Group life insurance is a type of life insurance in which an employer provides as an employee benefit. The employer usually pays for most (if not all) of the premiums. The cost of group coverage is typically less than what someone would pay for an individual life insurance policy.
Companies are not required to offer their employees a life insurance plan, so if your employer does, that’s a nice benefit to take advantage of. With a group plan, the amount of coverage you have is typically one or two times your annual salary. For most working individuals, this amount is not enough to protect your family financially if you were to die and your income was suddenly gone.
Jane Smith is a marketing coordinator and makes $45,000 annually. The only life insurance she has is the group plan from her employer that amounts to $75,000 in coverage.
Jane is married and has two children. She and her husband purchased a home three years ago when their second child was born. Their mortgage loan is $200,000 and the potential cost of sending two children to college will total at least $80,000. If Jane got into a deadly car collision on the way to work one morning, that $75,000 will cover her final expenses and one child’s college tuition.
Her husband John will now have to figure out how to raise two children, take care of daily living expenses, mortgage payments, and pay for college tuitions on one income.
Group life insurance is a generous addition to an employee benefit package, but it’s likely not enough on its own. Not only are the coverage amounts relatively low, the coverage only remains inforce if you’re employed by the company. If you quit or are terminated, your group coverage doesn’t follow you.
John Smith was out snowboarding and, even though he’s quite experienced, made a wrong move and wiped out. He was brought to a hospital by helicopter where it was determined that extensive brain damage occurred. After 90 days of little to no improvement, his employer had no choice but to terminate his employment which also ended John’s life insurance coverage. John went into a coma and never came out. His family was left with no life insurance death benefit to help cover funeral expenses and resulting medical bills.
Sometimes you have the option of converting your group coverage to an individual policy if you leave your employer, even without having to prove insurability. However, most people choose not to do this because these conversion premiums tend to be much higher than premiums for comparable policies available to individuals. Typically, only those who are otherwise uninsurable (because of a health condition, for example) take advantage of this conversion option.
We recommend purchasing an individual term life insurance policy as your base policy and use your group policy to supplement it. Term life insurance coverage is not tied to your employer. As long as you keep paying the premiums, a term policy will follow you wherever you go. It’s also very affordable.
Let’s say Jane from the earlier example is 35 years of age, doesn’t smoke, and tries to stay healthy. Since she has a mortgage and two children, a 20-year $500,000 policy would be a good option for her. Using the term quote tool on the Quotacy website, Jane can get this policy for as little as $20 per month.
John the snowboarder is 30 years old. He and his wife do not have any children, but might in the future. If he opted for a 30-year $250,000 policy, his monthly payment could be as low as $19 per month.
Calculate how much life insurance you need using our needs analysis tool. After answering three simple questions, you’ll get an idea of how much coverage you should own. Buying life insurance is easy and hassle-free through Quotacy. Contact us if you have any questions. We’re happy to help.