Considering an insurance policy from your employer or another group? Here’s what you need to know.
Group life insurance includes any policy where you apply and receive coverage as part of a group. These can include employer-provided group life insurance plans or policies from member associations, like AARP and AAA.
Group life can be an easy way to access insurance, since the company has already done its research and selected policy options for you. In some cases, you may also be able to get covered at little or no cost. That said, group life policies come with some limitations, including lower coverage amounts and, in many cases, the inability to take the policy with you if you leave the group. To ensure that your family is fully covered, it’s often a good idea to supplement it with an individual policy.
To access group life insurance, you can apply through your employer or association. There are two main kinds of group life insurance: basic and supplemental.
Basic group life insurance is a small policy that employers often (but not always) provide to employees automatically as an employee benefit. Typical coverage amounts can range from $25,000 to a multiplier of your annual salary. Because this is often paid by your employer and coverage is generally guaranteed, it makes sense to accept it. With basic group life, you can name a beneficiary, or the payout will automatically go to your spouse or other relatives based on the laws in your state.
In some cases, you may also have the option to buy supplemental coverage. Supplemental group life insurance plans generally allow you to buy coverage up to three or four times your annual salary, and may require you to fill out an “evidence of insurability” health questionnaire.
Employers or associations typically offer predetermined options for coverage, including set coverage limits. Group life insurance plans are often designed with an easy approval process, and you can keep them as long as you’re with that employer or group.
Absolutely. Buying an individual policy can help you make sure your family will be covered, no matter what happens to your job or membership. A life insurance agent can help you explore your options and balance your individual coverage with your group plan.
Life insurance benefits are tax-free in most cases, but there are a few exceptions with group life. If you get life insurance coverage through your work and your employer is subsidizing the cost, any coverage over $50,000 is typically treated as taxable income. In many instances, coverage less than $50,000 won’t be taxed. You should speak with your tax advisor to understand how taxes may apply to your specific group policy.
The two major types of individual policies you can buy are term life and permanent life insurance. Term life insurance covers you for a set period of time, usually 10 to 30 years, and can be a good choice if you have financial responsibilities with a deadline, like young kids or a mortgage. Permanent life insurance offers lifelong coverage and an extra cash value component. It’s more expensive than term insurance, but can be a good fit if you have financial responsibilities that will last a lifetime.
Group life insurance is often a renewable term policy. Some insurers may allow you to convert to a permanent life insurance policy as an individual if you separate employment or leave the sponsoring organization.
At eFinancial, we offer a variety of term life, permanent life, and final expense insurance plans from more than 20 leading insurance companies. We can help you assess your current group or individual coverage and find the right policy to fit your needs. With competitive rates and a team of agents ready to walk you through the process, we’re here to make buying life insurance easy.
To learn more, start your free, no-obligation online quote or call 800-957-9525 to talk with one of our agents.
