Group life insurance

Group life insurance (also called group term life insurance) is a popular benefit for employers to offer. According to the Bureau of Labor Statistics (BLS), in 2020 60% of non-government workers had access to employer-provided life insurance. Life insurance isn’t as common in an employee benefits package as health insurance, so offering it can help draw talent to a company and improve the employer-employee relationship.

Group life insurance is often easier to qualify for than an individual life insurance policy, but doesn’t provide the level of coverage many people need. That makes it a form of supplemental life insurance at best.

What is group life insurance?

Group life insurance, also known as group term life insurance, is the type of life insurance offered by employers, usually through large carriers like MetLife, Principal or Liberty Mutual. It gets the name from the fact that it’s offered to a large group (in this case, employees of the same company) rather than an individual.

Besides an organization (the employer) being the owner of the policy, group life insurance works essentially the same as individual policies:

• It’s usually a term life insurance policy, which means the coverage expires after a certain number of years.
• A premium is paid either monthly or annually to keep the policy active, covered in full or in part by the employer.
• Upon the death of the employee, a death benefit is paid out to a designated group or person known as the beneficiary.

→ Learn more about term life insurance

Who can get group life insurance?

Group life insurance isn’t available for everyone. If your employer doesn’t offer group coverage in their benefits package, you cannot get this type of policy (though individual life insurance is still an option).

Eligibility for group life insurance coverage also varies by employer. Some organizations may require a minimum tenure to qualify and will only allow employees to opt-in after their first 90 days.

If you switch jobs, retire, resign, or are fired, you’ll no longer be insured through the group coverage.

How much does group life insurance cost?

The cost of group life insurance depends on your individual company and the benefit amount. You may be expected to contribute some money to it or the cost may be completely covered by your employer. Additionally, depending on the coverage amount, group life insurance can be taxable.

If and when you leave your job, you’ll need to start the search for life insurance on your own since your workplace policy isn’t portable. According to the BLS in a 2020 report, the average workplace tenure is around four years.

Pros of group life insurance

Ninety-eight percent of people who have access to a group life insurance plan take advantage of it. Why is this benefit so popular? Because it’s an easy, affordable start to creating a financial safety net.

It’s easy to get even if you’re older or in poor health

Group life insurance is often guaranteed issue, which means fewer (if any) hurdles to getting coverage and no underwriting.

Your employer pays for it

Much like health insurance, employer-provided group life insurance is subsidized and insulates employees from the full cost of the policy. A certain amount of coverage — typically a set amount, like $50,000, or up to one to two times an employee’s annual salary — is provided as a benefit at no cost to the employee.

Some life insurance is better than none

There’s little obligation to group life insurance, so it can be a nice-to-have (free) benefit until you get an additional, more robust individual policy.

Cons of group life insurance

Many people make the mistake of thinking that because their employer offers life insurance, that’s the only coverage they need. For most people, this isn’t true. Group life plans are limited in their coverage and options, and it could cost you if you rely on that policy for too long before buying an individual one.

It won't provide enough coverage

There are often maximum life insurance benefits (the median is $250,000) allowed through employer-provided plans. A good rule of thumb is to have life insurance coverage that’s 10 to 15 times your income, so you may require more coverage depending on your needs.

It’s one-size-fits-all

Unlike individual life insurance policies that allow you to customize the death benefit amount, term length, and add riders, group life insurance policies don’t provide the customization some people need. That means in addition to being underinsured, you may also find yourself with a policy that doesn’t fit your unique situation.

You can’t take it with you

Employer life insurance is tied to your employment, so if you switch jobs or are fired, your policy will no longer cover you. You may be given the option to convert your group policy to an individual policy when you leave, but if it's a guaranteed issue policy, you’ll pay even more than you would for a properly underwritten policy if you choose to convert.

"The combination of benefit limits, inability to customize, and portability restrictions means that only having life insurance coverage through your group plan will almost always leave you under-protected,” says Patrick Hanzel, Advanced Planning Specialist and Certified Financial Planner at Policygenius. “A strong financial plan requires limiting these risks whenever possible."

How to get group life insurance

If your employer offers group life insurance, you’ll typically be able to enroll in the plan when you’re first hired.

If employees don’t enroll when the policy is first offered, they may need to wait until their employer’s open enrollment period and then complete an Evidence of Insurability (EOI) form, which is a health history questionnaire, at which point they could be declined.

Because the open enrollment period differs from company to company, you should check with your HR team or benefits manager for the exact dates.

The open enrollment period is also an opportunity to change or update any existing benefits you have. Depending on your employer’s group life insurance plan, you may be able to increase your coverage during open enrollment.

Most of the country’s top life insurance companies offer group insurance, including:

• MetLife
• AXA
• Brighthouse Financial
• Cigna
• MassMutual
• Principal

Check with your HR team or benefits manager to find out who provides your company’s group life insurance and when you can apply.

→ Learn more about how to buy life insurance

Is group life insurance worth it?

Signing up for free life insurance coverage is a no-brainer and we recommend taking advantage of group life insurance policies offered by your employer. Because group life insurance alone isn’t enough coverage for most people it’s important to pair a group life insurance policy with an individual life insurance policy so you don’t experience a coverage gap and your loved ones are fully protected.