Group Life Insurance – Meaning, Pros, And Cons

Group life insurance is a type of life insurance coverage in which a single contract is issued to cover a group of persons. It is a long-term insurance policy, also known as death in service benefits, which an employer provides to their staff.

Group Life Insurance - Meaning, Pros, And Cons

It is set up by employers to cover staff while employed within their organization. This insurance is often provided as part of a complete employee benefits package. In most cases, the cost of group life coverage is less than what the members or employees would pay for a similar amount of protection.

So, as an employee, if you are offered group life insurance through your employer or a group, you should take it. Especially if your personal coverage is inadequate or you don’t have other life insurance. Group life insurance products offer different benefits to a group of people regardless of their profession, age, and social background.

As the policy owner, the other entity or employer keeps the actual insurance policy, known as the master contract. All of those who are covered receive a certificate of insurance that serves as evidence of insurance but isn’t actually the policy. And just like other types of life insurance, group life insurance allows you to choose your beneficiary.

How Group Life Insurance Works

Most group life insurance policies are offered through a company’s employer. According to the Bureau of Labor Statistics study about employee benefits in the United States, 60% of all civilian workers had access to term life insurance and 96% of them participated in the offered plans. The typical coverage amounts, or the death benefit payments, for term life insurance, vary by life insurance and employer.

The employer is the one that chooses the policy and becomes the policy owner. So, it is up to them to decide coverage terms in conjunction with what is available from the insurer. However, you will be able to choose whom you want to assign as your beneficiaries on the policy.

Common amounts of coverage for group life insurance are between $26,000 and two times your annual salary. This is less than the amount of life insurance that is recommended as enough protection, which is around 5 to 15 times your annual salary.

The employer can also include dismemberment and accidental death coverage as part of a term life insurance policy. This coverage typically pays out the full death benefits if you die and for other benefits such as losing your sight or limb. You can also receive the full benefit if an accident causes multiple losses of limbs and other applicable factors.

Benefits Group Life Insurance

Just like I mentioned above, this type of life insurance offers benefits to a people regardless of their social background and other factors. Below are the benefits offered by this insurance coverage; check it out.

  • You’ll get absolute peace of mind.
  • It is a yearly renewable term policy.
  • It works in line with the provisions of the law.
  • The sum assured is at least 3 times the annual total emolument for those in employment and any required flat for other groups.
  • It can be arranged to provide for additional benefits such as burial expenses, accidental expenses, disability insurance, etc.
  • It provides financial support to the family of the deceased.
  • If a member of the group life insurance dies, the sum assured will be given to the nominee of the member.

Although different insurance companies offer term life insurance, these are the common features and benefits. Check out insurance companies online for more additional benefits.

Pros and Cons of Group Life Insurance

Now, let’s talk about the advantages and disadvantages of this type of life insurance. After much research about life insurance, here is a quick overview of the pros and cons of this type of life insurance;

Pros

  • Free and affordable.
  • No strict or hard requirements.
  • It is simple to sign up for.
  • You will get life insurance coverage.

Cons

  • Restricts policy options
  • Inadequate coverage
  • Coverage ties to employment

There are actually no downsides to getting this type of life insurance if it is offered for free by your employer. Even if you already have an individual life insurance policy, going for term life insurance means more coverage. You can check out insurance companies for more information and the cost of the group life insurance coverage.