Group Life Insurance 2012

Group Life Insurance

Life Insurance for Large Organizations

Life insurance comes in a variety of different types and the most common one that can be purchased by large organizations is Group life insurance.

Employers of all type usually offer this type of life insurance to their employees as part of the benefit package and Group life insurance policies have also been known to available to other groups and their members, such as worker’s unions and civic organizations.

It works by offering each member of the group a sub-policy under the master policy which is owned by the employer or group that purchases the coverage. The group, by law, cannot benefit from the life insurance policies. Only the individual who holds the insurance certificate issued off of the master policy can.

Group Life Insurance Policies for Groups

Group life insurance policies are available to groups that are made of 10 or more people.

They can be paid for in three different ways depending on how the organization takes out the master policy.

1. The employer or group pays all of the premium costs for the member.
2. The cost of the policy is split between the group and the member.
3. The member pays the entire premium, which usually carries a lower premium than most individual life insurance policies.

The Most Common Group Life Insurance

The most common way to pay Group life insurance is the even split of the cost between the group member and the master policy holder.

While many companies still offer their employees Group life insurance with the company paying 100% of the premium, rising costs are causing more and more businesses to change the way their premiums are paid and asking employees who wish to keep their Group life insurance to pay have of their premium.

Drawbacks to Group Life Insurance

One of the biggest drawbacks to Group life insurance, especially if the employee pays into the policy, is that the policy only covers the employee while they are employed with the master policy holder.

As soon as they leave the company – termination, resignation or retirement – the policy becomes null and void unless they convert the Group life insurance policy into an individual life insurance policy.

Because state and federal laws and legislation govern Group life insurance policies, each Group life insurance policy must include within it: a list of instances and codicils which govern the policy; a grace period for premium payment; conversion option provisions; and certificates of insurance.

These rules are set in place to protect the individual policy holder, hence the reason why the group cannot take advantage of an individual policy holder.

What a Member Gets in Group Life Insurance

As mentioned, each member of the group who participates in Group life insurance coverage is provided with a certificate of insurance. The certificate will contain all the necessary policy information, such as the sub-policy holder’s name, policy number, amount of coverage to be paid out, premium costs, and who holds the master Group life insurance policy.

It will also include all of the aforementioned codicils and instances as well as additional information on the policy and any agreements that have made between the Group life insurance issuer and the holder of the master Group life insurance policy.

The Options for Group Life Insurance

When Group life insurance is offered to an employee or group member, the policy may also offer coverage for the sub-policy holder’s spouse and family.

Group life insurance master policy holders do not have to offer this, but more often than the not, it is part of the benefits package the group member or employee is entitled to. Once again, if the employee leaves for any reason, the coverage stops unless it is converted to an individual policy. This includes family coverage.

What Most Group Life Insurance Policies Cover

Most Group life insurance policies limit the amount of coverage and payout that each individual can purchase. Each employer has their own rules and regulations regarding this.

The amount of coverage that can be purchased for dependents – spouse and children – is usually less and more often than not, it is not quite enough to even cover funeral expenses anymore.

The Types of Group Coverage

Group life insurance comes in two types: group whole insurance and group term insurance. Group life insurance that falls under group term is the standard type of Group life insurance policies that most employers carry.

The ‘term’ in the title tells you that the policy is only good while you work at a specific job and when you leave the Group life insurance policy is canceled unless you convert it to an individual policy.

The master policy on these types of Group life insurance must be renewed once a year. Whole life insurance policies are carried throughout the life of the sub-policy holder regardless of if they have left the job for any reason and must be paid in full upon the certificate holder’s death.