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Group life insurance

Considering an insurance policy from your employer or another group? Here’s what you need to know.

Group life insurance

Considering an insurance policy from your employer or another group? Here’s what you need to know.

What is group life insurance?

Group life insurance includes any policy where you apply and receive coverage as part of a group. These can include employer-provided group life insurance plans or policies from member associations, like AARP and AAA.

Group life can be an easy way to access insurance, since the company has already done its research and selected policy options for you. In some cases, you may also be able to get covered at little or no cost. That said, group life policies come with some limitations, including lower coverage amounts and, in many cases, the inability to take the policy with you if you leave the group. To ensure that your family is fully covered, it’s often a good idea to supplement it with an individual policy.

How does group life insurance work?

To access group life insurance, you can apply through your employer or association. There are two main kinds of group life insurance: basic and supplemental.

Basic group life insurance is a small policy that employers often (but not always) provide to employees automatically as an employee benefit. Typical coverage amounts can range from $25,000 to a multiplier of your annual salary. Because this is often paid by your employer and coverage is generally guaranteed, it makes sense to accept it. With basic group life, you can name a beneficiary, or the payout will automatically go to your spouse or other relatives based on the laws in your state.

In some cases, you may also have the option to buy supplemental coverage. Supplemental group life insurance plans generally allow you to buy coverage up to three or four times your annual salary, and may require you to fill out an “evidence of insurability” health questionnaire.

Employers or associations typically offer predetermined options for coverage, including set coverage limits. Group life insurance plans are often designed with an easy approval process, and you can keep them as long as you’re with that employer or group.

Pros vs. cons of group life insurance

Pros:

  • Simple process. Since the employer or association has done its research and created options for you, you can simply enroll without having to shop and compare policies on your own. 
  • Easier acceptance. These plans are designed to encourage people with a variety of health backgrounds to participate as an employee benefit. They often have a simplified underwriting process with quick or guaranteed approval, and rarely require a medical exam.
  • Affordable coverage. Since many people are participating in these plans, groups are often able to negotiate favorable rates with the insurance company and may subsidize all or part of the cost. If you aren’t in the best health, you may also get lower rates with a group plan than you would on your own.

Cons:

  • Limited portability. If you switch jobs or end your membership, your coverage often ends, leaving your family unprotected. Gaps in coverage can be costly, since insurance rates rise as you age. You also run the risk of developing a medical condition that makes it hard to qualify for coverage.
  • Lower coverage levels. Group coverage levels are often capped at a lower amount, which may mean you don’t have enough to protect your family. On average, households that only have group life insurance have $225,000 less in life insurance coverage than they need. Our calculator can help you estimate your coverage needs.
  • Penalty for good health. Group life works to accommodate people regardless of their health. That’s good news if you have medical issues, but if you’re healthy, you may wind up paying more for a group plan than an individual one.
  • Fewer options. Because your employer or the group has done the choosing for you, you most likely can’t customize your plan. If you have specific needs, an individual policy may be a better bet.

The bottom line? Group life can be a simple way to get covered, but it’s still smart to make sure you have enough coverage and that you won’t be stuck without financial protection if you leave.

That’s where an individual policy can help.

You’ve got questions. We’ve gotanswers.

Life insurance quotes through eFinancial

At eFinancial, we offer a variety of term life, permanent life, and final expense insurance plans from more than 20 leading insurance companies. We can help you assess your current group or individual coverage and find the right policy to fit your needs. With competitive rates and a team of agents ready to walk you through the process, we’re here to make buying life insurance easy.

To learn more, start your free, no-obligation online quote today, or call 866-388-3996800-957-9525 to talk with one of our agents.