All you need to know about Group Life Insurance
Group life insurance or sometimes called supplemental life insurance is offered to members or employees as a benefit, by their employer or an organization they belong to, such as a Credit Union.
Some employers will offer supplemental life insurance at no added cost, which you should take advantage of, even if you already have enough life insurance coverage inforce.
Supplemental life insurance should never replace any personal life insurance owned outside of your employer. It should be used just like the name sounds, as a supplement.
If your healthy and can qualify for a reasonable rate with a traditional life policy, then we don’t recommend purchasing group insurance. However, if you are unhealthy or have pre-existing conditions, then group life insurance would be a good choice because it’s usually a no-exam life insurance policy and guaranteed issue.
The definition of group life insurance is insurance that is provided through your work or an organization to a group of people. Even though the life insurance coverage is provided through your employer or organization, you still get to name your beneficiary, which can be a loved one or spouse.
Common organizations that offer group insurance are:
- Veterans Affairs
- AARP
- Local Credit Union
- Church
- Employer whether it’s private or part of the government
- Police/ Firefighter Union
- Costco
Your employer usually provides supplemental life insurance as a multiple of your salary. They usually offer 2 types of coverage:
- Basic Group Life Insurance
- Supplemental Life Insurance
Basic group life insurance is the amount of protection given to you for free by your employer, this is usually around 1 year salary. It’s always a good idea to opt-in to any offered at your workplace. Providing additional life insurance for your loved ones at no cost to you is always a good financial move.
Since basic group life insurance is purchased through your employer or the organization you are member of, they (employer and organization) own the policy. A major downside to group life insurance is, if you leave/lose your job or end you membership with the organization, you will probably lose the group life insurance also. Also the amount of life insurance that can be purchased through a basic group policy may be limited and not be enough to meet your needs.
One of the most appealing features of a basic group life policy is that they are typically guaranteed issue, meaning everyone is accepted. Pre-existing conditions or background history are not used in determining your eligibility. So if unhealthy, you will definitely want to look into your employers group life insurance coverage that is offered.
What is Supplemental Life Insurance?
Supplemental life insurance refers to any extra life insurance that you buy above the amount of basic group life insurance given to you by your employer. Your premium payments are usually pre-tax and handled by payroll deduction. Sometimes you are able to purchase supplemental life insurance on your spouse and children also.
Your health will be a determining factor in whether supplemental life insurance is good purchase. What I mean by this is, if you are healthy or young, more times than not you will qualify for better rates with a traditional life insurance policy. With that said though, if you are unhealthy purchasing a supplemental policy through your work may be your only choice to find affordable life insurance.
Even with the ability to add more coverage than a basic group life policy allows, the amounts allowed without having to show evidence of insurability are limited.
Types of Group Insurance Policies
Most group insurance polices are annual renewable term life insurance. This allows for the coverage to expire within a year of your leaving your job or leaving the organization.
The premiums are paid by your employer and based on the age group that you fall into. If you select to buy supplemental life insurance, then the premiums are deducted from your paycheck, usually each pay period.
Some employers do offer group insurance policies that have permanent coverage, such as whole, universal life, or accidental death and dismemberment insurance. These types of policies you get to keep even after you leave your employer.
When you leave your employer, basic group term life insurance is usually terminated. However, any supplemental term life insurance purchased may be portable. This means you are able to convert the coverage to an individual policy under the same guidelines.
These options for conversions are usually guaranteed, regardless of your health. The premiums will be significantly higher simply because you went from a group policy to an individual policy.
Reasons to Consider Group Life Insurance
There are 3 reasons to consider buying group life insurance:
- Convenience- Easy to qualify and apply
- Price- Premiums will usually be cheaper than an individual life insurance, but they could increase as you get older
- Acceptance- Most group life insurance is guaranteed issue which is great for consumers with pre-existing health conditions.
Disadvantages to Group Life Insurance
The disadvantages to group life insurance need to be carefully considered before purchasing. They are:
- If you leave work, which most people change jobs a few times throughout there life, you lose coverage.
- Limited in the amount of coverage you can apply for.
- Limited products and features.
Our Thoughts
First and foremost, any basic group life insurance or “free life insurance” you should sign up for. As for supplemental life insurance, we recommend always getting quotes for multiple life insurance carries to see what type of life insurance best fits your short and long term needs. It’s never a bad idea to carry supplemental life insurance, but remember what it is to be used for….to supplement your personal individual life insurance, not replace. If you have any questions or comments please let us know. If you would like to see quotes from the top life insurance carriers click here.
Frequently Asked Questions
What is Group Life Insurance?
The definition of group life insurance is insurance that is provided through your work or an organization to a group of people. Even though the life insurance coverage is provided through your employer or organization, you still get to name your beneficiary, which can be a loved one or spouse.
Should I buy Group Life Insurance?
There are 3 reasons to consider buying group life insurance:
1. Convenience- Easy to qualify and apply
2. Price- Premiums will usually be cheaper than an individual life insurance, but they could increase as you get older
3. Acceptance- Most group life insurance is guaranteed issue which is great for consumers with pre-existing health conditions.
What are the disadvantages of Group Life Insurance?
The disadvantages to group life insurance need to be carefully considered before purchasing. They are:
1. If you leave work, which most people change jobs a few times throughout there life, you lose coverage.
2. Limited in the amount of coverage you can apply for.
3. Limited products and features.
What type of life insurance is group life insurance?
Most group insurance polices are annual renewable term life insurance. This allows for the coverage to expire within a year of your leaving your job or leaving the organization.
Some employers do offer group insurance policies that have permanent coverage, such as whole, universal life, or accidental death and dismemberment insurance. These types of policies you get to keep even after you leave your employer.
Can I keep my group life insurance if I leave my job?
Most of the time, but not all, you will lose your coverage if you leave your job. This is why it’s important to obtain individual coverage outside of work.