The Three Types of Group Life Insurance
Group life insurance is a type of life insurance where one policy covers several people. For example, an employer might use group life insurance to provide for their employees. Other entities that use this type of life insurance include labor organizations. The life insurance is generally part of a benefits package and makes life insurance less expensive for everyone as a whole. Whether you are an employer trying to choose a group insurance or a recipient trying to understand your benefits, there are three main types of group life insurance. Each has slight differences, as well as pros and cons.
Group Term Life
Term life insurance is the most popular individual and group policy insurance. It is easier to understand because it much less complicated than whole or universal life policies. The general contract follows what the employer set in the beginning. Depending on what the employer and insurance company decided, it is often renewable annually. It costs roughly an employee’s salary or double that amount. Employers pay the policy. However, employees can adjust benefits to suit their own needs and pay the additional fees.
There are three types of term policies: basic, supplemental, and portable. Basic group term life insurance plans are considered tax free employee income, provide policies up to about $50,000 and general coverage. Supplemental group term life insurance may be provided in addition to basic insurance, and is the aspect of group term policies that give employees freedom to have higher policies or meet other potential needs, through their own dollar.
Portable group term life insurance is quite literally, portable. If the employee is no longer eligible for whatever group insurance the employer provides, portable policies can be kept. Payments are made to the insurer, rather than the employer, and stick around until the employee is about 70 years old.
Group Universal Life
Group universal life insurance comes with not only the benefits of term insurance, but a few added bonuses. Rather than just life insurance, as with most forms of universal policies, the holder can have a savings account in addition to their life insurance. Loans can be taken against these once enough money is built up. It’s a great way to get universal life insurance at a more affordable rate for the individual. Plus it continues up to 100 years of age and may provide insurance for a dependent.
Variable Group Universal Life
Variable group universal life insurance offers more options, and is intended for higher level executives or as a retirement package. Because it’s through group insurance, it is not as expensive as variable universal policies tend to be. Coverage extends to 99 years of age, and dependents may be added to the insurance policy.
The biggest advantage of variable policies is that the savings account in universal policies become an investment account. There are many ways to utilize those investment options, and it is important to remember that there are always risks associated with investments—but rewards can be big. Unfortunately, variable universal coverage also tends to come with a lot more added fees than other forms of group insurance.