What Is Group Term Life Insurance?
Group term life insurance is a type of term insurance in which one contract is issued to cover multiple people. The most common group is a company, where the contract is issued to the employer who then offers coverage as a benefit to employees. Many employers provide, at no cost, a base amount of group coverage as well as the ability to purchase supplemental coverage and coverage for employees’ spouses and children.
Group term life insurance is relatively inexpensive compared to individual life insurance. As a result, participation is high.
How Group Term Life Insurance Works
About 80% of companies offer company-paid group life insurance as a benefit, reports the Society for Human Resource Management.1 Group life insurance policies are generally written as term insurance and offered to employees who meet eligibility requirements, such as being a permanent employee or 30 days after hire. Group term life insurance coverage can be adjusted for qualifying life events or during an open-enrollment period.
The standard amount of coverage is usually equivalent to the covered employee’s annual salary. Employers typically pay most or all of the premiums for basic coverage. Additional amounts, ordinarily in multiples of the employee’s annual salary, are usually offered for an extra premium paid by the employee.
Insured members receive certificates of insurance as proof of coverage. As with individual life insurance, insured parties choose their beneficiaries.