If your employer offers a group life insurance plan, consider taking advantage of the opportunity. You will receive many benefits, including the following.
#1 Lower Costs
In a group insurance plan, the cost to add one person is much lower than it is for an individual plan. This cost per person continues to go down the larger the plan. For example, the cost of the thirtieth person on a plan will be higher than the cost of the thirty-first. As a result, everyone protected through a large plan benefits from an overall lower cost.
#2 Ease of Contribution
You can easily contribute to a life insurance plan through your monthly or bimonthly paycheck. Just as your medical insurance costs are deducted, your life insurance costs can be directly deposited. Typically, life insurance on a group plan is less than $20 per month. If your survivors ever need the money, it will be well-worth this cost.
#3 Protect Your Dependents
If you have no dependents, the cost of life insurance may not be worth the reward. However, it is important to think about the responsibilities you assume for others in your life before making any life insurance decision. If you would leave survivors in a disadvantaged situation should you no longer be able to provide income, life insurance is a necessary protection.
What will happen to my group life insurance when I retire?
If you are on a group life insurance plan with your employer, you will not continue to receive benefits once you retire. Essentially, life insurance plans through your employer are left behind if they are not needed. You may have the option to continue your coverage through an individual plan. This can be very important when you retire, as the chances that you will need your life insurance policy begin to accelerate. You should compare the cost of this continuation with the cost of individual plans for retirees to determine which is least expensive and which will offer the greatest benefits at this time in your life.
What are the drawbacks of a group life insurance plan?
The main drawback of a group life insurance plan is its rigidity. When your employer or union offers a plan, the group decides on which options it will present you. As a participant, you will typically be choosing from no more than two plans rather than the long list of custom plans most insurance companies offer. If you are not in need of detailed coverage--for example, if you are very young or do not have dependents--a group life insurance plan does not need to be highly customizable. If you have very special needs, however, you may consider paying more for an individual plan.
How does a group life insurance policy differ from individual coverage?
When you participate in a group life insurance policy, you are only one of several or many individuals taking part in your employer's plan. The employer is the actual "insured," and you are a subdivision within this greater policy. As a result, the process the insurance company undergoes for determining the plan's costs and features is different from the process used for individual coverage. Your employer applies based on its revenues, number of employees and industry. Claim history will also be considered. Your individual claim history will not have an effect on the underwriting process. Instead, you simply get a piece of the pie once the employer has made an agreement with the insurance company.
Will my group life insurance policy remain in effect if I am laid off?
If you are laid off from your job, you may lose all insurance benefits including your group life insurance policy. Your employer has no responsibility to ensure that these benefits are continued on your behalf. However, you will be eligible for continuation of benefits through the COBRA system. It is your job to obtain the necessary forms to apply for and secure COBRA. You will have to pay 100 percent of your costs. During your employment, your employer likely split those costs with you. However, you may be qualified for up to a 60 percent reduction through federal programs. When you file your unemployment benefits, ask about this eligibility.
Can I get group life insurance if I have a disability?
It is easier to secure life insurance with a disability through a group plan. With a group plan, your employer is the one applying for coverage. You are eligible for benefits through your employer, and if you have added costs due to your disability, these will be spread throughout the group. As a result, a group life insurance plan is an excellent option for you. However, since the plan is tied to your job, you will lose the plan if you lose your job. In this case, you will have to find extensions through individual plans, which can be harder to secure with a disability.