There are many ways to show your employees that you care about them, and buying group life insurance is one way to go. Group life insurance gives your employees peace of mind knowing that if something happens to them, their families and loved ones will be taken care of.
Group life insurance policies provide extensive benefits for your team. Providing your team with robust benefits insurance package that includes health, dental and other coverage can significantly improve morale, retention, and engagement.
This blog post discusses group life insurance, how it works, its pros and cons, and whether it is the best decision for your business and employees.
Read on to learn more.
What is Group Life Insurance?
Group life insurance is a single contract that extends life insurance coverage to a group of people. It is commonly provided as part of your employee benefits package. Typically, your employer or organization is the policyholder, and the policy covers every member of the group or organization.
Group life insurance is relatively inexpensive and may be free for certain employees. Those who receive group life insurance coverage do not have to pay anything out of their pockets. However, the coverage amount for group life insurance is relatively low, but you can quickly get life insurance coverage without undergoing medical exams or being subjected to individual underwriting.
You can decide to purchase additional coverage if your group life insurance is not enough. Your premiums for the extra coverage will be independent of your group life insurance and may be expensive depending on your age and health status.
Some group life insurance allows you to add riders to help you customize your coverage to suit your needs, e.g., you can buy riders to cover your spouse and children.
Also, some group life insurance comes with a conversion privilege, which allows you to convert your group life insurance into an individual policy without undergoing any medical exams. Although, the premiums for the new policy will likely be expensive.
Further, group life insurance allows you to name a beneficiary of your choice who will receive your policy’s death benefit. Your beneficiary will receive the proceeds of your group life insurance if you die while the policy is still in force.
Types of Group Life Insurance
As an employer or organization, you should know the types of group life insurance available in Canada before deciding which is suitable for your business and employees.
1. Employee Basic Life
This group life insurance specifies an amount of money to be paid out to the designated beneficiaries of a covered employee. The premiums are renewed yearly and increase based on the demographics of your group.
Premiums paid by employers are taxable, but the benefits are non-taxable. Employees have to name specific individuals as beneficiaries; otherwise, the death benefit goes through their estate, which may lead to probate and long court processes.
2. Employee Optional Life
Some insurance companies allow employers to offer supplemental life insurance that increases the benefits their beneficiaries receive if they die. Employees must provide medical evidence, and coverage ends between 65 and 75 years.
3. Dependent Basic life
This group life insurance offers coverage for an employee’s spouse and children. Coverage for children begins at 14 days and ends at age 21 or 25 to 26 years for full-time students.
Also, policies for children cost less than policies for spouses.
4. Dependent Optional Life
Some employers offer supplemental coverage that you can add to the base coverage for your spouse and children. Employers can choose to pay part of the premiums or pass the total cost of premiums to their employees.
Why Should You Offer Group Life Insurance to your Employees?
As an employer or resources manager, if you are looking to maximize the wellness and functionality of your employees, life insurance is a crucial benefit you need to consider.
- Group life insurance helps boost your employees’ financial security: It provides them with peace of mind knowing they are financially secure. They have confidence that their spouse and children will be cared for if anything happens to them. And financial security can be linked to improved productivity at the office.
- Group life insurance helps improve retention and recruitment: Employees with dependents are now looking for jobs with a comprehensive life insurance plan. Group life insurance is a crucial benefit that helps you recruit and retain your employees. Most top employers offer group life insurance as part of their employee benefits package.
- Group life insurance is inexpensive for employers: Premiums for group life insurance are significantly lower than individual life insurance policies.
Requirements for Group Life Insurance
Most employers in Canada usually set eligibility requirements for their group life insurance, and only employees who meet those requirements can benefit from the group life insurance. For example, an employer in Canada may offer group life insurance to all permanent employees.
Typically, employers require that you participate in the organization for a minimum amount of time before they can grant coverage. Many employers need you to wait until after a probationary period of three to six months before becoming eligible for group benefits like health and life insurance.
However, coverage is only valid as long as you are a part of the group. Once you leave the group, by resignation or firing, your coverage automatically ends.
Benefits of Group Life Insurance
Group life insurance comes with many benefits that make it worthwhile. If you have group life insurance from your employer, it is best to consider the group life insurance benefits and take it.
- Affordability: Group life insurance generally costs less than individual life insurance. Most times, group life insurance from your job might even come free.
- Convenience: With group life insurance, you do not go through the hassle of the insurance application process. The organization’s HR department usually handles all the paperwork. You can quickly and conveniently get insurance coverage through group life insurance.
- Liberal Underwriting Standards: Group life insurance makes it easy to get life insurance coverage if you have pre-existing conditions. If your employer provides group life insurance, you automatically qualify for coverage once you meet the criteria set by your employer.
- Conversion privilege: Some group life insurance comes with the conversion privilege, which allows you to convert the group insurance to an individual one if you retire or get terminated from your job without submitting any proof of insurability.
Downsides of Group Life Insurance
While there are many advantages to group life insurance, including low-cost insurance coverage, group life insurance has some drawbacks too. They include:
- Coverage is tied to your job: Group life insurance is not portable and cannot be carried from one job to another. So if you leave or lose your job, your coverage will likely end. You will have to take out a new insurance policy if you still need coverage, which might be more expensive depending on your age and health status.
- Group life insurance may not be enough: Group life insurance coverage amounts are usually capped at one or two times your annual salary. However, experts advise you to take out insurance that covers six to ten times your yearly salary. So, if you are the breadwinner and sole provider for your family, you need to buy additional coverage.
- They are not flexible: Group life insurance is not flexible and cannot be customized to suit your personal needs. Individual life insurance plans allow you to add relevant riders to your policy to suit your needs. However, with group life insurance, your employer decides which riders can be added to your base policy.
- Group life insurance is effective as long as your employer continues the plan: Your group life insurance coverage ends whenever your employer decides. Though it is infrequent, you will automatically lose coverage if your employer ends the group plan.
> If you already have employer provided group term life insurance, do you still need more coverage?
Final Thoughts on Group Life Insurance
If you want to earn greater respect and loyalty from your employees, you should consider offering them group life insurance as part of a comprehensive employee benefits package.
By doing this, you are investing in taking care of your employees, and they will reward you with quality performance, improved productivity, and goodwill.
You can reach out to us if you need any help finding the right coverage for your organization’s needs. We can help you find the right group life insurance coverage to suit your specific needs at the lowest price.
Hi, I'm Adeola Adegoke. I am a licensed Insurance Broker in Manitoba, and I hold a master’s degree in Mathematical Sciences (with a major in Financial Modeling) from the African Institute for Mathematical Sciences (AIMS), Tanzania.
Also, I have a second master's degree in Statistics from the University of Regina, and I am currently pursuing my Ph.D. in Statistics at the University of Manitoba.
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