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Group Life Insurance: How It Works, Types, Pros & Cons

Life insurance might not be something you think about every day—the topic can seem morbid at the best of times, but it’s a necessary part of the life of any adult who has dependents such as family members, old parents, or young children that may need financial support after they’re gone.

One possible option for getting life insurance includes group life insurance. This type of insurance is usually provided by employers or other large-scale entities, like labor organizations or associations. It’s inexpensive, can be free for specific employees, and is a common type of insurance found across the nation.

Group life insurance doesn’t have that much coverage, and is usually provided as a portion of a larger membership or employer benefit package. As a member of a group life policy, you won’t have to undergo a medical examination and aren’t subject to underwriting on an individual basis.

Here’s all you need to know about it:

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Key points about group life insurance

Group life insurance contracts provide life insurance coverage for a specific group of people. Companies can secure lower costs for individual employees by buying group insurance instead of buying individual policies. As the person who’s receiving the coverage, you likely won’t have to pay anything to get the benefits from the policy.

If you opt for advanced coverage along with the regular amount, you might have to pay for the premium with your paycheck. Like any other insurance policy, an insured patient must list their beneficiaries before it comes into effect. You can change your beneficiary whenever you want.

The most typical policy of this kind is term life insurance, which is renewable annually through a company’s open-enrollment process. The other type of group life insurance is whole life insurance, where you get coverage regardless of when you might pass away. These permanent insurance policies have rather high death benefits and premiums and are a popular kind of life insurance.

In group life insurance, an organization or employer that’s purchasing the policy for their members or staff are the retainers of the original contract. Any employee who elects to get coverage through this policy will receive a certificate outlining the terms of their coverage in case they leave the organization or company, terminating the coverage.

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What are the requirements?

There are specific conditions attached to a group life insurance policy. Many organizations require their group members to be a part of the company for a certain period of time before they get access to coverage. As an employee, you might have to pass the probationary period before you can receive life insurance and health benefits.

Your coverage will only be valid for the amount of time that you’re a part of the company. After you leave, whether through firing or resignation, your coverage will end.

Pros and cons

The most appealing part of a group life insurance policy for an employer is its affordability and value for cash. Group members usually pay meager amounts, or sometimes even nothing at all. The premiums are directly withdrawn from monthly or weekly gross earnings. It’s also rather easy to qualify for a group policy—coverage is a guaranteed aspect for each group member. Unlike an individual policy, this type of insurance doesn’t require any medical exams.

However, convenience and low cost aren’t everything. This policy only provides very basic coverage that might not fulfill the policyholder’s needs. Typically, your loved ones will only get around $20-50k, or around 1-2 times your annual salary. According to experts, group life insurance should only be treated as a perk, and not a standalone coverage.

One major drawback of this type of life insurance is that your employer has complete control over the policy. This means that your premiums might increase according to any decisions that they might make. If your organization decides to stop investing in group life insurance, or if you switch your job, you won’t get any more coverage.

As a former employee, you will get the option to continue your coverage at an individual level. Converting the group policy to an individual policy usually comes at a higher cost, however, people who are uninsurable because of medical reasons can still benefit from this conversion because of the lack of medical exams required.

Certain organizations might allow you to buy more coverage at a less expensive rate. This add-on can also be switched between jobs. However, you might need to fill out a questionnaire about your medical needs and history for additional coverage.

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The right health insurance company can help

If you’re searching for the best kind of life insurance for yourself or your employees, it’s best to talk to a specialist at a top insurance agency such asCovered California Certified Agent. We have experienced agents who can help you findgroup life insurance, life insurance, employee insurance, and dental insurance at affordable costs. We have worked with numerous clients from a wide variety of industries and backgrounds, so you can have confidence in relying on us for both your short-term and long-term needs.

Reach out to us today by dialing 800-771-7653.