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What is group life insurance?
Group Life insurance covers the lives of multiple persons, such as some or all employees of a business, or members of a labor union, or those owing money to an automobile finance company, or members of an association. The person owning the "master group policy" in the above examples are the employer, the union, the finance company and the association, respectively. The insured persons, whether they get the life insurance as an "employee benefit", or a member benefit "for free", or make a contribution to its cost, or pay for it completely themselves, generally may name their own beneficiaries and are issued "Certificates" that are subject to the underlying Group Life Policy.
Group Life insurance historically was based on the risk characteristics of the group as a whole, without the intensive underwriting of each member, recognizing that some members of the group would be better risks than others, but it all works out. Further many groups generally were strongly cohesive, with many common characteristics linking all members of the group. For example, all employees of an established company like General Motors (who as people working on a job are healthier than an average of the population of like age, which includes some so ill they cannot work), or a group of lawyers (who do not engage in what is commonly considered a dangerous occupation), or actively flying commercial airline pilots (who, although in a slightly riskier job, must be in far better health to be actively flying). This often produced savings for members, as it lowered the costs of underwriting and issuing policies.
The practical distinction between Individual and Group Life has become more and more blurred as the scope of some groups increases to be so broad to include essentially the population as a whole (the so called "group" of "all people who breath air"), and the face amounts increase, and coverage become more "optional". As a result, many associations sponsor life insurance plans that are nominally Group Life coverage, but apply similar underwriting criteria, and most require individual underwriting as Individual Life. However, if a legal matter ever arises, the technical distinctions between Group and Individual may become critical. Also, as many companies have completely different units that deal with Group and Individual, the same insurer frequently would handle the exact matter completely differently depending on whether its Group or Individual unit is involved. |
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