What is group life insurance?
Group life insurance is a policy provided by your employer as a benefit of your job. Many employers offer some level of coverage, often one or two times your annual salary, for free, with the option to purchase more coverage at a low cost.
Group life insurance is usually term life insurance. An employee is only eligible for this coverage as long as they continue to work for the company, although you may be able to take any additional coverage you pay for, above what your employer has provided at no charge, with you. It's best to combine it with an individual life insurance policy.
Pros and cons of group life insurance
Group life insurance offers an affordable (often free) amount of life insurance coverage that's easy to qualify for, but you generally lose the coverage if you leave your job.
Pros of group life include:
- Some coverage is often available at no charge
- Additional coverage can be added at a low cost
- It's easy to qualify and generally doesn't require any medical questions or tests
Cons of group life include:
- You can't take it with you if you change jobs, with some exceptions for additional coverage you purchase
- The amount of coverage may be limited, especially if you have only what your employer offers for free, usually one to two times your annual salary.
Alternatives to group life insurance
If your employer doesn’t offer group life, or if it does but you want more coverage that won't be lost if you change jobs, you can purchase an individual life insurance policy from a private company.
Permanent life insurance<, such as a whole life or universal life policy, will be more expensive, but it'll cover you in perpetuity as long as you make your payments.
Term life insurance limits coverage to a specific period, but offers a larger death benefit for less. Premiums are lower, and term life is usually the best choice for financial needs that will be reduced over time, such as covering a mortgage.
Another possibility is accidental death and dismemberment insurance. AD&D coverage awards a cash benefit in the event of your accidental death or if you experience a severe, debilitating injury. Some employers offer this voluntary coverage as part of their employee benefits package. You should consider it supplemental coverage -- along with an individual life insurance policy -- that can provide financial support for your family after your death.
Is group life insurance enough?
No, for most people, a group life insurance policy isn't enough, mainly because it offers lower coverage levels and is usually lost when you change jobs. It's best to buy life insurance coverage that will continue to be available your family regardless of where you work.
Consider your group life insurance through work as a supplement to individual life insurance rather than the other way around. It's a great added death benefit for your family, but it can't be counted on as the main source of funds to provide for them.
Work with a licensed life insurance agent or a financial planner to determine the right way for you to plan for your family's financial future.
