Group term life insurance is designed to benefit a group of people at once. Many people who have this also go for extra coverage to compensate for what this one lacks.
Just like the name, it is not made to be a personal policy, but policyholders can later turn it into a private policy depending on the type of coverage.
Additionally, group term life insurance is among the cheapest policies you can get; this is why some employers prefer to offer it to their employees.
Job seekers seeking jobs and luckily land an employer offering this policy as benefits should read this.
Perhaps you have it, but you seek to know how to utilize it to the fullest; this article will give you more information.
What is group term life insurance?
It is a type of term life insurance that can simultaneously serve a group of people.
Employers or business owners mostly purchase these insurance benefits for their employees.
This type of insurance is not as expensive as regular personal insurance, which is why it has limited coverage.
Some employers give this coverage without charge, while others take out the premium from the employees’ salaries.
How does group term life insurance operate?
As soon as you gain employment, you may be lucky to be in a company that offers it to their workers.
If this is the case, you may begin to enjoy these benefits as soon as you get your offer letter, or you will have to wait after a month of employment or when you become a permanent employee.
All this depends on the rules of the company and benefits only people that meet the requirements.
When you leave the company, you may not be able to take the insurance with you, and you may not be able to convert it to personal coverage.
Furthermore, employers always go back to renew the policy as term life insurance has an expiry date, so it is not a one-off policy.
In cases where the employer does not cover the expenses, employers deduct the premium from the employee’s salary and pay the rest to them.
When you accept this benefit as an employee, the company will issue you a certificate of your coverage.
So while working at the company and you enjoy insurance made for everyone in that company, you must surrender the policy once you decide to leave.
If you pass away while still employed and under the coverage, your family members will receive a lump sum of money as a benefit.
Advantages and disadvantages of group term life insurance
Group term life offers you benefits in more ways than you know
May not pay for the premium
Some employers prefer to pay for the premiums themselves without bothering the workers. The employer also takes care of the yearly renewal of the policy from the company’s funds.
It is very cheap
Generally, the premiums from this insurance do not break the pocket, and it is just how it works because insurance companies know that employers always buy it for their workers.
Therefore, if you work in an organization that offers this insurance as a benefit to the employees but requires that they pay for the premiums themselves, the employee will be notified before the insurance kicks in.
However, the premium amount will not eat deep into your salary; soon enough, you will adapt to your new salary after deduction.
You do not have to go for a medical exam.
Since the benefits meet you at work already bought and paid for, and you are not the only user, you do not have to stress about the documentation. Medical exams come in when you want to purchase personal life insurance policies and not when an employer includes you in an existing one.
It is one of the perks of getting a job in an organization that offers this benefit. You only need to gain employment and meet some criteria, and your loved ones become eligible for beneficiary benefits. So, should in case you pass away while still on the job, the company pays your loved ones the beneficiary lump sum of money. However, it may not be as big as personal insurance payouts.
Disadvantages of group team life insurance
It is not portable
It is a significant drawback of this insurance. Once you resign or quit your job, that will end your coverage. Unlike some policies that you can change to personal coverage when you leave employment, this does not have that feature.
So, as soon as you leave that job, you can not port with the insurance.
You do not have control over it.
The policy has already been signed and bought. Whatever feature or clause that is ingrained is all you get. Except your employer allows you to add an extra clause to the coverage.
For example, some employers allow their workers to add family members to the policy if they depend on them. In such cases, the worker and the family get under the employee coverage so long they are still employed in the company.
The beneficiary benefits are negligible.
Group term life insurance beneficiary’s payout is less than other life insurance beneficiary payout, which may be due to the cheap premiums. Insurance policies with high premiums often generate a huge lump sum as the beneficiary payout. But policies with affordable premiums only boast fewer coverage options and payouts for loved ones.
Group life insurance comes in different types; group term life and group universal life insurance. As we have seen, what makes the group term lesser is that the other type has more features and is more expensive to maintain.