Group life insurance: Is it right for you?
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The best life insurance companies offer policies that can provide your family with a crucial income source after you pass away. However, before you move forward with the purchase of a life insurance policy, you should first check for any group life insurance coverage you might be able to qualify for, either through your employer or another organization.
Why? Because group life insurance comes with serious benefits for those who can qualify, and it may be cheap or even free depending on how you receive it. Let’s take a look at exactly what group life insurance entails and if it might make sense for you.
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Group life insurance is a term used to describe any life insurance policy that covers an entire group of people. Commonly, this type of life insurance is offered within an employee or labor organization’s benefits package, so the coverage can cost far less than the market rate. In some cases, it may even be offered for free, or there may be both free and paid options.
Most importantly, group life insurance policies are offered to a group within a single contract, so there are no medical questions or medical exams required. The life insurance company assesses risk based on the entire group instead of the individual, so it doesn’t need to know your personal medical history.
This means you can qualify for group life insurance coverage (if you’re offered it) regardless of your medical history. You can even get group life insurance when you can’t get life insurance coverage separately on your own.
But remember that group life insurance coverage may not be sufficient to cover all your life insurance needs. If the group life insurance plan you’re offered has a death benefit that comes up short of what you think you need, you should consider supplementing it with a separate life insurance plan you buy on your own.
Expert Tip: You can have more than one life insurance policy at the same time. Many people who receive group life insurance through work also purchase a separate term life insurance policy.
Another reason to buy your own life insurance policy is that group life insurance is tied to your employer or the organization that offers it. This means if you leave your job, you’ll lose your group life insurance coverage from that employer. Your employer can also decide to stop offering group life insurance as an employee benefit.
Like other types of life insurance, group life insurance can come in many different forms. The details of the coverage offered will depend on the life insurance company, the employer or organization’s budget and other factors.
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Most employer-offered life insurance coverage comes in the form of term life insurance. This type of life insurance is offered for a preset term, usually 10 to 30 years, and features a premium amount that never changes. Some employers will provide a basic group life insurance policy to all of its employees for free as part of the benefits of employment.
Group life insurance can be a nice perk of your job, especially if it’s free. However, in most cases, employer-provided policies are relatively small compared to what you’re likely to need overall in terms of life insurance, so you probably won’t want to rely solely on it to cover you in case the worst happens.
Often, employees who are part of a group life insurance plan can pay to add additional coverage. This type of additional coverage, known as supplemental group life insurance, lets employees pay the difference in premiums to achieve a higher death benefit and additional perks.
Depending on your situation, getting supplemental group life insurance can make sense if the cost is lower than you’d otherwise pay for a similar individual policy. Again, though, your coverage is tied to your employer, so if you leave your job, you’ll lose your coverage.
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Some employers that offer group life insurance might also extend supplemental coverage to spouses and dependents on the condition that the employee pays additional premiums. Often the premiums are reasonable, and no medical exam is necessary for your spouse or dependents.
However, like all group life insurance, this supplemental coverage is still tied to an employer or organization, so you can lose it if you switch jobs or if your employer decides to cut the benefit.
While not as common, it may be possible to get permanent group life insurance coverage as a benefit through an employer or organization. Permanent life insurance is intended to last an entire lifetime instead of for a specific term. It can come in different forms, such as Group Universal Life (GUL) or Group Variable Universal Life (GVUL).
Like other permanent policies, group life insurance that lasts a lifetime builds cash value that plan participants can rely on later in life. However, because it’s permanent, it can also be expensive, so you’ll need to decide if the extra cost is worth it to you.
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Accidental death and dismemberment
Many employers and labor organizations also offer accidental death and dismemberment as part of their group life insurance plan. This type of coverage provides an additional cash benefit if the plan participant dies as the result of a covered accident or if they are dismembered during a covered event.
The US Department of Veterans Affairs offers veterans group life insurance coverage that allows eligible veterans to extend their life insurance benefits after they leave the military by continuing to pay the premiums themselves.
With veterans group life insurance coverage, you do have to meet specific criteria to qualify, and policies are available in amounts from $10,000 to $400,000.
According to VA.gov, you can initially sign up for veterans group life insurance coverage in the amount you had during your military service, but can then increase your coverage by $25,000 every five years thereafter until you reach the age of 60 (and up to the $400,000 coverage cap).
For those who can qualify for group life insurance, signing up for the basic policy offered by your employer almost always makes sense. After all, group life insurance offers financial protection for yourself and your family, and it can be very cost efficient based on the amount of coverage you receive.
Just make sure you’re not relying on group life insurance as the sole coverage to protect your family. While group life insurance can be an important part of your financial planning, you should make sure you have enough life insurance to replace your income and cover your family’s needs if you unexpectedly pass away.
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Not sure if group life insurance is right for you? Read CNN Underscored’s guide to the different types of life insurance.
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