What is Group Life Insurance?
A group life insurance policy can be defined as life insurance generally offered by an employer or large-scale entity (i.e.association or labor organization) to its workers or members as an important part of a company’s overall compensation plan. These types of benefits can help employers attract and retain first-rate employees. Typically, the policy owner is an employer, and the policy covers the employees or members of the group. So, Group life insurance is a type of life insurance in which a single contract covers an entire group of people. A group life insurance policy is most often offered as a piece of a larger employer or membership benefit package.
What About the Cost of a Group Life Insurance Policy?
In most cases, the cost of a group policy coverage is far less than what the employees or members would pay for a similar amount of individual protection. By purchasing coverage through a provider on a “wholesale” basis for its members, a company can offer its employees the coverage for each individual worker/member at a much lower rate than if they had to purchase an individual policy. So, if you are offered group life insurance through your employer or another group, you should usually take it, especially if you have no other life insurance or if your personal coverage is inadequate.
What Type of Policy is Group Life Insurance?
Term insurance is the most common form of group life insurance. Group term life is typically provided in the form of yearly renewable term insurance. Furthermore, when group term insurance is provided through your employer, the employer usually pays for most (and in some cases all) of the premiums, but this is not always the case. Employers can offer term life insurance in multiple ways: employer-paid, employee-paid (voluntary), or a combination of these (contributory). The amount of your coverage is typically equal to one or two times your annual salary.
Who is Eligible for Group Life Insurance?
Organizations and employers have quite a bit of leeway in choosing how and to whom they offer participation in group insurance plans. Employers can choose to offer this benefit to all employees, or only a select class of employees, such as managers. Employers can also exclude certain employees that don’t meet specific criteria. Many employers require employees to work a minimum number of hours per week to be eligible. Many times an employee must remain employed for an allotted time before they are eligible for benefits.
Breaking Down Group Life Insurance Further
Because you are the purchaser of the policy and thus the policy owner, the employer, organization, or other entity keeps the actual insurance policy, known as the master contract. In addition, all of those who are covered by the policy typically receive a certificate of insurance or a certificate of credible coverage that serves as proof of insurance laying out the terms of he individual’s policy, such as beneficiaries, but is not actually the insurance policy. As with other types of life insurance, group life insurance allows you to choose your beneficiary. Also, group term coverage remains in force until your employment is terminated or until the specific term of coverage ends. Finally, in the event the policy holder leaves the company – thus terminating the policy – the certificate of credible coverage will need to be provided to any subsequent insurance companies.