Group Term Life Insurance

Group term life cover is a life insurance policy in which multiple people are covered under one policy. It is mostly purchased by employers for their employees and most of them provide it at no cost. An employee can buy an individual policy if the group policy doesn't fulfill his or her needs.

What is group term life insurance?

Group term life insurance is a type of life insurance that covers a group of people. It is mostly provided in the form of yearly renewable term. Typically, group term is purchased by employers or companies for their employees, whereby an employer becomes the owner of the policy. Most of them provide it free to their employees as a part of the benefits package.

Each Employee or member who is covered by group life insurance policy receives a certificate of insurance to prove that he or she is covered by that policy. But the actual insurance contract known as master policy is owned by an employer.

The covered employees are required to select their beneficiaries who will receive death benefits when they die.

In case an employee quit a job, the coverage ends. But he or she is allowed to convert the group life cover to individual life cover if he or she is leaving a job. However, it may cost a lot of money to convert a policy than buying a new one.

Group term life is cheap compared to individual life insurance. Also has no cash value, therefore, you can't access it while you're alive as you can do when you are covered with permanent life insurance. 

One person can be covered with both group and individual life insurance at the same time, so, a group member have a room to buy his or her own policy if think that group cover doesn't fulfill his or her needs.

Cash value

Group term life insurance doesn't guarantee cash values. If you need to be covered by a policy that guarantees you cash value, you should consider a permanent life insurance.

Premiums

In group term, premiums are lower than when in an individual life insurance policy. Premiums may increase each year since group term is mostly provided in yearly renewable form.

Death benefit

Typically, in group term death benefit is fixed. 

Coverage length

Most of group term insurance are annual renewable, means that they cover a single year.

How it works

An employer or a company or an organization purchases a policy for its employees. The company becomes the owner of the policy while employees receive a certificate of prove. If an employee dies within a coverage period, his or her beneficiaries receives death benefit. In case an employee quit a job, he or she will no longer be the part of that policy. However an employee can convert a group cover to an individual life cover but normally at higher cost than buying a new policy.

Advantage of group term life insurance

1. Less expensive than individual life insurance.

2. Both healthy and unhealthy people pay the same amount for the same coverage. 

3. It provides coverage to people who do not have an individual life cover yet.

Disadvantage of term life insurance

1. If you quit a job or leave a group your coverage ends.

2. It might be inadequate, so you may have to buy an individual life policy to fulfill your needs.