How Group Term Life Insurance Really Works

group term life insurance

You might want to talk to HR sooner than later about your life insurance options!

One of the easiest ways you can buy life insurance might be one you’ve been overlooking for quite some time. Group term life insurance through work is available to a vast majority of employees nationwide, yet numbers show a staggering amount of people still not utilizing it.

Group term life insurance is usually one of the simplest ways to buy life insurance because of the instant access you have. It can also be very affordable.

But before you buy, there are a couple things you might want to ask yourself and you HR director.

Let’s discuss what a good group term life insurance plan looks like and we’ll talk about other options if you require them as well.

How Group Term Life Insurance Really Works

When you’re looking into getting a policy, life insurance can seem intimidating. Fortunately, you might find a simple election in your company’s next benefit enrollment period to be a simple fix to the problem. Most companies who have enough employees offer life insurance, usually tied to with a health insurance plan or on an individual basis which is deducted from payroll.

Buying your policy from a group term life insurance plan is excellent for three main reasons:

  1. Easy To Buy
  2. Easy Approval
  3. Low Cost

It’s easy to get the insurance because it’s offered to you a la carte from your benefits coordinator. You don’t have to worry about putting your information into major life insurance websites and getting late night calls from call centers. It’s a quick menu where you can usually choose how much you want in coverage, or by how much you want deducted from your check.

The approval process is one of the easiest because there is actually little or even no underwriting at all. Because the life insurance plan is for a group, it’s simplified underwriting meaning there are just few questions to answer and no medical exam to be performed. If the group is large enough, it could even be on a guaranteed issue basis, meaning you get the policy no matter what; there are zero questions and zero medicals.

The cost is also a fantastic attribute for a group term life insurance policy. Because an insurance company who offers these types of plans can spread their risk over many people, it’s much easier for them to keep premiums lower. Premiums are also kept low because group term life insurance plans usually segregate the insureds into age brackets, just adding small amounts as the employee ages.

While it seems like nothing but good news, it’s not as perfect as it sounds. Not for everyone at least. There are a few exceptions, as with every rule, where a person might actually be better off going with a private life insurance plan. A private plan simply means one they get outside of work.

If someone is one or all of the following, they may want to seek something outside of their employers group term life insurance enrollment:

  • Healthy
  • Need More Coverage
  • Willing To Wait

If you’re a healthy person, there’s a really good chance you could save yourself some money. How? By going through underwriting. A group term life insurance plan is very affordable, but the rates are still higher than the rates for very healthy person because the insurance company still has to offset their risk for those who apply and aren’t in great shape. If you’re healthy and willing, take the medical exam and get great discounts.

Sometimes, a group plan might not allow for enough coverage to meet your needs. You can still partake in the group term policy as a supplemental benefit, but you’ll want to have enough private insurance to make up the difference. But when you do this, it might be beneficial to hold you entire amount in one policy because there are price breaks at several coverage amounts. Usually, $100,000 and $250,000 have discounts, as well as $1 million life insurance policies.

Last, you need to be willing to wait. While you can get a group term life insurance policy in just a few days, a fully underwritten life insurance policy can take 4-6 weeks on average. For the most healthy, it’s less, but it could also be longer if you have an extensive medical history.

If you are curious to know if your work is the best plan or not, contact us and we’ll be happy to help.

About Jason Fisher

Jason Fisher+ is a life insurance specialist and co-founder of Waterway Financial Group, LLC, an independent agency in South Carolina. He is also co-founder of The Life Insurance Blog as well as a frequent contributor to many finance and insurance related blogs. He has been published in Forbes, Yahoo!Finance, and other large publications. For media inquiries, please email only.

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