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What Is Group Life Insurance

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What Is Group Life Insurance Policy

What is Group Life Insurance?

Group Life Insurance is a company scheme for a group of people. In Nigeria, this life insurance is compulsory by law. It caters to these groups to take out a policy for a minimum of 3x the total employee annual salary. The group of people is usually not less than 5.

The scheme includes employees in the public and private sectors , clubs, and associations.

What Amount Of Income Is Insured

The amount of income thats insured largely depends on your specific employer and the plans they have selected for the employees. It is also based on your particular position within the organization. In most cases, benefits for management and C-suite executives are greater than those offered to entry-level or hourly employees. Group life insurance policies usually only cover an employees base salary. However, there are employers that offer coverage that multiplies the employees base salary by a set increment, allowing for more robust coverage.

Group Life Insurance Coverage Is Limited

Typically 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.

“If you are older and sicker, it may be very difficult to replace this coverage,” Golding said.

That said, some group policies may allow you to buy out the policy or own it, but that will likely come at a cost.

“Group life insurance makes sense if you’re going to stay with your job for most of your life. This is becoming less the case, so getting insurance through your employer might be immediately convenient, but not in the long-term. Sometimes you can convert the insurance you have to personal life insurance, but you’ll likely pay significantly for this option. It’ll be smarter to look elsewhere,” Steiner said.

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Total Amount Of Coverage

IRC section 79 provides an exclusion for the first $50,000 of group-term life insurance coverage provided under a policy carried directly or indirectly by an employer. There are no tax consequences if the total amount of such policies does not exceed $50,000. The imputed cost of coverage in excess of $50,000 must be included in income, using the IRS Premium Table, and are subject to social security and Medicare taxes.

What Is Supplemental Life Insurance

Business Life Insurance: Find Group Coverage Today ...

Supplemental life insurance, also called voluntary supplemental life insurance, refers to any group life insurance you purchase on top of what is offered by your employer. Payments are typically handled by your employer, which deducts the premiums from your paycheck. Depending on the insurer your employer works with, you may be able to purchase supplemental life insurance for yourself, your spouse and your children.

Whether you should purchase supplemental life insurance through your employer primarily depends on your health. Simply put, if you’re healthy or young, you are very likely to get better rates purchasing an individual life insurance policy . On the other hand, if you need more life insurance than is provided as basic group coverage and have had trouble being approved for an individual policy, you should purchase supplemental life insurance.

Supplemental life insurance premiums are higher because the insurer has very little information about your health. Therefore, they may require “evidence of insurability” if you want to purchase a large amount of coverage, as it’s not guaranteed issue like basic group life insurance. Demonstrating insurability can include answering health questions, allowing the insurer to review your medical records or submitting to a medical exam.

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Is Group Term Life Insurance Worth It

There are ups and downs to group term life insurance. It can be significantly cheaper than alternatives, as the insurer offers lower premiums, and the employer generally subsidizes this further. It is much better than having no life insurance at all, especially in situations where the employer fully covers the cost.

However, group life insurance is limited by its nature. When a policy is designed well for a diverse group of people, it will rarely be designed well for each individual within that group. This can lead to paying for coverage you dont want and not getting the coverage that you do want. Further, you lose the ability to tailor your premium payments and death benefit payout to your needs and situation.

Thankfully, there are numerous styles of life insurance, each with different specialties and focuses. Like with most important purchases, it can help when buying life insurance to shop around and compare not only between companies but between product types as well:

If group insurance isnt what youre looking for, consider one or more of these other options.

Supplemental Life Insurance Might Offer Add

Employers might include some additional benefits in a group policy such as an accelerated death benefit or a waiver of premium benefit. With an accelerated death benefit, employees suffering from a terminal illness might be able to receive a portion of their life insurance payout. The payout youre eligible to receive is usually a percentage of the policys death benefit amount. This limit will depend on the insurer, but typically ranges between 50% and 90% of the full death benefit.

A waiver of premium benefit allows employees who have become totally disabled to continue their group life insurance policy without paying a premium. Usually, employees must be under age 60 and be disabled for at least 180 days to qualify.

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What Does It Mean To Port A Group Life Insurance Policy

If you have group life insurance through an employer, the insurance is likely job-dependent. If you leave the job youll generally lose the group life insurance. But sometimes you can port the workplace insurance, which allows you to continue buying the group life insurance after youve left the job.

For example, you might be offered portability if your employment is being terminated.

Advantages And Disadvantages Of Group Life Insurance

What Is Basic Group Term Life Insurance?

