What is Group Life Insurance?
Group life insurance is a type of life insurance in which a single contract covers an entire group of people. Typically, the policy owner is an employer or an entity such as a labor organization, and the policy covers the employees or members of the group. Group life insurance is often provided as part of a complete employee benefits package. In most cases, the cost of group coverage is far less than what the employees or members would pay for a similar amount of individual protection. 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.
As the policy owner, the employer or other entity keeps the actual insurance policy, known as the master contract. All of those who are covered typically receive a certificate of insurance that serves as proof of insurance but is not actually the insurance policy. As with other types of life insurance, group life insurance allows you to choose your beneficiary.
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. When group term insurance is provided through your employer, the employer usually pays for most (and in some cases all) of the premiums. The amount of your coverage is typically equal to one or two times your annual salary.
Group term coverage remains in force until your employment is terminated or until the specific term of coverage ends. You may have the option of converting your group coverage to an individual policy if you leave your employer. However, most people choose not to do this because these conversion premiums tend to be much higher than premiums for comparable policies available to individuals. Typically, only those who are otherwise non-insurable take advantage of this conversion option.
How does Group Life Insurance work?
Group life insurance doesn’t require a medical exam, a definite “pro” for folks in poor health, or who fear doctors. When you get group life insurance through your job, it’s part of your employee benefits package and doesn’t hinge on the state of your health. And if you sign up for group life insurance through a professional association or credit union, you probably won’t need to submit to a medical exam or answer questions about your medical history. The fact that you’re part of a group makes you a desirable customer in the eyes of the insurance company, regardless of the state of your health or lifestyle.
Another advantage of group life insurance is that it comes with low premiums. Because the risk to the insurance company is pooled, the company can charge less for covering each member of the group. (Think of it like buying in bulk.) If your health is only so-so, the lack of a medical exam and the low premiums are the primary benefits of joining a group policy. If you’re the healthiest person in the world (congratulations!) you won’t benefit from group rates in the same way, since your premiums for individual life insurance would be low anyway.
Employer-Provided Group Life Insurance
Some employers provide an additional Group Term Life Insurance and/or Accidental Death & Dismemberment benefit. Please check with your employer or diocese to confirm the specific details of your plan.
Employer-provided Group Life Insurance: Each diocese or institution determines if coverage is available and, if available, the amount of coverage offered. Active clergy who are compensated for a minimum of 20 hours a week may be eligible.
Accidental Death & Dismemberment Insurance: Generally, active clergy who are under the age of 70 and enrolled in Group Term Life Insurance are eligible. The maximum benefit pays up to the value of the full amount of your Group Term Life Insurance benefit.
Supplemental Life Insurance: Supplemental Group Life Insurance is available through Church Life and can be selected only when you are hired and during periodic open enrollments. Please note that you and your dependents can only have one supplemental life policy.
Group Life Insurance vs. Individual Life Insurance
Group life insurance isn’t portable, meaning you leave your policy behind when you change employers. Say you start a job at 40 and you get group life insurance as a benefit. At 50, after encountering some health problems, you leave your job. You might not be able to convert your group life insurance to individual life insurance, or you may be charged hefty fees and premium hikes for doing so. If you can’t convert your policy when you leave your job and your health has declined, you’re in a pickle. You may have a hard time finding an affordable individual policy on the open market, or you may be turned down for insurance altogether.
Another disadvantage of group policies is that group life insurance offers less flexibility than individual life insurance. You won’t have the power to negotiate the terms of your policy when you sign up for group life insurance. For example, if the policy isn’t convertible you probably won’t be able to negotiate changes that would guarantee you the right to extend coverage.
The final disadvantage to group life insurance is that it may not offer as much coverage as you need. If you don’t have any dependents and you have plenty of savings that could be used to cover your final expenses, we’re not talking to you. For you, life insurance is probably a nice-to-have, not a need-to-have. If, on the other hand, you have dependents, a mortgage, and a high income to replace, you might need a higher-value policy than your group life insurance offers.
What should you do if you find yourself with a group life insurance policy that doesn’t give you as much coverage as you need? Well, some employee policies give you the option of paying group rates for a top-up on the free life insurance you get as part of your benefits package.
For those who don’t have this option, they will need to buy individual life insurance to supplement the coverage they get through work. Individual life insurance policies are portable as you move from job to job, and they come with the option to negotiate riders and terms. You can customize your individual life insurance policy in a way that’s just not possible with group life insurance.
Shop The Individual Life Insurance Marketplace
Use Our State of the Art Life Insurance Quote & Apply Platform to Shop & Compare Policies
It’s a good idea to say “yes” to a free or cost-effective policy that you get through work. You may need to top up that coverage, though, depending on how much life insurance you need. Your first step should be to review the details of your group policy and see how it stacks up against your life insurance needs. The right life insurance protects your estate and your dependents, so it’s worth taking the time to make sure you have enough coverage.
Contact Us To Explore Your Small or Large Group Life Options Through Our Partner MetLife
Schedule an Appointment
Speak to a Broker Today