What is group life insurance? Find out if it's right for you (2024)

FAQs

What is group life insurance? Find out if it's right for you? ›

Group life insurance is just what it sounds like — life insurance for a group of people, generally offered through a job, union or other professional association. Group life insurance policies usually provide much less coverage than an individual policy, typically one or two times your salary.

Compared to individual life insurance, group life insurance is much more affordable. Even if you purchase additional coverage, the rates are typically lower, especially if you're young and in good health.

What Is Group Life Insurance? Group life insurance is a single contract that provides coverage to a group of people, typically those who work for the same company. The employer owns the policy, which covers the employees. Your beneficiaries will get a payout if you pass away while covered by group insurance.

Group life insurance is a type of term life insurance plan purchased by an employer or organization to cover an entire group of people. Often, this insurance is offered as an employment benefit or membership perk at little or no cost to insured individuals.

1 Group life insurance policies are generally written as term insurance and offered to employees who meet eligibility requirements, such as being a permanent employee who has been with the company for at least 30 days.

You can cash out a life insurance policy. How much money you get for it will depend on the amount of cash value held in it. If you have, say $10,000 of accumulated cash value, you would be entitled to withdraw up to all of that amount (less any surrender fees).

A group plan only covers up to three to five times the annual income. Group insurance, whether health or life, covers you only while you are a part of the organisation providing coverage. The policy does not cover you if you leave the company to work for another or retire.

Since a group term is linked to ongoing employment, the coverage automatically ends when an individual's employment terminates. Some insurance companies do offer the option to continue coverage by converting to an individual permanent life insurance policy.

The most common type of group life insurance is group term insurance that renews yearly. This type of insurance provides only a death benefit and is the least expensive option. Group universal life is more expensive, but offers the opportunity to build cash value alongside the death benefit.

If you see GTL or a similar reference to group term life on your paycheck, that means it's included as part of your employee benefits package. Though your employer may pay the premiums for the insurance, you could owe tax on it depending on the amount of coverage you're provided.

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

Individual policies are owned by an individual person and within this category, you can choose between permanent (or whole) and term policies. Group life insurance, on the other hand, typically comes in the form of an employer-sponsored life insurance policy you receive as a benefit through work.

To be eligible for group health insurance, an employee must be on payroll and the employer must pay payroll taxes. Individuals usually not eligible for group coverage include independent contractors, retirees and seasonal or temporary employees.

Recruitment and Retainment. Protecting and supporting your employees and their families is an important reason to provide group life insurance as part of your employee benefits plan; but it's not the only reason.

In many cases, it takes anywhere from 14 to 60 days for beneficiaries to receive a life insurance payout. But many factors impact this time frame. These include the insurance company's procedures, when the claim is filed, how long the policy was active, the cause of death, and state laws regarding insurance payouts.

Your beneficiary can be a person, a charity, a trust, or your estate. Almost any person can be named as a beneficiary, although your state of residence or the provider of your benefits may restrict who you can name as a beneficiary. Make sure you research your state's laws before naming your beneficiary.

Group term life is often a part of employee benefits packages, and there are a number of payment options employers can use. Typically, an employer pays most, if not all, of the premiums, but the employer can also split the cost with employees, or even make it 100% voluntary (paid by employees) to offset costs.

The primary advantage of a group plan is that it spreads risk across a pool of insured individuals. This benefits the group members by keeping premiums low, and insurers can better manage risk when they have a clearer idea of who they are covering.

Yes, group insurance is cheaper than individual insurance because there are more people buying into the plan. Group insurance plans are meant to cover a large number of people, but they offer them all the same benefits. Individual insurance is more, but customizable to your needs.

Like its name suggests, group term life insurance provides term life insurance as a benefit to eligible, enrolled employees or group members of an organization at a lower cost than what they would pay for an individual term life policy.