How Does Group Life Insurance Work?

If you or someone you know has life insurance through their employer, it is likely that the policy is a group life insurance policy. Group policies are sometimes offered as an employment benefit but may also be available through professional organizations or trade groups. 

These policies have their advantages, but there may also be reasons to consider additional coverage. 

Advantages of group life insurance

If your employer offers group life insurance, there are some good reasons to take the coverage.

  • Group life insurance is convenient. Getting started with coverage is usually an easy process. Your human resources department can help you with enrollment forms or change of beneficiary. 
  • Group life insurance often has no cost for employees. In many cases, coverage is available with no payroll deduction or other payments. 
  • Acceptance is guaranteed. Because the policy covers a wide range of employees, a group life policy does not have a traditional application process or physical exam. This makes a group policy an attractive option for workers who have health concerns that may affect eligibility or rates for a traditional life insurance policy.

Disadvantages of group life insurance

 A group life insurance policy can be a less-than-perfect fit. For many households, it may be wiser to view a group life policy as supplemental coverage.

Here are some potential disadvantages to a group policy:

  • Your coverage is connected to your job. Because a group policy is tied to your job, you may lose coverage if you change jobs. As we get older, health can change, possibly making the task of finding a replacement policy more challenging. Rates for a new policy increase as we get older as well, so a purchasing a replacement policy after 10 or 20 years on the job can be more expensive. 
  • Your coverage amount may not provide enough protection for your family. Group life insurance usually caps coverage at 1 to 2 years of salary. This amount might be fine if you don’t have any debt or ongoing financial responsibilities. But for households with a mortgage, car loans, and kids, a traditional life insurance policy offers a more customizable way to plan for your family’s financial needs. 

Reach out to your broker to discuss your coverage needs

If your employer offers a group policy, there is no reason not to take the benefit—especially if it is offered at no charge to you. But coverage amounts may be lower than you need, and the coverage is often tied to your job. 
Think of your group policy as extra coverage. Your broker can help your find primary coverage that meets your needs long into the future with a policy that you control.

Talk to an expert LIG Broker today about coverage solutions offered that best suit your unique needs.