Last updated: March 20th, 2023
Reviewed by
Lisa A Koosis
Medical Claims Specialist
Table of Contents
Group life insurance is a type of life insurance coverage in which a group is the master policyholder of an insurance contract, and certificates of insurance are issued to participating individual members.
These insurance policies are most commonly offered by employers to their employees as a free or optional benefit. Entities such as organizations, trade groups, and associations also can offer group life insurance to their members.
It is available to people of all ages, and there are few health questions, if any, that must be answered in order to qualify. Term and whole life policies may be available, depending on the group.
When group life coverage is offered as a free benefit – in this case, there is no reason to pass it up.
Group life insurance is a benefit and should not be the only life insurance coverage you have. It is recommended that you have individual life insurance, and a group life policy as additional coverage.
Since the risk of a claim is spread out among a large group, coverage costs are low for participants. Optional group coverage may or may not be a good financial decision. For those in good health, it is often cheaper to purchase an individual life insurance policy than to spend money on group coverage.
If you under 50 years of age and cannot qualify for individual life insurance, group coverage may be the only way to obtain life insurance.
Since there are few health questions that must be answered to qualify for group life coverage, this type of insurance is an option for people with health conditions such as:
The risk to the insurance company is spread out among many participants in group plans. Group life insurance is often free for qualifying employees and group members.
Group life plans have few health questions to qualify. Some plans have no health questions. The more coverage you apply for, the more health questions.
Applications are one or two pages, and they are active when the policy is processed by the insurance company. How fast this happens depends on the group and insurance company issuing the certificates. If you apply online, your policy may be active the moment you sign and date the application.
group policies do not have waiting periods for the full coverage amount to be available to beneficiaries. Some final expense whole life policies have a two-year waiting period for the full coverage amount is available.
Medical exams cost insurance companies money. For small group life plans, the risk to insurance companies is small, so exams are not required. Typically the application is the only requirement to qualify.
When coverage amounts are small, insurance companies do not run financial risk assessments. Risk assessments cost the insurance company money are not required. As you increase your coverage amount, the insurance company may require this qualification requirement.
Individual life insurance policies use build charts as one of the factors in determining the cost of a policy. Group life plans don’t have health classes so there is no need for height and weight requirements.
As with group life insurance offered through an employer, the association is the ultimate policyholder. The association holds the master policy, and issues certificates of insurance to its members. While a certificate of insurance is valid proof of having a life insurance policy, you are not the owner of the policy.
If the premiums aren’t guaranteed and the group experiences too many claims they can raise the premiums. Another way the premium could increase is if the plan offered is a “banded term policy in which the premiums increase every five years.
This happens when the premiums are guaranteed, but the coverage isn’t. As you age, the risk to the insurance company increases. When you reach a certain age, typically 60 years old, the coverage amount begins to decrease every year.
Group life is easier to qualify for than fully underwritten individual policies. Since there are so few health questions, the insurance company lowers its risk by offering low amounts of coverage.
The insurance company does not handle general services like updating billing or beneficiary changes. Instead, service is often handled by the master certificate holder. This can cause confusion when the plan administrator is not a licensed insurance agent.
Group term policies with 5 year coverage periods. Every five years the cost of the coverage increases.
Group whole life policies with guaranteed level premiums where the coverage amount decreases after age 65.
There are many types of groups and they all have different requirements for becoming a member.
Some charge membership fees or have participation requirements for its members.
Another way to find potential groups/associations is a google search for membership life insurance benefit
Access to groups and associations is a way to get access to insurance products and rates that are not possible for individuals.
Depending on your personal situation, the pros can far outweigh the cons. Especially for individuals who would have a tough time qualifying for an individual life insurance policy, due to their health. Yet, group life insurance popularity has been declining for the last decade. Why?
This could be largely due to the fact that fewer employers are offering group life insurance through work. Many individuals aren’t aware that they can join a group or association that offers this type of insurance on their own.
Of individuals who have life insurance in general, 55% of people have an individually owned life insurance policy, which is still the most popular choice by far. One in four individuals (27%) have group life insurance only.
Lastly, 18% of people who have life insurance, have both an individual and group owned policy.
| Carrier | In Force Life Premium | A.M Best Financial Rating |
| MetLife | 3.5 billion | A++ |
| Prudential | 1.6 billion | A+ |
| Cigna | 1.2 billion | A |
| Securian | 1.1 billion | A+ |
| The Hartford | 875 million | A+ |
| Unum | 450 million | A |
| Liberty Mutual | 320 million | A |
| The Standard | 310 million | A |
| Lincoln Financial Group | 270 million | A+ |
| Reliance Standard | 105 million | A+ |
Source: http://www.ambest.com/
Speak with an independent life insurance agent to discuss your options.
Brian is the founder and CEO of Insurist and carries Life, Health, and Property & Casualty licenses in all 50 U.S. states. Since 2013, Brian has been a member of Million Dollar Round Table, a designation for the top 1% of financial advisors worldwide. Brian has been featured in Yahoo! Finance, Money.com, Entrepreneur.com, Life Happens, Forbes, MSN, and Good Financial Cents. Brian’s goal is to show customers the best products, the quickest answers to their questions, and provide expert advice.
Lisa worked as a medical claims specialist for five years, adjudicating claims, developing appeals training programs and liaising with insurance auditors. As a full-time freelancer, she now completes work that includes writing and fact-checking life and health insurance content for a variety of online publications.
