Employer-Provided Group Life Insurance Plans (2018 Update)


Last Updated: 03/01/2017


Open-Enrollment is just around the corner, and many people believe that signing up for life insurance through their employer is their best option for affordable coverage.

Is purchasing a group life insurance plan through your employer really the best option though?

Selecting the best provider for your life insurance depends on a number of different factors. To help you make an informed decision, we’ve weighed the pros and cons of each type of coverage in this insider’s guide.

Search from over 60 providers

Get your free life insurance quote in less than a minute

Coverage Amount

$500,000

  • $25,000
  • $50,000
  • $100,000
  • $200,000
  • $250,000
  • $300,000
  • $400,000
  • $500,000
  • $600,000
  • $700,000
  • $750,000
  • $800,000
  • $900,000
  • $1,000,000
  • $1,500,000
  • $2,000,000
  • $3,000,000
  • $4,000,000
  • $5,000,000
  • $10,000,000+

Term Length

20 Years

  • 10 Years
  • 15 Years
  • 20 Years
  • 25 Years
  • 30 Years
  • 20-Year Return of Premium
  • 30-Year Return of Premium
  • Lifetime

or (855) 902-6494

Quick Article Guide:

  1. The Good and the Bad of Group Life Insurance
  2. What You Should Consider
  3. We’re Here to Help With All of Your Life Insurance Needs

The Good and the Bad

There are definitely pros and cons to both Individual Life Policies and Group Life Insurance Plans and it’s important to do your research so that you can make an informed decision.

A majority of U.S. employers (about 61%) offer some sort of group life insurance coverage to their employees. The death benefit for these policies average one to three times the employee’s annual salary. There’s typically no cost for this coverage… part of the benefit package, with an eligibility “waiting time” of 3 to 12 months.

No medical exam is required. Therefore, there may be exclusions for certain “pre-conditions”.

This sounds like a no-brainer for most people, but most individuals with young children and mortgages are under-insured if there’s only 1-3 years of replaced salary if the family breadwinner dies. Those funds are usually gone in a hurry, particularly if death occurs after a pro-longed illness.

A friend of mine lost his wife to breast cancer. He did everything he could to save her, including trips out of state for treatments at a nationally recognized hospital best for her aggressive cancer. When she passed, bills left behind totaled close to $200,000.

Supplemental group life insurance coverage (what you pay for on top of your employer-paid coverage) if often available. This is typically a line item on your pay stub.

Here are a few items to consider when making this choice:

1. Unlike individual Term Life or Permanent Life, group policies generally don’t require a medical exam and may only ask a few health questions. This could be good or bad depending on your current state of health.

The advantage is: if you’re in poor health and/or smoke cigarettes, this may be the only affordable life insurance you will qualify for.

A disadvantage is: if you’re in good health, the cost of your life insurance is likely subsidizing your unhealthy co-workers. The cost and health is averaged across the group, so a healthy, 30-year-old triathlete could very well pay the same cost as his overweight 50-something-year-old boss who’s out on a “smoke break” every couple hours.

2. Some group life insurance plans are priced in 5-year bands, with pretty big jumps after age 50.

Let’s compare the cost of $500,000 life insurance for a healthy guy purchasing at age 40 and keeping his coverage for 20 years. A group plan often works like a “5-year renewable term policy” (rates increase every 5 years), whereas, the cost of a 20-year level term policy will remain the same for the duration. We realize people typically stay at a job for 20 years, however, the cost of a group supplemental life insurance is based on age, no matter where you are working.

In this example, a healthy guy locking in coverage at age 40 would save $4,260 in the cost of his life insurance by buying on his own, outside the group.

$500,000 Life Insurance “Real World” Cost Comparison – Employer Group Plan vs. Individual Life Insurance

 Group PlanIndividual Plan
Monthly Cost5-Year CostMonthly Cost*5-Year Cost*
Age 40-45$44$2,640$37$2,220
Age 46-50$50$3,000$37$2,220
Age 51-55$59$3,540$37$2,220
Age 56-60$66$3,960$37$2,220
Total Cost$13,140$8,880

*Rates are for a non-smoking 40-year-old male in the “Preferred” risk class, 20-year term.

*Rates are accurate as of 2/15/18 and are determined by age, health/lifestyle underwriting and state of residence/application.

3. If you change employers, you’re typically going to have a 3-12 month waiting period before you have the ability to purchase supplement group coverage. If you have no other life insurance, you’re likely underinsured, putting your family at risk.

4. Group coverage rates are not guaranteed. They can be increase if your employer changes plans or reduces the amount they’re paying to supplement the employee’s cost.

5. As the cost of group health insurance continues to increase, many companies are cutting life insurance benefits/options entirely to manage benefits cost.

6. If you become ill or injured and can no longer work, you will almost always lose your group life insurance within 12-18 months. If you have individual life insurance, your coverage cannot be cancelled by the insurer – only you – as long as you’re paying your premiums.

This is another reason we recommend securing an affordable term life insurance policy to at least bridge yourself to retirement age. You can always cancel it early, but needing life insurance and unable to qualify or afford it, is a disturbing predicament.

We’re Here to Help With All of Your Life Insurance Needs

We Can HelpTerm Life Advice works with over 60 top-rated life insurance carriers. It’s because each life insurance company has its specific niche – some have best rates for heavy people, some the best for diabetics. Have diabetes, heart stents, or a cancer survivor? Smoke cigars or have a medical marijuana card? There’s a company for you!

If you’re in better than average health, some companies may even approve you without even providing a medical exam. For more information on life insurance policies that do not require an exam, please see our article: “Life Insurance With No Medical Exam Required”.

We’re glad to provide accurate, pre-qualified quotes right over the phone, to help you determine if a Group Plan, Individual life insurance, or combination of the two are right for you.

Give us a call, one of our licensed agents will be happy to assist you with all of your life insurance needs. Toll-Free: 855-902-9464.

Search from over 60 providers

Get your free life insurance quote in less than a minute

Coverage Amount

$500,000

  • $25,000
  • $50,000
  • $100,000
  • $200,000
  • $250,000
  • $300,000
  • $400,000
  • $500,000
  • $600,000
  • $700,000
  • $750,000
  • $800,000
  • $900,000
  • $1,000,000
  • $1,500,000
  • $2,000,000
  • $3,000,000
  • $4,000,000
  • $5,000,000
  • $10,000,000+

Term Length

20 Years

  • 10 Years
  • 15 Years
  • 20 Years
  • 25 Years
  • 30 Years
  • 20-Year Return of Premium
  • 30-Year Return of Premium
  • Lifetime

or (855) 902-6494

No Comments

Be the first to start a conversation

Leave a Reply

  • (will not be published)