Group life insurance

Group life insurance

  • April 17, 2022
Group life insurance is a type of insurance policy that offers coverage for a group of people with a common interest, mostly the staff of an establishment. This group of people could also be members of a club, association, cooperatives, religious groups, social groups, etc.

Group life insurance provides a lump sum as a benefit to the beneficiaries of a member of the group after the death of the member.

Any business owner who has up to 5 employees should get group life insurance for the staff of his establishment.

Group life insurance is less expensive than personal life insurance hence the high rate of purchase. Most employers also offer this type of insurance to their staff as benefits.

How does group life insurance work

A group life insurance is the sole life insurance for a group of people. When a group purchases group life insurance from an insurer for members,  they buy at a discounted rate. Since it has to do with a group of people, the price for the policy for each individual is cheaper than buying a personal policy. Most times the employee may not have to pay anything to benefit from this, the employer or organization takes care of the expenses. Some members may decide to choose a higher coverage, if they do, they pay any extra cost or it can be deducted from their salary.

Just like individual life insurance, members of the group partaking in the group life insurance are expected to list their beneficiaries before the beginning of their policy coverage period; these beneficiaries can be changed at any time within the coverage period.

The most popular group life insurance is usually group term life insurance, which is renewable yearly.

The employers or organization are usually in possession of the master contract for their group, while its insured members receive a certificate of coverage, which can be submitted to other insurance companies should their coverage be terminated for any reason such as leaving the company or group and they wish to continue coverage.

Advantages of group life insurance

One of the advantages of this type of life insurance is that the organization pays for the insurance and even if the members of the group are to pay any premium it is very little.

Also, the premium is subtracted from their paycheck on a weekly on a monthly basis so it’s barely noticeable

Being qualified for group life insurance is easy, Unlike individual life insurance policies, it does not require a medical examination. Although they are required to answer a medical questionnaire, it is a better option for those with health issues.

If an insured member leaves the group or in the case of a company gets fired or resigns, the policy can be transferred to subsequent insurance providers as individual life insurance.

Disadvantages of group life insurance

With all the advantages stated above, there are still some drawbacks attached to it. Some of these drawbacks are; 

Although Group life insurance is not expensive, it only offers basic coverage, which may not fulfill the coverage needs of the group members as it offers only one or two times the salary of the insured. In other words, it is advised that group insurance should not be sole insurance but a supplement to personal insurance.

Another disadvantage is that the organization or employer is the sole controller of the policy which means that the basis of the contract can change at any time and the premium increase.

If or when you want to go for a personal life insurance policy to supplement that of your group’s life insurance, ensure to check and compare different insurers to choose which is best for you.