What does group life insurance cover?
UPDATED: December 16, 2019
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Group life insurance covers the lives of multiple persons such as some or all employees of a business, members of a labor union, or members of an association. Depending on the group life insurance policy, the insured person may receive life insurance coverage as an employee benefit, make a contribution to pay part of the cost, or may pay for the group life insurance policy on their own.
Understanding Group Life Insurance
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 less of a risk than others. Further, many groups purchasing group life insurance generally were strongly cohesive with many common characteristics linking all members of the group. For example, all employees of an established company such as General Motors or a group of lawyers are all generally considered to be healthy to perform the tasks at hand and they rarely engage in risky behavior related to the job. This produces savings for members, as it lowers the costs of underwriting and issuing policies.
Differences Between Individual and Group Life Insurance
Unlike an individual life insurance policy, group life insurance coverage is not based on the risk associated with an individual person. Group life insurance policies are established based on the risk factor of the group as a whole, so higher risk members of the group are protected from being adversely singled out and either excluded or forced to pay more. A member of a group life insurance policy is typically protected from their employer or organization cancelling their specific insurance as long as the person remains a member of the group. When an individual buys into a group life insurance policy, they cannot be exempt from the group life insurance coverage as long as they remain in the group, and may have the option to continue to buy into they group plan for a certain period of time after they leave. For questions about a group life insurance policy, contact an experienced insurance attorney.