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The basics of group life insurance

Group life insurance is a benefit offered by groups to their members -- most commonly by employers to their workers.

With a group life insurance policy, the insurance contract is between the group and the insurance company, and the participating group members receive certificates of coverage.

More than half of life insurance policies is group coverage. Group life insurance covers 108 million people. Only 102 million people have individual coverage.

The advantages of group life insurance

Group life has two things going for it:

  • It's easy to qualify for coverage.  Unlike an individual life insurance policy, where you might be rejected, group life coverage is guaranteed and there are no medical questions. The insurer bases the premium on the risk of the group as a whole and considers such factors as the ratio of women to men, members' ages and the kind of work they perform.
  • When offered as part of a basic benefits package, the coverage is often free to the employee, with higher levels of coverage available at group rates.

Free life insurance is a great deal, but think of group life as a supplement, versus a replacement, for an individual life insurance policy. Experts generally advise against relying solely on employer-provided group life for protection because you don't control the policy; the employer does.

Group life insurance coverage is limited

Group life insurance explainedTypically an employer-sponsored group policy is term life insurance. The coverage ends when you leave the company. Your next employer might not offer the benefit.

Your group life insurance benefits can also end if the employer decides to terminate the policy to cut costs.

Another reason not to rely solely on employer-sponsored group life is the small coverage amount. Typically the death benefit is one or two times your annual salary -- not enough to cover a family's long-term financial needs.

Buying more coverage at group life rates

You might have the opportunity to buy additional coverage through the group. You pay the premium for the additional coverage at the group rate, but you may need to answer some health questions.

The voluntary coverage you buy through the group may be portable, meaning you continue it after you leave the company. Make sure you check with your benefits administrator on the portability of the voluntary coverage, if this is of interest.

Although most group life policies are term life, through some groups you can buy whole life insurance, which covers you no matter when you die.

To buy the additional insurance, you may have to fill out a brief questionnaire about your medical history. And you might have to undergo an exam if the answers reveal any serious health problems. But generally you won't have to supply as much health information for the group coverage as you would when buying an individual policy.

That could be an important advantage if you have a health condition that makes qualifying for an individual life policy challenging.

Comparing life insurance quotes

If you're young and healthy, and your “group” tends to be older, you might find a better deal shopping for an individual policy that requires you to disclose health information and undergo a life insurance medical exam. Nonsmokers in excellent health with no other risk factors, such as a family member who died from heart disease before age 60, generally qualify for preferred select rates. Also called preferred plus, super preferred or preferred elite, those are the very best rates and may be lower than those offered through the group.

How low are the best rates? A healthy 30-year-old man can buy a $500,000 term life for 20 years for about $417 annually on average. That same policy for a 30-year-old woman averages $349. 

Another advantage of individual term life insurance is you can lock in the rate for 15, 20 or even 30 years. With a group life policy, your premium may increase as you age.

Before you opt for additional group coverage, get quotes for a comparable individual life insurance policy to compare rates. If you do buy life insurance through the group, make sure it's enough to cover your family's needs. 

Buying an individual life insurance policy

Group life insurance is a great deal, but given its limited coverage,  typically you will also need an individual policy to be sure your loved ones are fully protected should the unthinkable happen. 

One way to figure out how much life insurance you need is by using Insure.com's Life Insurance Calculator, which helps you decide how much coverage you need and what type. 

Our Insurance Advisor tool  will give you recommendations regarding any gaps in your coverage and what actions you need to take to ensure sufficient coverage to better protect you and your love ones.

Insure.com's annual survey of 3,700 customers also ranks the Best Life Insurance Companies on value, customer service, and renewal recommendations.

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