Under an employer-sponsored group life insurance plan, a business purchases a policy that covers all employees collectively, which reduces the overall cost individually. For business owners and employers, the cost of group life insurance plans are deductible if they pay for the entire group premium. If employees must pay a portion of the cost, that amount is almost always lower than if they sought a plan on their own, which makes it an affordable alternative to individual life insurance plans.
Group life insurance also offers some benefits to employees in the form of less hassle when it comes to filing a claim. For example, when an employee signs up for a group life insurance benefit, they don’t usually need to get a physical or medical exam beforehand, which is not the case with individual policies. Additionally, many employers choose to offer a guaranteed amount of coverage, which makes it much easier to file a claim since less documentation is required if a claim is under a set amount–usually a factor of their pay. Because the risk is spread out among all employees, it’s generally easier for individual employees to qualify for group life insurance.
Group life insurance plans are not portable in most cases, meaning they cannot be carried from one employer to another. Since the plans are offered by an employer to employees–and the premium is based on the group–an individual that leaves a company will not have continued coverage.
Here are some of the factors that go into the cost of providing group life insurance to employees:
Typically, these risk factors are reassessed every five years and the premium is adjusted accordingly. Additional coverage may also be included in a group life insurance plan, including accidental death and dismemberment (AD&D) and coverage for dependents.
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