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What is group life insurance?

Simply put, group life insurance is a benefit offered by a group to its members. The policy itself exists between the group, which exists as the policyholder, and the insurance provider, with participating group members receiving a certificate of insurance that serves as proof of coverage. 1

What you need to know about group life insurance

Like other kinds of life insurance, group life insurance allows its members to choose their own beneficiary. 2 An additional benefit of group life insurance is that it’s generally fairly easy to qualify for coverage, as group life coverage doesn’t face the same scrutiny as an individual life insurance policy. 3 However, there is no one-size-fits-all for insurance, and finding the right fit for you can be tricky.

Choosing your coverage

While choosing your coverage can be tricky, it’s important to note that group members don’t always have the luxury of selecting the type of coverage offered by their group. In fact, the type of coverage offered to group members is often decided by the policyholder, where it then becomes the members’ responsibility to decide what kind of coverage best suits their needs. 4

But how does one even begin to decide on group coverage? Like all things, it is important that group members make the most informed decision possible when choosing their coverage. As such, we recommend asking yourself the following questions before you explore your group life insurance options, as doing so will give you a better idea of how you should proceed.

  • What are some of the reasons I should consider a group life insurance policy?
    • One of the main reasons people opt-in for group life insurance coverage hinges on their income. Generally, if one’s income is important in supporting a family, paying bills or ensuring a way of life, a group life insurance policy can help ensure the continued financial security of your loved ones when you’re no longer there to offer support.
  • How much coverage do I need?
    • Since there are so many factors that inform this decision, it’s difficult to apply a single golden rule that determines how much coverage you should apply for. However, many use their income, number of dependents, overall health status, and age to inform their decision.
  • How much does it cost?
    • Depending on the insurance policy offered, group life insurance can range in price. In most cases the least expensive form of life insurance comes from a group term life policy—however, that doesn’t necessarily mean it’s the best fit for you.

Types of coverage:

Once you’ve asked yourself the above mentioned questions it’s important to discuss the three common types of basic group life insurance offered to group members by policyholders. As mentioned, there is no one-size-fits all for group life insurance, so understanding some fundamental differences between your options can help you with your decision making process.

  • Group Term Life: Out of the three most common options, group term life insurance is the most common form of coverage offered by a group to its members. Typically, this is the most budget-friendly form of group life insurance for members and may be offered with annual renewable terms. 5 However, as group term life insurance is tied to your membership of a group, coverage may end when members either opt-out of coverage or elect to leave the group. 6 Find out more here.
  • Group Universal Life: One of the most notable features of a group universal life policy is its portability, allowing members to continue their coverage even after they leave their designated group. 7 Additionally, those enrolled in a group universal life policy benefit from flexible premium payments, a death benefit, and an optional cash accumulation account. 8 Find out more here.
  • Variable Group Universal Life: A type of permanent life insurance policy with a cash value. Similarly to a group universal life policy, variable group universal life coverage allows members to keep their coverage no matter where they go with a flexible premium. 9 However, there are some risks in managing the account, including the maintenance of minimum cash value. 10 Find out more here.

Supplemental Coverage

While there are three main options for group life insurance, none of them may be the right fit for your unique situation. As such, group members looking for a little something more to add to their policy have the option of adding supplemental life insurance. Supplemental life insurance is typically available from employers, but there are limitations as to what it can do. For those looking for more flexibility, it may be worth exploring the opportunities provided by a private supplemental life insurance policy. You can learn more about their differences here.

Conclusion:

At the end of the day, churches, like all organizations, have the option of selecting a group life insurance policy for their personnel. However, this doesn’t necessarily mean that the benefits offered are the right fit for all its members. As a result, it’s important to do your research before committing to any group life insurance policy. Weigh your options carefully, review your needs, and explore the option of supplemental insurance when necessary.

  1. Investopedia, Group Term Life Insurance, 2019
  2. AXA, What is group life insurance?, 2016
  3. Investopedia, Group Term Life Insurance, 2019
  4. AXA, What is group life insurance?, 2016
  5. Financial Web, 3 Types of Group Life Insurance, 2018
  6. Investopedia, Group Term Life Insurance, 2019
  7. Investopedia, Group Universal Life Policy- GULP, 2019
  8. Investopedia, Group Universal Life Policy- GULP, 2019
  9. Investopedia, Variable Universal Life Insurance (VUL), 2019
  10. Investopedia, Variable Universal Life Insurance (VUL), 2019
 

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