According to one American College text, ‘Traditionally most group life insurance plans were designed to provide coverage during an employee’s working years, with coverage usually ceasing upon termination of employment for any reason. …The oldest and most common form of group life insurance is group term insurance. Coverage virtually always consists of yearly renewable term insurance that provides death benefits only, with no buildup of cash values.’[i]
Most employees rely on their employer for financial stability. And not only are employees looking to employers for pay checks, they desire pay roll deduction plans, cafeteria plans, and even employer contributions towards life insurance benefits. A recent LIMRA (Life Insurance and Market Research Association) study revealed that in 2011, ‘for the first time, the percentage of adults having group life insurance has surpassed adults owning individual life insurance.’ However, the study also shows that ‘people insured only through group life insurance have the lowest average amount of coverage.’[ii]
Nevertheless, for employers wanting to reward employees with a valuable benefit or desiring to provide employees with a method to purchase cheaper life insurance with the ease of payroll deductions and simplified or guaranteed issued underwriting (see No-Exam Life Insurance), then group life insurance plan can be tailored to fit their needs.
- NON-CONTRIBUTORY GROUP LIFE INSURANCE:
There are two basic methods to fund and offer group life insurance. They are contributory and non-contributory. If the coverage is provided non-contributory then the employer is paying all of the premiums. Non-contributory group insurance plans require that the plan be offered to all employees in the same class, such as full-time employees, and all the staff employees, etc. These plans also require enrollment dates, notice of terminations, 100 % employer contributions of premiums, and 100 % available participation unless the coverage is waived by the employee. These life insurance types are usually offered in connection with a group health plan, and offer $ 10,000 to $ 50,000 worth of coverage, or up to one times the employee’s salary.
- CONTRIBUTORY GROUP LIFE INSURANCE:
Both non-contributory and contributory group life insurance plans normally allow for spouse and or children coverage. Both plans are typically guaranteed issued, and in some cases simplified issued. Contributory group life plans usually require about 75 % employee participation and often a minimum employer contribution, such as 25 %. The more employees on a group plan the better the premium offer and amount of coverage without underwriting.
Like other No-exam plans, group life insurance is a great opportunity for individuals that would otherwise be significantly rated or declined for coverage. Additionally, group life insurance is a great supplement to provide needed life insurance coverage. And for those professionals and workers able to get low cost group term insurance up to $ 250,000 and $ 500,000 with simplified or guaranteed issued underwriting – especially where the employer pays a portion of the premium – the choice is an easy one.
Nevertheless, for those individuals that desire a cash value permanent life insurance plan to provide lifetime or extended coverage; or for those persons needing more term coverage, they should examine and compare traditional universal life insurance, whole life insurance, and term life insurance plans.