Group Life and Disability Insurance

Thursday, April 4, 2024 16:42 Posted by Admin

For many people, the benefits that they receive from their employer may be just as important, if not more, than their salary or hourly wage. In addition to sick pay and vacation time, most full-time employees also enjoy the advantage of dental, vision, healthcare, 401(k) matching or pension, and potentially some discount opportunities. Other common benefits that your employer may provide are group life insurance and group disability insurance.

What is Group Life Insurance?

Group life insurance, also called employer-paid life insurance, is a form of life insurance that involves a one contract, or agreement, that protects an entire group of individuals. In most cases, the policyholder is an employer or other entity, such as a labor union, and the policy covers the employees or group members.

Employers commonly provide group life insurance within their comprehensive employee benefits packages. It is often seen as a major advantage, as it gives employees’ loved ones some extra income should the employee pass away. Group life insurance is also generally more affordable than what employees, or members, would end up paying for individual insurance. For these reasons, if your employer or some other group offers you group life insurance, it’s highly advised that you take it – unless you already have life insurance or your personal coverage is sufficient.

As the policyholder, your employer has the authentic insurance policy, which is called the ‘master contract.’ Those who are covered under this policy usually get a certificate of insurance, which acts as proof of insurance but it’s technically the insurance policy itself. Like other types of life insurance, you are allowed to choose your beneficiary with group life insurance.

Types of Group Life Insurance

There are three main forms of group life insurance: group term life, group universal life, and variable group universal life. Let’s take a look at each of these in detail.

Group Term Life

Group term life is the most common type of group life insurance available. In most cases, the employer provides it to the employees via a one-year term insurance policy that renews annually. When the policy is up to be renewed, both the employer and the insurance company are given the option to continue or not. The rates may also go up during the renewal process.

When your employer, or another entity, provides group term life insurance, they usually pay for the majority, if not all, of the premiums. The typical coverage amount is equal to one to times the employee’s yearly salary. Group term life insurance also has three primary types:

  • Basic: This is the most common coverage, involving basic coverage. Premiums, which are up to $50,000, are paid by the employer and are an income tax-free advantage for the employee.
  • Supplemental: This option is usually offered by the employer, along with basic group term life. You choose this type and the level of coverage based on your needs and individual circumstances, and also pay for the premiums.
  • Portable: Whether you leave the group or retire, this coverage can be taken with you to continue being protected until you reach the age of 70. As the former employee, you will be responsible for making the payments to the insurer.

 Group Universal Life

This form of group life insurance encompasses the advantages of term life and whole life insurance. You have the choice of paying the life insurance premium on its own or also make additional payments that are above the premium and add value. The benefits of this type of group life insurance are cost-effective rates, basic underwriting, and the option of portability and cash accumulation.

 Variable Group Universal Life

Typically found in executive benefit plans or used to fund retiree life insurance, this type of group life insurance offers flexibility, a guaranteed account, and the option of sub-account investment selections. Though, the drawback to variable group universal life insurance is the expenses and fees, including mortality and expense fees, management and distribution charges, and fund expenses.

What is Group Disability Insurance?

Ensuring that you have enough income to support yourself and your family if you are sick or injured and can no longer work for a specified period of time is a crucial component in any financial plan. This is what’s known as a disability. During such unprecedented times, having disability insurance to fall back on has become more and more important.

To provide income should a disability occur, employers often offer their full-time staff the benefit of either group short or group long-term disability coverage. With group disability insurance, the coverage is tied to your employer and generally cheaper. Whereas, if you were to choose an individual policy, you’d likely pay much higher premiums.

However, if you end up changing or losing your job, group coverage is not portable. This means that you cannot take it with you when you leave. Another drawback to group disability insurance is the fact that the cost of your coverage can change year over year. With individual disability policies, the benefits, costs, and details are contractually agreed and will not chance – even if you end up changing employment or occupation.

Group Short vs. Long-Term Disability Insurance

The two main types of group disability insurance that your employer may offer you are short term and long term.

  • Short-Term Disability Insurance (STD): As the name suggests, these types of group disability policies pay benefits for short periods of time. In most cases, these policies are three months, six months, or one year of coverage, after a short waiting (elimination) period. If you become disabled, short term disability coverage will pay a percentage of your salary. The typical short term disability insurance policy gives you between 40 and 65 percent of your base salary, prior to your disability. Short term disability coverage is usually very expensive when bought as an individual, and group plans are less expensive than their long-term group counterparts.
  • Long-Term Disability Insurance (LTD): Essentially, long term disability insurance will pick up after the short term disability coverage runs out. Once the short term benefits experience, usually after three months, six months, or a year, your long term policy will pay you between 50 and 60 percent of your salary. The specific percentage depends on your policy. As the name suggests, these benefits are issued over a longer period of time. They often last for two years, five years, 10 years, or until you turn 65. Though, the longer the benefit period, the higher your premium will be.
 Taylor Benefits Insurance Agency Can Help!

Whether you’re an employer looking to create a quality employee benefits package or you’re looking for an affordable individual insurance plan, we can help! We’ve been in business for over thirty years and are one of the best group health insurance brokers in the nation.

Whether you are located in the Bay Area or anywhere else in the United States, our experienced and professional brokers can explain the plans available to you, break down all the little details, and help you find the ideal group life and disability insurance plan for you. Contact us now to learn more and get started!

Written by Todd Taylor

Todd Taylor

Todd Taylor oversees most of the marketing and client administration for the agency with help of an incredible team. Todd is a seasoned benefits insurance broker with over 35 years of industry experience. As the Founder and CEO of Taylor Benefits Insurance Agency, Inc., he provides strategic consultations and high-quality support to ensure his clients’ competitive position in the market.

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