What Is Group Life Insurance and How Does It Work?
Many U.S. employers offer group life insurance coverage as a company benefit — at no or low cost — to protect their employees' families financially after the policyholder’s death.
MW
By Melissa Wylie
MW
Content and SEO Manager
Melissa Wylie is the Content and SEO Manager at MoneyGeek, with nearly a decade of editorial experience and six years of work in financial content focused on small businesses. She previously held SEO positions at Bankrate and LendingTree, with bylines on ValuePenguin and MagnifyMoney. Wylie has a journalism degree from the University of North Texas. Her strong foundation in journalism helps her craft content that simplifies complex financial topics to help everyone feel confident when making decisions with their money.
MF
Reviewed by Mark Friedlander
MF
Director, Corporate Communications, Insurance Information Institute
Mark Friedlander has over 30 years of experience in financial services and insurance. He is the Director of Corporate Communications at the [Insurance Information Institute (III)](https://www.iii.org/) — a New York-based nonprofit research and education organization focused on providing consumers with a better understanding of insurance — serving as a national insurance industry media spokesperson for broadcast, digital and print outlets. Before joining the III, Friedlander held senior communications roles at Main Street America Insurance, Arthur Andersen LLP and Prudential Financial. His recent contributions and appearances include The Washington Post, The New York Times, Bloomberg, CNN, Fox Weather, the Associated Press, Reuters, National Public Radio (NPR), NBC News, ABC News, CNBC and many more national and regional news outlets. Friedlander holds a bachelor's degree in journalism and public relations from the Ohio State University.
Edited by Lukas VeluntaLukas Velunta Senior Editor Lukas Velunta is a MoneyGeek senior editor with over 12 years of experience in economics, finance, management and consumer science content. He also works as a research editor, preparing articles from non-native English speakers for peer review in Q1 journals.
MW
By Melissa Wylie
MW
Melissa Wylie Content and SEO Manager Melissa Wylie is the Content and SEO Manager at MoneyGeek, with nearly a decade of editorial experience and six years of work in financial content focused on small businesses. She previously held SEO positions at Bankrate and LendingTree, with bylines on ValuePenguin and MagnifyMoney. Wylie has a journalism degree from the University of North Texas. Her strong foundation in journalism helps her craft content that simplifies complex financial topics to help everyone feel confident when making decisions with their money.
MF
Reviewed by Mark Friedlander
MF
Mark Friedlander Director, Corporate Communications, Insurance Information Institute Mark Friedlander has over 30 years of experience in financial services and insurance. He is the Director of Corporate Communications at the [Insurance Information Institute (III)](https://www.iii.org/) — a New York-based nonprofit research and education organization focused on providing consumers with a better understanding of insurance — serving as a national insurance industry media spokesperson for broadcast, digital and print outlets. Before joining the III, Friedlander held senior communications roles at Main Street America Insurance, Arthur Andersen LLP and Prudential Financial. His recent contributions and appearances include The Washington Post, The New York Times, Bloomberg, CNN, Fox Weather, the Associated Press, Reuters, National Public Radio (NPR), NBC News, ABC News, CNBC and many more national and regional news outlets. Friedlander holds a bachelor's degree in journalism and public relations from the Ohio State University.
Edited by Lukas VeluntaLukas Velunta Senior Editor Lukas Velunta is a MoneyGeek senior editor with over 12 years of experience in economics, finance, management and consumer science content. He also works as a research editor, preparing articles from non-native English speakers for peer review in Q1 journals.
Updated: May 22, 2024 Advertising & Editorial DisclosureGroup life insurance, or basic life insurance, is often provided by an employer or organization to its eligible workers or members. It’s an easy and affordable — or sometimes free — way to get life insurance because no medical exam is required.
However, group life insurance often comes with low coverage. While it may benefit those who simply need coverage for funeral expenses, breadwinners may want to get supplemental life insurance to increase the policy’s coverage while benefiting from group rates.
Employers offer group life insurance to eligible employees to help them protect their loved ones and beneficiaries in the event of their death.
A group life policy is usually more affordable than individual policies due to negotiated rates but may provide a limited level of coverage.
Employers may choose to subsidize the costs of group life insurance entirely or may pay for it in part and deduct the premium from your salary.
Group life insurance is a policy offered by employers and private organizations to eligible employees or members to protect their families' financial well-being if the policyholder dies. It is sometimes called basic life insurance or employer-sponsored insurance.
Group life policies are a convenient and affordable way to get coverage because employees don’t need to undergo a medical exam and can benefit from shared premiums. Some companies may even offer group life insurance for free.
Generally, group life insurance covers several people under a single contract in the employer’s name. The employer can pay premiums entirely or partly, with the remaining portion paid for by employees who opt in.
Depending on the employer, the amount of coverage may be based on a specific dollar amount, the equivalent to an insured's annual salary or a multiple thereof. If the coverage amount is small, employees can sometimes purchase supplemental life insurance, adding more coverage at group costs.
Typically, companies choose term life policies because they don’t expect employees to stay at one company their entire lives. However, some companies may offer whole life insurance, which includes a cash value component.
Some group life insurance policies may require a minimum number of employees to participate in the plan. This number can vary depending on the insurance provider and the specific policy.
Typically, only full-time employees are eligible for group life insurance. Some employers may extend coverage to part-time employees and those with irregular work schedules, but they may need to work a certain number of hours per week to be eligible.
Some organizations may also have a waiting period before new employees are eligible. This period can range from a few months to a year, depending on the employer's policy.
Calculating the benefits of group life insurance is done through various methods, each tailored to different needs and preferences.
Group life insurance provides coverage for many scenarios, but it's not all-encompassing. Understanding what it doesn't cover can help you make informed decisions about your insurance needs.
Group life insurance offers distinct advantages and potential disadvantages. Understanding both can guide you in making the right choice for your situation.
Group life policies are employer-sponsored, meaning the company or small business subsidizes some or all of the premium costs. Since group insurance rates are typically lower than individual rates, many companies can afford to do this.
However, since it’s not mandatory, employees consider employer-sponsored group life insurance a benefit.
Low-cost or free
Group life insurance can be completely or partially subsidized by the employer. But even if it's partially subsidized, group life insurance can be attractive for employees who want low-cost coverage. Even if you upgrade your coverage at an extra cost, it may still be cheaper than purchasing life insurance on your own.
Typically, group life policies offer maximum coverage of one year's base salary, excluding commissions and bonuses. While employees may have the option to upgrade their coverage, this may not be enough for those who are the primary breadwinners or have significant financial obligations.
If a group life policy is insufficient, you can increase your coverage with an individual policy.
Employees can enroll in group life insurance policies without having to undergo a medical exam, making buying coverage easier. This can benefit employees who are smokers or have underlying health problems.
In some organizations, employees may have to wait for a specified time frame before qualifying for group life insurance.
If an employee leaves their job or is terminated, some group life insurance policies offer the option of converting the group coverage to an individual policy. It’s a convenient option for employees who want to ensure their coverage is maintained. However, it is important to note that conversion may come with higher premiums.
