What is Group Life Insurance?
Group life insurance is life insurance that covers a group of people under a single contract bought by an individual entity. A company might buy a group life insurance policy to cover their employees, for example.
How does group life insurance work?
Group life insurance coverage is a life insurance policy that your employer essentially buys for you. Your employer works with the life insurance provider to get life insurance quotes and purchase a policy for all of their employees. That makes the coverage much more affordable than it would be if the policies were purchased individually.
Because the employer handles the logistics of buying this coverage, the insured only needs to opt-in — assuming they are eligible.
In terms of the type of policies, group life insurance is almost always group term life insurance (policies that expire after a certain term) rather than group whole policies (life insurance that lasts your lifetime) because term policies are cheaper (although some employers do offer permanent life insurance coverage).
Who buys group life insurance?
Group life insurance policies are usually purchased by larger-scale entities, like employers or labor organizations. In most cases, the entity purchasing the group life insurance policy makes it part of a larger benefits package that might include things like health insurance and retirement accounts.
Usually, group life coverage is a term life insurance policy that the purchasing entity renews annually. Their employees may need to re-enroll each year in order to maintain their coverage.
Group life policies usually offer a death benefit that is much smaller than an individual would purchase on their own. They may offer one or two times the employee’s annual salary as a death benefit, for example, rather than the $500,000 or $1 million many people get with individual policies.
That said, group life insurance policies may cost a lot less — or even be free — for the employee.
Who gets group life insurance?
Usually, employers have eligibility requirements for enrollment in their group life policy. You might need to be a full-time employee who has worked there for a certain amount of time, for example.
If you’re eligible for group life insurance through your employer, your policy may be free for you or come at a low cost, depending on your specific benefits package. If you have to pay to enroll in the group life policy, the amount you owe will generally be deducted from your paycheck.
Once you meet that requirement, you have the option to enroll in the company’s group term life insurance coverage. In some cases, you might even get automatically enrolled in this benefit.
This differs from individual life insurance in that eligibility comes down to your employment status, not your health. Individual life insurance usually requires a medical exam before you can get coverage (although no-exam policies are available).
Unlike individual life insurance, group life insurance doesn’t require a medical exam. As long as you meet your employer’s requirements for eligibility, you should be able to opt-in and get life insurance coverage.
Group term life insurance premiums
One of the major perks about this employment benefit is that your employer usually heavily —or even entirely — subsidizes your group term life insurance rates. In some cases, you might pay $0 out-of-pocket for life insurance through your work.
Your employer may also offer the option to increase coverage, often for a pretty nominal fee. And you may be able to add life insurance for your spouse and/or children at an additional cost, too.
Whether your base group term life insurance policy requires a premium or you opt to pay for additional coverage, your employer will usually deduct any amount you owe for this benefit from your paycheck (and you will see this as a “GTL deduction” on your paycheck).
Additionally, you may want to weigh your own financial situation. Even if you get group life insurance through your workplace, you may also want to purchase an individual life insurance policy to ensure the people who rely on you would have ample protection after you’re gone.
Maintaining your group life coverage
If you get group life coverage through your employer and quit, retire, or get fired, you will almost always lose group coverage as soon as you stop working for the employer or very shortly after. You may be able to convert the policy into an individual one, though, but that depends on your employer and the group policy provider they’ve chosen. If you can convert the policy, you’ll be responsible for paying the premiums in their entirety from then on.
If you have a health condition, doing so can help you maintain life insurance coverage without being subject to a medical exam.