How to Evaluate Group Life insurance coverage Through Work


Group life insurance is one of the most common workplace benefits offered by employers. According to a 2021 report by the Society for Hr Management, 82% of employers provide group life insurance coverage benefits.

If this type of workplace benefit is really commonplace, should you be taking advantage of it discover already? Most Americans are not. A 2021 study by LIMRA and Life Happens found that just 29% of adults have a group life insurance policy.

With open enrollment season approaching, you'll have an opportunity to decide whether you want group life insurance coverage if your employer offers this benefit. Before you sign up, here's what you should know relating to this benefit to assist you to see whether it's best for you.

What is group life insurance coverage?

If your employer offers life insurance coverage like a workplace benefit, it most likely is a group life policy. As the name suggests, it covers someone – in this instance, the workers in the company where your work – instead of a person.

The employer owns the group policy and decides the quantity of coverage that's offered. “It is a predetermined set amount that's usually around one to three times your salary,” says David Hessel, an economic planner with Global View Capital Advisors.

Typically, there is no health check to get group life insurance while there is with an individual life insurance coverage, and coverage is usually guaranteed issue, Hessel says. As such, the premium is exactly the same for everybody in the group.

The advantages of group life insurance

One from the main advantages of group life insurance is the easy getting a policy, says R.J. Weiss, a professional FINANCIAL PLANNERTM professional and founding father of the personal finance website The Ways to Wealth. Many companies automatically enroll employees in their group life insurance coverage plans upon hiring them, he says.

Plus, individuals with pre-existing conditions that make it nearly impossible to find individual life insurance often be eligible for a a group life policy because there's no medical underwriting and coverage is usually guaranteed.

The other big benefit of an organization life insurance policy is the cost, Weiss says. “Many employers pay 100% from the cost of the insurance up to a certain amount of coverage,” he states. Even if a company doesn't cover the cost, the premium for group life coverage could be lower than for individual coverage discover in good condition or have other risks, he states.

When applying for an individual term life insurance policy, you usually must answer questions about your health and perhaps undergo a medical exam to find out how much of a risk you are towards the insurer. (Note: It's very important to be truthful when completing the applying. The issuance of the policy or payment of advantages may rely on the answers given in the applying and their truthfulness.) The larger your risk, the larger your insurance rate is going to be by having an individual policy.

The drawbacks of group life insurance

Although the cost of an organization life insurance coverage can be cheaper for those who have health problems, it isn't always the best offer for people in good health, Weiss says. Healthy individuals usually pay higher premiums for group life policies than for a person policy since they are being lumped in with people whose health prevents them from qualifying for the best life insurance rates.

That's only some of the drawback of life insurance coverage offered through an employer. “While many employers offer coverage free of charge, the total amount found here is typically much smaller compared to actual needs from the employee,” Weiss says. “So, if you only trusted group life insurance, you’ll likely underinsured.”

On top of that, you likely can't keep the coverage should you leave your work. “While some insurers do offer an option to transform your intend to an individual policy, many different plans do not,” Weiss says. Then you may wind up without insurance coverage to protect all your family members.

How to evaluate a group life policy

Before evaluating your employer’s group life insurance coverage plan, you should know what your own life insurance needs are, Weiss says. That means knowing how much coverage you'll need and also the type of life insurance that's good for you. “Understanding your own needs provides you with the ability to properly assess your group’s policy,” Weiss says.

One guideline when getting life insurance would be to have a policy having a benefit amount comparable to Ten times your annual pre-tax income. This is often a starting place. But Hessel says you should consider these four factors to obtain a better concept of how much coverage you need:

Death expense

This is the amount you anticipate your burial and funeral to cost. Make sure to include this amount when figuring how much life insurance coverage you might need.

Income replacement

Ask yourself how much would you would like your family to get in a lump sum to exchange your income if you were to pass away. “For example: If you make $100,000 annually and you would like to provide your family Ten years of less financial worry, then the total to place here's $1 million,” Hessel says.


This may be the amount left on your current mortgage..


The best questions to ask here is if you would like to pay for some or all your child's college expense. If that's the case, look up the price of schools your child might attend to have an estimate for the total amount for four years of education multiplied by the quantity of children you've.

“The total of these four sections provides you with a good estimate for the amount of life insurance coverage that you'll require,” Hessel says. Then you will know whether the coverage provided by your employer's group plan is enough for you personally. Make use of a online for free calculator that takes many of these factors – and much more – into account to estimate the amount of insurance coverage you need.

Also consider the kind of life insurance your employer is providing. If it's a phrase life insurance coverage, you need to determine whether the word – that's, the space – from the policy is of sufficient length for your needs. The younger you are, the more the word you likely need. And if you're in your 20s and also the group life insurance coverage at the work has a term of only Ten years, that policy would simply be essentially to your 30s – which likely will not be a long enough term for your requirements.

You also should think about the price of the group plan. If you have to spend the money for premium, compare that rate with the rate you could get with an individual term life insurance policy to find out whether it's a great deal. “Often individual coverage is less than most think,” Hessel says.

Finally, understand whether the group policy could be converted to an individual life insurance policy if you left your job. If it can't, you may have trouble getting individual coverage at an affordable rate depending on how old you are and health whenever you leave your job.

Why you may need individual life insurance coverage

If your employer offers free group insurance coverage, you might want to think hard before turning down this benefit, Weiss says.

Butyou should consider supplementing by having an individual term life insurance policy even if you have coverage at work. Why? You won't want to risk being underinsured having a group life insurance policy when the benefit amount is too promising small to protect your loved ones.

Nor do you want your family's protection to be solely tied to your employment with a company, Hessel says. “If you depart your employer, it's unlikely that these needs for your family will go away much like your insurance coverage will.”

If this happens when you're older, you will possibly not be able to get a new policy. The older you're, the greater your chance of using a medical issue that can make you uninsurable, Hessel says.

Hessel notes that individual coverage is a good way of preventing being underprotected.