Life insurance helps people provide for their loved ones if they unexpectedly pass away. For individuals who have jobs and earn an income that their families rely on, this is an especially important type of insurance. Businesses and other organizations can help their employees obtain coverage by offering group life insurance in benefits packages.
Group life insurance provides life insurance coverage for multiple people who are part of a defined group. In most cases, a business, government, membership organization, or similar entity is a policyholder, and its employees or members receive the life insurance coverage. As the policyholder, the business or other entity typically receives the actual policy paperwork, and covered individuals might get a certificate of insurance for their own records.
A group life policy may be set up so that a business or its employees pay the associated premiums. In some cases, businesses provide a basic amount of coverage for employees, and employees who want more protection can choose to pay for additional coverage.
The amount of coverage that businesses and other entities offer varies greatly. Some only provide a nominal amount of coverage, sometimes just $1,000, while others offer coverage equal to several times an employee’s annual salary.
While there may be a few group life policies that offer whole life insurance, most provide term life insurance. Coverage typically expires when an employee’s employment ends or when the policy’s term is over.
Whether or not employees must enroll in a group life policy depends on how the policy is set up. If the premiums are fully paid by the business or other entity, employees may be automatically enrolled. If employees pay at least a portion of the premiums, they may need to sign up for the policy before they have coverage.
Even when employees are automatically enrolled, they should still be familiar with the policy. It’s often a good idea for employees to choose a beneficiary for their benefits. A beneficiary is someone who will receive the funds if the employee passes away.
Group life insurance is usually included as one component of a group benefits package. Businesses that are interested in learning more about how a group life policy may fit into a benefits package should talk with an advisor who is familiar with all of the products that may be included in a benefits package. They’ll be able to both help set up a group life policy and design a benefits package that is well-suited for a business’ employees.