The biggest appeal group life insurance has for employees is its value for money. Group members typically pay very little, if anything at all. Any premiums are drawn directly from their weekly or monthly gross earnings. Qualifying for group policies is easy, with coverage guaranteed to all group members. Unlike with individual policies, group insurance doesnt require a medical exam.

However, low cost and convenience arent everything. Group life insurance generally comes with only basic coverage, which means it may not fulfill the needs of policyholders. Typical amounts are $20,000, $50,000, or one or two times the insureds annual salary. Thats why experts say it should be treated as a perk and supplemented with a separate individual policy, rather than being seen as sufficient standalone coverage.

Another drawback is that the employer controls the policy, which means your premiums can increase based on decisions that your employer makes. If an organization opts to terminate group life insuranceor a person decides to switch jobscoverage usually stops. However, the former employee does have an option to continue coverage at the individual level. This means the policy is converted from a group life policy to an individual one, which comes with higher premiums. While many people may not want the greater cost, those who are otherwise uninsurable will benefit from the conversion, as a medical exam still would not be required.

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Characteristics Of Group Insurance

Investopedia defines group life insurance as “Life insurance offered by an employer or large-scale entity to its workers or members. ” Group life insurance is typically offered as a piece of a larger employer or membership benefit package. By purchasing coverage through a provider on a ‘wholesale’ basis for its members, the coverage costs each individual worker/member much less than the purchase of an individual policy. People who elect coverage through the group policy receive a ‘certificate of credible coverage’ useful in obtaining subsequent coverage, if necessary from another insurance.

Thus we can infer the following characteristics of group life insurance, which also apply to other group insurances:

  • There must be a group of people to be insured who have something in common other than the purpose of obtaining insurance.
  • There is often a master policy holder who will retain the documentation on behalf of the members, and may deal with the members on behalf of the insurer.
  • Group rates are cheaper than individual rates, as administration and expected claims costs are lower.

Insurable Groups can broadly be classified as mainly two types – ” employer – employee ” groups where all members work for the employer proposing to cover them or “affinity” groups, whose members have a commonality other than employment – say deposit holders of a bank.

Why You May Need Additional Coverage

Group term life insurance policies are generally limited in their coverage. Depending on your employer and their insurance company, you may be able to purchase expanded coverage through your existing policy with them. However, in many cases, it can be necessary to purchase an additional individual life insurance policy to supplement the group plan offered by your employer.

For single people with no dependents, the group policy may offer sufficient coverage. However, for families and those with dependents, these term policies are often too limited in their benefits. In these cases, it can be wise to take out a larger individual plan to ensure that your beneficiaries will receive a large enough payout to meet their needs.

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Taxes On Group Term Life Insurance

Similar to an individual life insurance policy, your beneficiaries generally wouldn’t pay income taxes on the policy’s death benefit when you die. However, you may have to pay taxes on the value of your group and supplemental life insurance, as this can be considered part of your income.

In most cases, if you have less than $50,000 of group and supplemental term life insurance through your employer, you won’t have any associated income taxes. Any group term coverage above $50,000 is assigned a fair market value by the IRS. If you pay less in premiums than this fair market value, the difference is considered as part of your income and you would pay taxes on it.

It may seem odd to pay taxes on coverage that you already pay for. A fair market value is assigned to compensate for situations where an employee receives significantly discounted premiums by having their risk pooled with healthier people.

There are some exceptions to this calculation. For example, if your spouse or children have more than $2,000 of life insurance, the total cost of their coverage could be considered as taxable income. And, if the company offers different amounts of life insurance to certain segments of employees, you may have to pay taxes on the full cost of coverage if you’re an officer or significant owner of the company.

The Basics Of Group Life Insurance

Individual Life Insurance vs. Group Term 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.;

“If your employer offers group life insurance for free, even if it’s a small amount, go ahead and take it. This doesn’t affect whether you can get additional life insurance elsewhere, so there’s no real reason not to take advantage of this,” said Chane Steiner, CEO of Crediful.

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What Exactly Is Group Life Insurance Anyway

Group life insurance involves a single contract covering a group of people, typically an employer or large scale organisation. In these cases the insurer agrees to offer the insurance without collecting detailed personal information on each persons current health status and previous health history.

As the insurer is insuring a large number of people at the same time, they make certain assumptions of the health condition of that group of people as a whole.

Group life insurance has been around for many years before it was included in some employer superannuation arrangements. ;It was made available, and in some situations still is, to large companies to offer life and TPD insurance to the companys employees. Income protection insurance was sometimes also offered separately to the life and TPD insurance.

