What Is Group Life Insurance?
Group life insurance is a term life policy offered by employers to employees. It can provide basic coverage at little or no cost to you. However, coverage amounts are often limited. You may need to buy supplemental group life insurance or an individual policy to meet your needs.
- Written by Rachel Christian
Rachel Christian
Financial Writer and Certified Educator in Personal Finance
Rachel Christian is a writer and researcher for RetireGuide. She covers annuities, Medicare, life insurance and other important retirement topics. Rachel is a member of the Association for Financial Counseling & Planning Education.
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Matt Mauney
Matt Mauney
Financial Editor
Matt Mauney is an award-winning journalist, editor, writer and content strategist with more than 15 years of professional experience working for nationally recognized newspapers and digital brands. He has contributed content for ChicagoTribune.com, LATimes.com, The Hill and the American Cancer Society, and he was part of the Orlando Sentinel digital staff that was named a Pulitzer Prize finalist in 2017.
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Eric Estevez
Eric Estevez
Owner of HLC Insurance Broker, LLC
Eric Estevez is a duly licensed independent insurance broker and a former financial institution auditor with more than a decade of professional experience. He has specialized in federal, state and local compliance for both large and small businesses.
Read More- Published: January 19, 2021
- Updated: May 15, 2023
- 4 min read time
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Understanding Group Life Insurance Basics
Group life insurance is a free or low-cost life insurance policy offered by employers and certain organizations — such as labor unions — to workers or members.
Group life policies are often part of a larger workplace benefits package.
By purchasing insurance on a wholesale basis for its members, companies can lock in lower life insurance rates for each employee.
That’s why it is often more affordable to buy life insurance at work than to buy an individual policy on your own.
- Group life policies are term life insurance policies, which means coverage expires after a set time, such as 10, 20 or 30 years.
- An insurance premium is paid either in full or in part by the employer. You may or may not owe a premium for basic coverage.
- You will need to name a beneficiary on your policy. This is the person or people who receive a death benefit payout from the life insurance company if you pass away.
If you die while employed and enrolled in your group life insurance policy, your beneficiary will receive your death benefit.
Basic Versus Supplemental Group Life
Some employers offer a small amount of life insurance coverage for free. This is known as basic group life insurance.
Coverage amounts tend to be lower, such as $25,000, $50,000 or the equivalent of your annual salary.
Most experts recommend signing up for basic group life insurance if your employer offers it.
Your employer may also allow you to purchase additional coverage. This is known as supplemental group life insurance.
These policies come with higher coverage amounts, such as three or four times your yearly salary.
While basic and supplemental group life insurance can be a useful workplace benefit, the coverage may not be sufficient if you have a family or other people who depend on your income.
Keep in mind that most insurance experts recommend selecting 10 times your annual income as your life insurance death benefit.
How to Enroll in Group Life Insurance
Signing up for group life insurance is relatively easy. Sometimes enrollment is automatic.
The best time to sign up for a group life policy is during your company’s annual open enrollment period or when you start a new job.
Open enrollment dates vary by company but may take place near the end of the year.
Check with your human resources department to see when you can apply.
You will need to fill out and submit paperwork to your employer to enroll. This will likely include an Evidence of Insurability form or a health history questionnaire.
Your current health and certain preexisting conditions may disqualify you from coverage.
You may need to work at your job for a certain time before you can qualify for group life insurance. For example, some employers may not offer you a policy during your first 90 days on the job.
Keep in mind that not all employers offer group life insurance. In this case, you will need to purchase an individual policy on your own.
Pros and Cons of Group Life Insurance
Group life insurance has its perks. It is often affordable and relatively easy to obtain.
- Affordable
- Like health insurance, employer-sponsored group life insurance is subsidized. Group members typically pay very little — if anything — for this type of policy. It may be the cheapest life insurance you can get.
- Convenient
- You don’t need to compare and look for plans on your own. And if you are required to pay premiums, they’re automatically deducted from your gross earnings.
- Easy to Qualify For
- You rarely need to undergo a full medical exam to qualify for free basic group life insurance. However, you may need to undergo medical underwriting if you want to purchase supplemental insurance through your group plan.
While group life insurance offers basic coverage at a minimum cost, there are a few drawbacks.
- Limited Coverage
- Free basic group life policies tend to have much lower coverage amounts than individual term life policies. You may want to buy regular term life insurance instead or consider supplemental group life insurance options at work.
- It’s Tied to Your Employment
- You will lose your group life insurance if you switch jobs, retire, resign or are fired. You may be able to convert your group policy to individual life insurance if you leave, but you may pay much more for coverage.
- Lack of Customized Options
- Most group life insurance policies lack customization. You might not be able to adjust the death benefit amount, term length or add riders. If you want a more complex product such as whole life insurance or universal life insurance, you will need to look elsewhere.
- Member of the Association for Financial Counseling & Planning Education
- Certified educator in personal finance
- Former member of the American Finance Association
3 Cited Research Articles
- Lee, R. (2020, November 13). Group life insurance through your job is probably the cheapest coverage you can get, but it's not a perfect solution. Retrieved from https://www.businessinsider.com/personal-finance/group-life-insurance
- Bureau of Labor Statistics. (2020, September 24). Employee Benefits in the United States — March 2020. Retrieved from https://www.bls.gov/news.release/archives/ebs2_09242020.pdf
- Chorpenning, A. (2020, July 17). 7 Things To Know About Supplemental Life Insurance. Retrieved from https://www.forbes.com/advisor/life-insurance/supplemental/
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