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Group life insurance

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Most organizations offer healthcare benefits to employees, like medical and dental insurance. As of 2018, roughly 60% of employees in the United States also had access to a life insurance plan through their employer. This type of coverage, called group life insurance, is a good option for some people, but it has limitations. 

If you’re considering opting in to your employer’s group life insurance plan, there are a few things you should consider. Keep reading to learn what group life insurance is, why it’s beneficial for some people and where it falls short. This information will help you make an informed decision about what type of life insurance plan is best for you.

What is group life insurance?

Put simply, group life insurance is a life insurance policy that is offered to a group of people, rather than an individual. It commonly refers to life insurance that an organization or company offers to its members or employees. Just like health and dental insurance, group life insurance is typically offered as part of a benefits package.

“In general, the insurance you get with a group policy is term life, which covers you for a set period, or until your employment or membership with the group ends. No matter if you resign or get fired, your group life coverage typically ends at the end of the same month,” says financial expert, Laura Adams.

Unlike traditional life insurance policies, group life insurance is usually guaranteed coverage, so you don’t have to take a complete medical exam in order to get approved. Group life insurance includes a death benefit that gets paid to your beneficiaries if you pass away during the term period.

Another thing to know about group life insurance is that it’s very affordable, and some employers even offer it for free. However, the coverage amount is very low. Because the policy is managed by the organization, individuals don’t have the option to raise their coverage limits or make adjustments to their policy. For that reason, group life insurance can leave significant gaps in coverage.

Who needs group life insurance?

Group life insurance isn’t the best type of life insurance you can get. Despite that, it’s a major benefit for certain people. Group life insurance is a good option for people who don’t qualify for traditional coverage due to minor or moderate pre-existing health conditions. It’s also helpful for individuals who can’t afford a traditional policy and young people who are just starting to think about getting life insurance.

  • People with pre-existing health conditions: If you have pre-existing health conditions or a long family history of disease, it can be hard to get traditional life insurance coverage. If you can get approved, your premiums will be very expensive. With group life insurance, everyone who applies is guaranteed to get coverage, even if they have some health issues.
  • People who can’t afford traditional life insurance: Group life insurance is very inexpensive, and some organizations offer to pay your whole premium which makes it completely free. It’s a great option for people who can’t afford an individual policy but want to get some coverage for their family.
  • Young people who are considering life insurance: Getting group life insurance through your employer is quick, easy and convenient. It’s a good option for young people who are thinking about getting life insurance but don’t want to go through the hassle of shopping for coverage, taking a medical exam and waiting weeks for approval.

Ultimately, anyone can benefit from group life insurance coverage. After all, some life insurance coverage is better than none. “If you have the opportunity to enroll in group life insurance as part of a benefits package at work, don’t overlook its benefits. Since employers or large organizations (such as a trade or labor organization) may offer coverage, the cost may be low or even free,” says Adams.

What are the pros and cons of group life insurance?

If you’re thinking about joining your employer’s group life insurance plan, you should weigh the pros and cons beforehand. One of the biggest pros is that group life insurance is a cheap and convenient option, especially for older people and individuals with certain health issues.

However, there are some major downsides that you should keep in mind when making your decision. “While having a group life policy offers an excellent value, it may not give you enough coverage. For instance, if it provides your beneficiaries one or two times your annual salary, that may not be sufficient, especially if you have a spouse, partner or children,” says Adams. 

Pros and cons of group life insurance

Affordable coverageLow coverage limits
Guaranteed acceptanceCan’t customize your policy
Easy to get coverage without a medical exam or waiting periodCoverage ends if you leave your job

How to get group life insurance

Getting group life insurance is very simple and there are many insurance providers that offer it. Some of the most common group life insurance providers are Metlife, Cigna, MassMutual, Principal and AXA. Here’s a look at how to get group life insurance:

  • Enroll when you get hired: When you first get hired, your company’s HR manager will explain your benefits package and ask if you want to enroll in the group life insurance policy. If you enroll right away, your coverage will start as soon as you’re approved.
  • Get coverage during open enrollment: If you decline the group life insurance plan when you first get hired, but later decide that you want coverage, you’ll have to wait until the annual open enrollment period to do so. 
  • Learn about your options: Talk to your company’s HR manager about your life insurance options. Some companies offer multiple policies and some only offer one. Ask for a folder of information on the company and the policies you can opt into. If there are multiple policies, you can usually find a chart comparing the coverage limits, term length, etc.
  • Apply for coverage: Once you’ve decided on a policy, get the appropriate enrollment paperwork from your HR manager. You’ll choose the type of coverage, the amount of coverage, the length of your term, name your beneficiaries and add riders, if available. Depending on the policy, you might have to answer a few basic health questions as part of the application.

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

There are two types of group life insurance coverage—basic and supplemental. Basic group life insurance is free coverage that is paid fully by your employer, and includes a small amount of coverage. It’s guaranteed coverage and is completely free for the employee. 

Pros and cons of basic group life insurance

Completely free for the employeeOffers very low coverage limits
Guaranteed coverageNo flexibility or ability to customize coverage

“Some plans allow group members to buy more insurance, known as supplemental or voluntary coverage. Depending on the cost and underwriting requirements, such as a physical exam, it may be an excellent way to boost your coverage and make sure your loved ones would be protected financially after your death,” says Adams.

With supplement group life insurance, coverage limits are much higher, but because of that employees pay only a small premium. Supplemental group life insurance isn’t guaranteed coverage, and applicants are required to complete a health questionnaire before they can get approved.

Pros and cons of supplemental group life insurance

Higher coverage limitsEmployees pay a premium
Some customization optionsHealth questionnaire is required

The takeaway

  • Group life insurance is offered to employees through their employer.
  • Group life insurance is typically free, or has very affordable premiums.
  • The coverage limits are very low, so it’s not a good option for everyone.

If you’re looking for affordable and convenient life insurance with no medical exam, group life insurance may be a good choice for you. However, keep in mind that the coverage limits are low, and there are very few options for customization. Your coverage ends whenever you leave the company, unless you roll over your coverage into a more expensive individual policy. Before you get group life insurance, weigh the pros and cons to see if it’s the right choice for you.

Elizabeth Rivelli

Elizabeth is an insurance writer for coverage.com, where she covers insurance providers and reviews policies to help consumers find comprehensive and affordable coverage for every area of their life. She has more than three years of writing experience for top online insurance and finance publications.

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