Anyone who just started a new job has likely taken a look at the included benefits. Did you notice group life insurance as an option?
For some, group life insurance is an easy way to get started with life insurance, but it’s important to thoroughly evaluate all options first. To determine if employer-sponsored group life insurance is right for you, you’ll need to understand the basics and compare your policy options to both term and whole life insurance as well.
Quick Links
- What is Group Life Insurance?
- 4 Pros of Group Life Insurance
- 3 Cons of Group Life Insurance
- Group Life Insurance Alternatives
What is Group Life Insurance?
Many businesses provide their employees with benefits as part of their compensation packages. This is often health insurance, 401(k) matching benefits, parental leave, or paid vacations. In addition to these benefits, some employers offer an option for life insurance.
Employer-sponsored life insurance plans vary among companies, but typically anyone who joins the group life insurance plan will have their premiums mostly or entirely paid for by the company. Additionally, these plans are often provided as a form of term life insurance. For term life insurance, the insured individual will only have life insurance coverage for the amount of time outlined in the policy contract. Similarly, group term life insurance provides coverage for as long as the employee works at the company.
There are different ways to determine coverage amount, such as using a multiple of the employee’s annual salary. For example, an employer might offer group life insurance coverage that is twice the employees salary. So, for a salary of $60,000 a year, the employee would be covered for up to $120,000.
4 Pros of Group Life Insurance
Now that we’ve established a baseline understanding of group life insurance, let’s help determine if it’s the right option for you. For some, group life insurance is a great way to find coverage, especially if it’s part of the benefits offered by your employer. Here are a few of the benefits you can expect from group life insurance policies.
Convenience
Sometimes, figuring out how and when to find life insurance coverage can be complex. Employer-provided group life insurance helps make things simple. Just like other company-provided benefits, you’ll need to opt in and provide a bit of information before receiving coverage.
Qualifications
Sometimes people are hesitant to apply for life insurance products because they believe they won’t pass a health exam. However, group life insurance policies forgo the need for a medical evaluation and can provide coverage to anyone. So, if you think you’re not healthy enough for life insurance, group life insurance might be the way to go.
Expenses
For term and whole life insurance, policyholders are required to make premium payments in order to receive coverage. This might add up and put life insurance outside of your budget. But, many companies cover part of the cost of premiums for group life insurance policies. Better yet, some companies will pay for the entirety of premium payments so employees don't need to worry about whether or not they can afford it.
So, if you’re concerned about the up-front and monthly costs of life insurance coverage, you might be interested in a group life insurance option. Plus, if you aren’t paying for premiums, then you can save up your money for other financial goals.
Additional Coverage
Some employers might offer additional life insurance coverage options, such as riders. This is beneficial for anyone who might need extra assistance for ongoing medical conditions and disabilities beyond the basic policy option. Be sure to check with your employer to see if riders are an option for your group policy.
3 Cons of Group Life Insurance
While group life insurance is great for its convenient features, there are a few things that might make you hesitate before opting in. Before jumping into a group life insurance policy, consider these cons.
Coverage for Spouses
Many employer-provided group life insurance policies only offer coverage to the employee and not their spouses. In some cases, families rely on one individual to use their work benefits for others in the family, such as health insurance options. But, group life insurance doesn’t typically extend to other people.
Low Coverage Amount
Coverage options for group life insurance policies tend to be lower than traditional term or whole life insurance products. Depending on how your company chooses to utilize group life insurance in their benefits package, you might find that what is being offered doesn’t meet your individual requirements. Instead of being underinsured, you might want to consider opting out and explore other avenues for life insurance coverage.
Limited Terms
Employer-sponsored life insurance is often provided by a single life insurance provider. This means employees will only be able to use the policy options provided by that particular company. However, those options might not provide enough coverage for your lifestyle or goals. And, they might also lack desirable benefits, such as living and death benefits.
Additionally, group life insurance only provides coverage for as long as you are employed by your company. If you are looking to switch jobs in the future, your life insurance contract will be terminated and you’ll need to go to other resources for coverage.
Group Life Insurance Alternatives
Group life insurance is excellent for anyone looking for a basic policy, especially if an employer has group life insurance as an option in their benefits package. However, many of these policies don’t provide enough coverage or a long enough term. Luckily, there are plenty of alternatives to group life insurance that provide an array of benefits and fit within any budget.
For a more complex, well-rounded life insurance option, consider individual term or whole life insurance options from providers other than the one distributing group life insurance through an employer. For instance, employees might find that term life insurance better suits what they need.
Term life insurance follows a similar format to other group life insurance policies. Instead of a contract being in place for the duration of employment, an individual will be covered for a set amount of time, such as 5, 10, or 20 years depending on the policy. And, once the term ends, policyholders can renew their contract or consider upgrading to a different form of life insurance. Term life insurance is great for anyone looking to stay within a budget because premiums tend to be lower than whole or universal life insurance.
Speaking of whole life insurance, this is another option for anyone interested in life insurance outside of their employer-provided option. Whole life insurance provides coverage for a policyholder's entire life, but premiums might be higher than those associated with term life insurance. However, if group life insurance doesn’t provide you with the coverage amount that you’re looking for, then whole life insurance is an excellent alternative.
To get started with whole life insurance, turn to ELCO Mutual for a variety of life insurance products suited to your needs. Our whole life insurance policies are created to give you peace of mind and financial stability for the moments that you can’t always see coming. To learn more, get in touch with one of our independent insurance agents today!
