The Benefits of Employer-Provided Group Life Insurance

Group life insurance is life insurance provided by an employer to its employees. Employer-provided group life insurance has advantages for employers because it is an appealing component of a benefits package for attracting talent. It is also a benefit for employees because its premiums are typically paid for by the employer.

When an employer purchases this type of group life insurance, an insurance provider sells it “wholesale.” So the employer saves money by “buying in bulk.” Coverage for each employee is significantly less expensive than if the individual purchased a policy outright.

Because it is included in a benefits package, those receiving coverage will rarely have to pay anything “out of pocket” for policy premiums. Other employers require employees to pay a portion of the premium. Employees can choose to have their premium payments deducted from their paychecks on a regular basis.

Group life insurance coverage has numerous advantages that entice employers to provide such a benefit to their employees. Among the highlights are:

Employer Advantages:

  • Premiums are deductible from federal income taxes.
  • New employees are offered a desirable fringe benefit.
  • Reduced turnover saves you money on hiring and training.
  • Contributes to increased employee security and morale
  • Rates are typically lower.

Employees can benefit from group life insurance coverage as well. Among the highlights are:

Employee Advantages:

  • Employees have the ability to easily select and change beneficiaries.
  • Premium disability rider waiver may also be available.
  • Some policies may include optional features such as accidental with childcare and education options.
  • Some plans include will and estate planning.

Following a change in family status, many group plans allow for an increase in coverage. Frequently, there will be a certain amount that you can increase by answering health-related questions or having a medical exam. Increases in coverage are sometimes automatic, such as when your salary is raised.

In general, if used, the insurance plan pays your family a lump sum in the event of your death. The employer is the master policyholder.

If you leave your job, contact the insurer of your group life insurance policy to see if you can convert your existing coverage to an individual policy.

This is an important tip because conversion can often be done without proving insurability. In other words, you can get the coverage transferred into an individual policy for yourself without revealing your health status, lifestyle, or family health history for underwriting purposes.

Want to learn more about life insurance? Read our article The Most Frequently Asked Life Insurance Questions.

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