Group Life Insurance Today

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 coverage to their employees as part of the benefit package. These policies have also been known to other groups and their members, such as worker’s unions and civic organizations.

It works by offering each member a sub-policy under the master policy which is owned by the employer that purchases the coverage. The group, by law, cannot be benefitted from it.

Life Insurance Policies for Groups

These 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 syndicate pays all of the premium costs for the member.
  2. The cost is split between the group and the member.
  3. The member pays the entire premium, which usually carries a lower premium than most of the other policies.

The Most Common Group Life Coverage

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

While many companies still offer it to their employees 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 it.

Drawbacks to Group Life Coverage

One of the biggest drawbacks, especially if the employee pays, is that it only covers the employee while they are working for the organization.

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

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

These rules are set in place to protect the interests of the principle owner, hence the reason why the group cannot take advantage out of it.

What a Member gets in it

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

The Options for Group Life Insurance

When life coverage is offered to an employee or member, it 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 plan. This includes family coverage.

What Most Group Life Insurance Policies Cover

Most 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: Whole life and term life coverage.

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

The master policy on these types of policy 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.