This arrangement also means the cost can be lower than if the individual employees applied for the same insurance themselves. However, the amount of group life insurance cover can be quite low , often as low as the equivalent of one years worth of income.

Any income protection group insurance often offers a lower level of monthly benefit than income protection individually applied for, and also typically has less benefits and options attached.

Accidental Death & Dismemberment 2

Its no surprise. People have accidents every day. And, unfortunately, some of them are severe. Adding Accidental Death & Dismemberment coverage to group term life or voluntary term life provides your employees with even greater protection. A core benefit is paid for the loss of life, hands, feet, thumb and index finger, and vision as the result of an accident.

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Group Life Insurance Policy Options

NYL GBS Voluntary Term Life

Plans are tailored to meet employers needs with a choice of basic or voluntary term life coverage, or a combination of the two.

NYL GBS Universal Life

Insurance combines;the protection;of life insurance with;an option to build savings.

Our holistic, customer-centered approach to group life insurance provides value for both you and your employees:


Supplemental Group Life Insurance

What Is Group Term Life Insurance? : Life Insurance

Many people opt to buy more insurance, known as supplemental life insurance, through their workplace plans.

The amount of coverage available varies among companies, but can reach $500,000 or five times your annual salary. The higher amounts mean you may have to fill out a health questionnaire. The results are used to calculate your rates and eligibility for coverage.

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How Does Group Life Insurance Work

Group life insurance doesnt require a medical exam, a definite pro for folks in poor health, or who fear doctors. When you get group life insurance through your job, its part of your employee benefits package and doesnt hinge on the state of your health. And if you sign up for group life insurance through a professional association or credit union, you probably wont need to submit to a medical exam or answer questions about your medical history. The fact that youre part of a group makes you a desirable customer in the eyes of the insurance company, regardless of the state of your health or lifestyle.

Another advantage of group life insurance is that it comes with low premiums. Because the risk to the insurance company is pooled, the company can charge less for covering each member of the group. ;If your health is only so-so, the lack of a medical exam and the low premiums are;the primary benefits;of joining a group policy. If youre the healthiest person in the world you wont benefit from group rates in the same way, since your premiums for individual life insurance would be low anyway.

How To Get Group Life Insurance

If your employer offers group life insurance, youâll typically be able to enroll in the plan when youâre first hired. If you donât enroll when the policy is first offered, you may need to wait until your next open enrollment period.

The open enrollment period is also an opportunity to change or update any existing benefits you have. Depending on your employerâs group life insurance plan, you may be able to increase your coverage during open enrollment. Because open enrollment periods differ from company to company, check with your HR team or benefits manager for exact dates.

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What Is My Coverage

Your age and your annual earnings, not including overtime or honoraria, determine your Basic Group Life Insurance coverage.

For salaried employees, payments are calculated by multiplying your annual basic earnings by your age factor at the time of your death. For hourly employees, payments are calculated by multiplying the salary 12 months from the date of your death by your age factor at the time of your death. For example, if you die when you are 45 years old or younger, your beneficiary will receive four times your annual basic earnings. If you die between the ages of 65 and 71, your beneficiary will receive a payment equal to your annual basic earnings. The maximum amount your beneficiary will receive in the event of your death is $300,000.

The value of your life insurance coverage decreases as you get older, assuming your annual basic earnings remain constant. Your life insurance coverage may also decrease if your annual basic earnings are reduced.

You can convert all or a portion of the reduced coverage amount to an individual plan with Sun Life. You can convert all or a portion of your Basic Group Life Insurance coverage to an individual policy within 31 days after you experience a reduction in coverage or your coverage ends. See;Converting your group policy to an individual policy;for more information.

2 x annual basic earnings
Employees who reach their NRD*;and continue to work to 711 x annual basic earnings

What Are The Benefits Of A Group Term Insurance Plan To Employees

What workers need to know about group life insurance

Following are the benefits of a group term insurance plan to employees-

  • Employees are assured of financial assistance being extended to their families in the unfortunate event of their demise, critical illness, etc.
  • Employees can benefit from the inconvenience of medical tests be done away with until their free cover limits.
  • The premiums paid by their employers are not treated as perquisites.
  • Employees can enjoy death benefits that are exempt from tax under Section 10
  • Easy administration by way of simple documentation
  • Can be customised to meet niche needs of the employees enrolled
  • Offers security to the family of the insured
  • Safeguards the insureds financial interest

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