What is Group Term Insurance?

Group term insurance is insurance offered by an employer to their employers. Since it is term life insurance, it comes to maturity around the time the employee would normally retire, such as 65 or 70. Often, employers include group term insurance as a part of their employee benefit package. Usually, the employer covers most of the cost of the insurance policy. The employee might pay a portion of the premiums, but the premiums typically cover medical as well as life insurance policies.

Group Term Insurance Coverage

Group term insurance benefits go to the beneficiary named on the policy if the employee dies before the term of the policy. The amount covered depends on the policy chosen by the employer. For small companies, with fewer than ten employees, coverage is usually between $10,000 and $100,000 per life ensured. There can be a maximum for the entire group as well. Obviously, this amount is not intended to be the only life insurance the person has, but it is meant to be a benefit of employment, on top of other life insurance the insured might have. Larger companies, with more than nine employees, are usually eligible for greater coverage per employee, sometimes as much as $200,000. The group term insurance rates are affected by how much coverage the company chooses to have for each employee. The greater the coverage, the higher the rate, but the more attractive the benefits package, potentially drawing better employees.

What if Employee is Terminated:

If the employee is no longer with the company, they often have the option to continue their life insurance, provided they are willing to make the necessary payments for the premiums. The company will no longer be paying the premium.

Insurance companies also offer waiver of premium options. These options allow the employer to continue the coverage without paying the premium if their employee becomes disabled before the term of the policy. There is a fee for this benefit, but in high-risk jobs, it is a major draw for potential employees.

Premiums

The premiums for group term insurance are covered by the employer, with a portion sometimes covered through employee contributions. The premium will vary depending on the policy chosen by the employer. The more insurance the employer purchases, the higher the premium. The employer will want to strike a balance between the group term insurance rate and the level of coverage for the employees that will be a good draw.