What is group term life insurance? Group term life insurance is a type of employee benefit that provides every eligible worker within a company a pre-determined death benefit. Typically, employees are given a flat amount of life insurance or a multiple of their annual salary, and are always offered the opportunity to purchase additional coverage.
A group term life insurance policy provides better value to group members due to shared administrative costs and other factors.
Peace of mind for the dependents and loved ones of an employee in the event of his/her death is the driving force behind group life insurance benefits. Historically, group life insurance was intended to provide life insurance coverage during an employee’s active working career with an employer, with payments made upon death.
Many employers offer voluntary group term life insurance to employees. Because these policies don’t require medical exams, they’re a good way for unhealthy people to get coverage. But premiums usually increase significantly after age 50 and coverage often is not portable if you leave the company.
Individual Life Insurance vs. Group Life Insurance
|Individual Life Insurance||Group Life Insurance|
|You have your own contract.||You are part of a group contract.|
|You have a premium rate that is guaranteed in advance, the company cannot decide to change it.||The group policy premiums can be changed if the company decides to raise premiums for the group.|
|The insurance company cannot cancel your insurance, only you can.||The group contract can be cancelled by the issuing life company.|
|Your individual policy is fully portable. It is not connected to the group. If you change jobs or are no longer a member of the group, you will not lose the coverage.||The coverage will terminate if you leave your job or if you leave the group.|
A group term life insurance policy provides coverage on each of the individual members of the group, and their dependents, where applicable.
In employer group plans, the amount of basic coverage is usually computed as a multiple of the member’s salary, such as two times salary. In association group plans, coverage is generally a flat basic amount. Optional coverage can usually be obtained on both the plan member and his or her dependent family members.
Usually basic group term life insurance coverage is available without a medical examination or other evidence of insurability from the group members or the dependents of the group members. Additional coverage is subject to underwriting requirements. As with personal life insurance, the plan member has the right to name a beneficiary for the coverage.
The premium charged for each group member is based on the average age and sex of all members of the group. This premium rate is then applied to the amount of coverage applicable to each individual group member. Unlike individual insurance plans, group premium rates are not personalized according to the age, sex, and health of each individual plan member.
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