Group life insurance: Pros and cons

Congratulations, you got a job or joined a labor organization. Besides a steady paycheck, you’re probably getting a few sweet benefits like insurance and free coffee in the break room.

We suggest you grab a cup of joe and sit down to learn about all the benefits your employer has to offer as soon as possible; because you could be the newest member of a group life insurance policy.

Group life insurance is often a perk offered by employers or labor groups to everyone within the organization - but it’s often one of those benefits that gets easily overlooked.

While there are a few notable advantages to group life insurance, a one-size-fits-all life insurance plan may not offer enough coverage for your specific needs.

In this post, we’ll explain what group life insurance is and how it compares to individual life insurance policies that you could purchase from insurance providers on your own.

The basics of group life insurance

Group life insurance covers a group of people under one insurance contract. They are usually term life insurance policies that get renewed during the open-enrollment window.

Some people who receive group life insurance choose to purchase additional coverage to meet their needs.

Just like other life insurance policies, each person covered by a group life insurance policy can name their beneficiaries. These are the people who will receive death benefits if you pass away.

Benefits of group life insurance

It’s usually cheaper than buying life insurance yourself

Insurers usually offer lower rates for group plans, so you’ll be getting life insurance at a discount.

Your employer usually pays for some or all of your premium

If your boss is feeling generous, he or she may cover a portion or all of your life insurance premium. It’s generally a good idea to take advantage of this option if you have it, but you shouldn’t assume that the group plan is going to be all the life insurance you’ll need.

It gives people who are uninsurable access to life insurance

Some people cannot afford or qualify for life insurance on their own, but group life insurance policies need to offer coverage to everyone in the organization regardless of each person’s personal health history, age, and other factors.

Negatives of group life insurance

You may only have coverage while you’re working

Group insurance policies are typically only active while you’re a member of the group that holds the policy. So, if you quit your job or stop paying your union dues, you will no longer have life insurance.

Your coverage amount might be pretty basic

You may be getting a great deal on life insurance through a group policy, buy you want to make sure it’s providing enough coverage for your needs.

Check with the policyholder to see how much coverage you have and decide if you need to purchase additional life insurance.

Converting to an individual policy is pricey

Some group life insurance policies have an option to convert your group plan to an individual plan once you retire or leave your job. However, these premiums are often expensive.