group life insurance and its purpose. We’ll also discuss how it works and whether you should have it.
What Is Group Life Insurance?
Employers or large entities, such as associations or labour organizations, offer group life insurance to their workers or members. These policies typically provide coverage amounts of up to two times the salary of the person purchasing the coverage. This coverage is provided for the beneficiaries under one policy, regardless of whether they have any life insurance coverage through another source.
Group life insurance policies come with basic plan coverage that provides death benefit coverage and financial assistance in case of incapacity due to accidental death or dismemberment. Other plans, such as supplemental plans, provide additional benefits like medical expenses and income protection from job loss. The different methods are ideal for beneficiaries who require more coverage than essential plan covers.
Another benefit of group life insurance policies is that no medical examination is required to apply for the procedure. This makes it easy for beneficiaries to get coverage without much hassle.
In addition, group life insurance policies usually include access to lifestyle services such as legal and travel assistance. Thus, they are convenient financial tools that can make life’s transitions easier and smoother.
What Is the Purpose of Group Term Life Insurance?
Employers or larger entities, such as unions or associations, offer a group life insurance policy to their employees or members. It is intended to provide death benefit coverage to the beneficiaries of an employee or member if they die while part of the group covered under the policy.
Group life insurance policies do not require individual medical exams and are not subject to individual underwriting.
In essence, group life insurance is a form of life insurance that provides death benefit coverage to eligible beneficiaries when a group member dies while covered under the policy. This type of coverage helps provide financial support during loss and crisis.
What Happens to Group Life Insurance Coverage When I Retire?
After a group life insurance policy is established, coverage terminates upon retirement or the policy term has been completed. You can convert your group life insurance coverage into an individual policy if you are an employee. However, employers may not continue to pay premiums for the converted policy.
Employer-provided policies are usually minor compared to what is needed in terms of life insurance coverage. That said, term life insurance is generally quite affordable and can provide peace of mind and financial security for employees and their families.
Types of Group Life Insurance
Group term insurance is the most common type of group life insurance and offers death benefits coverage for a set period. It’s a cost-effective and convenient way of saving for life insurance coverage. In this kind of plan, death benefit payments are made on the death of an insured individual, regardless of how long they had been enrolled in the term insurance plan.
Group universal life insurance is similar to group term insurance but offers additional cash value options alongside death benefit coverage. In group adaptable life insurance plans, beneficiaries can build cash value inside the policy by paying premiums or taking money from it upon death. The variable term life insurance plans offer similar features as group term insurance plans but with an additional investment option.
Group life insurance also offers supplemental and additional plan coverage for up to five times an annual salary.
With this type of insurance, beneficiaries can receive additional benefits such as living benefits in case of a permanent disability, and optional conversion of post-retirement coverage in case their term life insurance policy has expired.
It’s also possible to get lifestyle services such as legal, financial, grief, travel assistance, and legacy planning services in group life policies. Besides, beneficiaries can save time and money by opting for group and universal life policies instead of individual term life insurance policies.
Advantages and Disadvantages of Group Life Insurance
Group life insurance provides basic and additional coverage for employees under multiple terms. It is also offered at affordable prices and doesn’t require medical underwriting.
Different types of group life insurance include group term and universal life insurance. While term life insurance offers coverage for a fixed period, universal life insurance covers the insured for life. Both these policies offer benefits such as death benefit and cash value.
The policy term of term insurance is usually ten years but can range from three to 30 years. The time of universal life insurance is typically 20 years but can vary from five to 40 years. Regarding features, term life insurance policies have higher coverage limits and death benefits than universal life policies.
However, both policies offer tax benefits on premiums paid by the policyholder.
No medical underwriting is required for group life insurance policies, and it is available at affordable rates. Besides, it’s easy to understand and secure in planning and to purchase the policy.
Conclusion
Group life insurance is a great way to help your loved ones and colleagues protect their future during your death. It covers the beneficiaries of group insurance policies, including spouses, children, and parents. The group life insurance benefit is usually paid out as a death benefit. Besides covering funeral and medical expenses, group life insurance also offers beneficiaries financial support through life insurance benefits. To learn more about group life insurance, read our comprehensive guide here.
