Group life insurance

Group term life insurance covers a group of people — usually employees — under one insurance contract. You should have group insurance, but you'll still need private coverage.

Rebecca Shoenthal author photoAmanda Shih author photo

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Rebecca Shoenthal

Rebecca Shoenthal

Editor & Licensed Life Insurance Expert

Rebecca Shoenthal is a licensed life, disability, and health insurance expert and a former editor at Policygenius. Her insights about life insurance and finance have appeared in The Wall Street Journal, Fox Business, The Balance, HerMoney, SBLI, and John Hancock.

 & Amanda Shih

Amanda Shih

Editor & Licensed Life Insurance Expert

Amanda Shih is an editor and a licensed life, disability, and health insurance expert at Policygenius, where she writes about life insurance and disability insurance. Her expertise has appeared in Slate, Lifehacker, Little Spoon, and J.D. Power.

Updated November 16, 2021 | 4 min read

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Group life insurance, also called group term life insurance, is one life insurance contract that covers a group of people. Employers commonly offer it as part of a benefits package: 60% of non-government workers had access to employer-provided life insurance in 2021. [1]

Group policies are easy to qualify for and affordable, but they rarely provide the level of coverage you need. To fully protect your loved ones, you should buy a term life insurance policy to complement your group plan.

What is group life insurance?

Group life insurance is usually offered by employers, but may also be offered by unions and trade organizations. As the name suggests, coverage is offered to a large group, rather than an individual.

Group term life insurance is often subsidized by the policyholder (e.g., your employer), so you pay little or none of the policy’s premiums. You get coverage up to a limit, usually $50,000 or one to two times your annual salary (up to a limit).

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How does group life insurance work?

Other than the coverage restrictions and who owns the policy, group life insurance works essentially the same as an individual term life policy:

  • Monthly or annual payments keep the policy active.

  • Policies expire after a certain period (for group life, coverage is often renewed yearly by the policyholder).

  • The insurer pays a death benefit to a designated beneficiary for most causes of death.

Most employers don’t let you keep your group life insurance if you leave the company. If they do let you take the coverage with you, it’s usually more expensive to keep it than to buy a new policy on your own.

Keeping or converting your group policy can make it a good option if you've had difficulty qualifying for your own life insurance in the past. The process doesn't require a medical exam.

Should you get group life insurance?

There’s no reason not to join your company’s life insurance plan. It’s an easy, affordable way to start a financial safety net for your family. But, if any loved ones rely on you financially, you should own a personal term life insurance policy too.

Policygenius experts recommend having a death benefit of at least 10 to 15 times your income to prevent your family from being underinsured — significantly more than an employer-sponsored plan offers.

"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."

→ Learn more about personal term life insurance options

quote

Only having life insurance coverage through your group plan will almost always leave you under-protected.

- Patrick Hanzel

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How much does group life insurance cost?

The cost of group life insurance depends on company or organization that manages your policy. You may need to contribute some money to your premiums or the cost may be completely covered.

Is group life insurance taxed?

If your group coverage exceeds $50,000, you could be on the hook for some taxes. Above that amount, the IRS considers any premiums your employer pays to be imputed income, a benefit that is not part of your salary but is taxable. [2]

The taxable amount varies on an individual basis, but you may be able to find it on your paystub as a line item labeled "group term life" or "GTL." This indicates the premiums your employer paid toward your coverage that are taxable.

How to get group life insurance

You can usually enroll in an employer-sponsored group life plan when you start a job. If you don’t enroll when you're hired, you can sign up during an open enrollment period or if you have a qualifying life event, like a marriage.

Unlike most life insurance policies, your health and age rarely impact whether you qualify for group life insurance. You probably won’t need to go through the underwriting process to get coverage.

Supplemental group life insurance

Your company may give you the choice to buy life insurance coverage on top of your employer-sponsored plan. This is called supplemental life insurance, optional life insurance, or voluntary life insurance.

The type of coverage and specifics around premiums vary by employer. Some employers may offer an accidental death and dismemberment policy or riders to customize your coverage. Others may allow you to increase the death benefit of your group life policy.

To get additional coverage, you may need to complete an Evidence of Insurability (EOI) form, which can include a medical questionnaire. If you have health problems or can’t prove a financial need for supplemental coverage, you could be declined.

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Signing up for free life insurance coverage is a no-brainer for anyone, and especially for people who might struggle to qualify for an individual policy. But, because group life insurance alone isn’t enough coverage for most people, it should be paired with an individual policy. You'll avoid a coverage gap and ensure your loved ones are fully protected.

Frequently asked questions

What is a group term life insurance plan?

Group term life insurance is owned by one organization (usually an employer) but covers many people. It pays a benefit to your beneficiaries if you die while the policy is active.

What’s the difference between group life and term life insurance?

Group life insurance covers many people with one policy, whereas term life insurance covers one person. Group life offers less coverage and is cheaper and easier to qualify for than term life.

What are the disadvantages of group life insurance?

Group life insurance rarely provides the amount of coverage you need, and you can't take it with you if you leave the job or organization that manages the policy.

What happens to group life insurance if you leave your job?

You either lose the policy or have an option to continue paying for the coverage on your own. You can usually find a cheaper individual policy.