Most adults are familiar with the term life insurance, but few understand the policy. Group life insurance is a type of life insurance that covers a group of people, usually employees of a company. It is often less expensive than individual policies, and it provides peace of mind for both the employees and their families. In this blog post, we’ll explain what group life insurance is and how it works. We’ll also discuss the benefits of having this coverage in place. If you’re considering group life insurance for your business, read on to learn more with PowerPAC plus
What is Group Life Insurance?
Employers are the most common providers of group life insurance, but unions and trade groups may also offer it. Coverage is provided to a large group rather than an individual, as the name implies. Because the policyholder (e.g., your employer) often subsidizes group term life insurance, you may pay little or no premiums. You are covered up to a certain amount, which is usually $50,000 or one to two times your yearly pay (up to a limit).
When you first start a job, you can usually enroll in an employer-sponsored group life plan. You can enroll during an open enrollment period or if you have a qualifying life event, such as a marriage, if you don’t enroll when you’re hired.
Unlike most life insurance policies, whether or not you qualify for group life insurance is mostly determined by your health and age. To receive coverage, you generally won’t have to go through the underwriting procedure.
How does Group Life Insurance work?
Aside from the coverage limitations and who owns the policy, group life insurance works similarly to individual term life insurance:
- Payments can be made on a monthly or annual basis to keep the coverage valid.
- After a given amount of time, policies expire
- For most causes of death, the insurer pays a death benefit to a selected beneficiary.
When you leave a firm, most employers do not allow you to keep your group life insurance. If you are allowed to keep current coverage, it is normally more expensive to keep it than to purchase a new policy on your own. If you’ve had trouble qualifying for your personal life insurance in the past, keeping or converting your group policy may be a smart alternative. The procedure does not necessitate a medical examination.
Advantage and Disadvantage of Group Life Insurance
Employees are more interested in group life insurance because of its cost-effectiveness. Members of a group usually pay relatively little, if anything at all. Premiums are deducted from their gross earnings on a weekly or monthly basis. Group insurance are simple to qualify for, and all group members are guaranteed coverage. Group insurance, unlike individual policies, does not require a medical checkup.
However, low prices and ease of use aren’t the only factors to consider. This insurance typically only provides basic coverage, which may not be sufficient to meet the demands of policyholders. $20,000, $50,000, or one or two times the insured’s annual wage are common figures. That’s why, rather than being viewed as sufficient solo coverage, experts advise treating it as a bonus that should be reinforced with a separate individual policy.
Another disadvantage is that the insurance is controlled by the employer, which means that your premiums may rise as a result of decisions made by your employer. When a company decides to discontinue offering group life insurance, or if a worker decides to change jobs, coverage normally ends. The former employee, on the other hand, has the option of continuing coverage on an individual basis.
This means the policy is changed from a group life to an individual life policy, which has higher premiums. While many people may not want to pay the higher price, those who are otherwise uninsurable will gain from the change because a medical exam is no longer required. Some groups allow members to obtain more coverage than just basic life insurance. Even though the additional premium will be based on the less expensive group rate, the extra voluntary coverage may make financial sense. That aspect of the policy may also be transferable from job to employment.
Unlike the basic group policy, supplementary coverage frequently requires applicants to complete a medical questionnaire but does not always involve a physical examination. This could be an excellent choice for folks whose health problems make it difficult to qualify for a low-cost individual coverage
Group life insurance is a valuable policy for businesses of all sizes. The policy can provide peace of mind to employees and their families in the event that something happens to them while they are working for the company. If you are looking for a way to protect your employees, it may be the right solution for you. Contact us today to learn more about this policy and how it can benefit your business.