Working for a company, you may be offered certain benefits such as group life insurance. Group life insurance is when large entities provide an outlet for life insurance to mass amounts of members. Essentially, there is one life insurance contract that can be extended to many other people. These people will receive certificates of coverage. They are common in corporations and other large groups like labor unions.1
When considering what type of life insurance policy makes sense for you, here are three things you need to know about group life insurance:
Group life insurance works a little differently because it is meant to cover a big group of people.
1. Group Life Insurance Premium
Because group life insurance is bought with many in mind, or as a wholesale, it tends to be a cheaper option than buying an individual policy. This is because when you buy in bulk, you can use the higher risk allocation due to the number of paying individuals to negotiate a lower price.2 At some companies, there is no real charge for their group life insurance. So, some employees are willing to pay a premium for life insurance coverage above the basic coverage offered, because it still is generally less than what they would be paying if they were to take a policy out individually.3
2. Group Life Insurance Coverage
Group life insurance typically has a minimal coverage amount. Because it’s provided to mass amounts of people, the coverage doesn’t get very specific to the individual clients.2 Another perk of group life insurance is that a lot of the time there isn’t an application required. It’s relatively easy to get and few are rejected. For the most part, these types of policies are term life policies.3
3. Group Life Insurance Termination
Unfortunately, group life insurance policies are only good if you are still a member of the group, whether that be an employee of the company or a member of the organization providing it. If you are terminated or quit, you will lose your group life insurance. Typically, group term life insurance does not have cash value as with other types of insurance such as Whole Life.3
Group life insurance works a little differently because it is meant to cover a big group of people. It’s an option for you if you’re looking for something relatively cheap with easy access and a lower benefit amount. For a better understanding of the different types of life insurance policies available to you, meet with a local licensed life insurance agent.