Group life insurance is an employee benefit offered by many employers. Organizations will typically extend this benefit to their workers for free, but coverage amounts can be lower than other standalone life insurance policies.

Whether you already have a group policy through work or you’re signing up for the first time, you’ll likely want to know if life insurance through work is a good idea and if you’ll need additional coverage to protect loved ones if the unexpected happens to you. In this guide, we explore how group life insurance works, and we’ll help you understand if it’s sufficient for your needs.

How does group life insurance work?

As the name suggests, group life insurance is not offered to an individual but rather to a large group of employees or members. This insurance is provided by employers and is typically free or subsidized. The policyholder – in this case, the employer – pays monthly or annual premiums to keep the policy active.

The coverage of group life insurance is usually limited. In most cases, it is one to two times the employee’s annual salary. Quite often, group life insurance is guaranteed issue, which means there is no need for a medical exam to qualify. It also pays a death benefit to the employee’s selected beneficiary if the employee passes away while the policy is in force.

What is the difference between individual life insurance and group life insurance?

Individual life insurance offers more control to the insured compared to employer-sponsored life insurance. Some of the major differences between these two options are discussed below.

• Medical exam: Individual life insurance requires a medical exam in many cases, although there are options for no medical exam coverage. Group life insurance is a guaranteed issue, meaning employees don’t need to submit to an exam or even answer health questions to qualify.
• Coverage amount: Group life insurance usually offers limited coverage, while an individual policy lets you apply for any coverage of your choice, up to $2 million, with certain insurers, like Fidelity Life.
• Cash value: Group life policies are often term coverage, meaning they can’t accrue cash value. However, if you purchase an individual policy, you can choose a permanent option that offers the ability to accrue cash value over time.
• Portability: Unlike individual life insurance, group life insurance remains with the employer or policyholder. Employees typically can’t take the coverage if they leave the job unless the insurer gives the option to convert to an individual policy. Individual life insurance is yours regardless of employment status.
• Cost: Employer-sponsored life insurance is either free or has a nominal cost. The cost of individual life insurance varies widely, depending on the policy, health, and age of the insured.

Is a group life insurance policy term or whole life?

A group life insurance policy is typically term coverage that renews annually. However, each company or organization is free to choose the type of coverage it offers to the employees or members.

What are the pros and cons of group life insurance?

As the most common form of life insurance in the US, group life insurance has its upsides as well as disadvantages. We discuss some of these below.

Benefits of group life policies

• Convenient: Some employers may auto-enroll employees into group coverage. If they don’t, sign-up is simple and happens as part of annual benefits enrollment.
• Inexpensive: Employer-sponsored life insurance is typically free up to a certain limit.
• Guaranteed: Since all employees qualify for coverage, group life is often a good fit for people who have had trouble qualifying for life insurance in the past.

Drawbacks of group life

• Not portable: Since group life insurance is tied to the workplace, employees often lose coverage if they separate employment.
• Few options: Employers or organizations have complete control over the offering, meaning employees have little say as to the type or coverage level. Individual policies offer many options.
• Small death benefit: The death benefit from a group life insurance policy may help loved ones cover some expenses, but it’s not sufficient to replace a steady income.

What happens to group life insurance when you leave a job?

Since group life insurance is provided through the workplace, it typically ends if you leave the company. In some cases, it may be possible to retain group life insurance coverage after terminating employment, but this is usually more expensive than buying an individual policy.

If you have employer-sponsored life insurance and are considering a change of job, there are a few options:

• Convert current policy: It may sometimes be possible to convert your group life insurance to an individual policy. Since this does not require a medical exam, it’s easier to qualify compared to signing up for a brand-new policy.
• Check with new employer: Life insurance through the workplace is common all over the country. If you’re starting a new job, it is good to check if group life insurance is included as part of the benefits package.
• Buy individual life insurance: If your employer does not provide group life insurance or if the coverage is insufficient, it is advisable to buy an individual policy through a life insurance company. Term life insurance is the most economical life insurance option. Get in touch with a licensed insurance agent at Fidelity Life to explore the options within your budget.

Is having a group life insurance policy enough?

If you’re young, unmarried, and don’t have dependents, your company’s group life insurance policy may be enough. However, if you’re the sole income earner or have loved ones relying on you financially, having your own individual policy is recommended. This might require you to manage two or more life insurance policies at the same time.

While it is possible to get supplemental coverage through an employer, the cost has to be covered by the individual. Regardless of the type of life insurance offered by an employer or organization, it often leaves the individual underinsured because of lower coverage limits. Getting individual life insurance can help provide the financial security and peace of mind you need for your family.

FAQs about group life insurance policies

Can you be denied group life insurance?

Unlike regular life insurance, which can deny coverage to certain people with high-risk factors, group life insurance is guaranteed, meaning all employees or members of the organization qualify.

Does group life insurance require a physical exam?

Life insurance through the workplace typically does not require a medical exam because it is guaranteed issue. You can also get individual life insurance coverage without a medical exam through certain insurers.

How long does group life insurance last?

Group life insurance lasts as long as the individual is employed by the company and the policyholder continues to make regular payments.

Who is the beneficiary of group life insurance?

You choose the beneficiary of group life insurance when you sign up for coverage. The individual or organization you select will receive the death benefit if you pass away. You may have more than one life insurance beneficiary and can change them if needed.