Understanding Employer (Group) Life Insurance
BASIC Term Life Insurance Policy
For some, the policy coverage is a flat amount (e.g., $25K of coverage). For others, it is based on one’s salary (e.g., coverage = 1 x salary).
- Convenient—Sign up at work, premiums get deducted from paycheck
- Guaranteed coverage—No questions, no tests, no underwriting
- Free—Generally free, regardless of age, health, etc.
- Work-Related Restrictions—Coverage typically requires “active” working status. If you become ill and unemployed before dying, the insurance may not pay.
- Not Portable—Can’t take policy with you if you leave the employer. Next employer may not offer life insurance.
SUPPLEMENTAL Term Life Insurance Policy
Some employers offer the option to buy additional life insurance – which can be 2x salary, 3x salary, etc. This can be added to the “Basic” coverage.
- Convenient—Sign up at work, premiums get deducted from paycheck (if issued).
- Minimal Underwriting (if any)—There may be some high-level medical questions (e.g., “Have you ever had a heart attack?”) or a medical exam.
- Potentially Lower Costs for Unhealthy—Have health issues? Your premiums may be lower than for an “Individual” policy because they are based on covering a group (the young, old, healthy and unhealthy).
- Work-Related Restrictions—Like the “Basic” coverage, typically requires you to be “actively” working.
- Not Portable—Can’t take policy with you if you leave the employer. If your next employer doesn’t offer “Supplemental” insurance, then you may need to purchase an “Individual” policy to maintain the same level of coverage – paying higher premiums based on your age and health.
- Increasing Premiums—Typically, costs increase each year as you age.
- No Options—Employer coverage typically offers few or no bells and whistles that an “Individual” policy may include.