Group Life Insurance

Group life insurance provides coverage for the lives of a group of people, such as the employees of a business or the members of an association or a union group. A single group life insurance policy, which is called the master group policy, covers each person within the group, and the holder of the policy is often the employer or the group entity such as the association or union itself.

Many employers provide group life insurance coverage for their employees as part of a complete benefits package which may also include medical and other types of insurance. Typically, the per-person premium cost for a group life insurance policy is substantially lower than the amount that each individual would pay for life insurance by themselves. Some group life insurance premiums are fully paid by the employer or association, and others expect the individual group member to pay a portion of the premium.

Group life insurance developed under the premise that a group of people considered as a whole poses less of a risk than does considering the risk of the individual members. An additional factor with groups of employees is that people who are healthy enough to work are, in general, a better risk than random members of the general population, many of whom are in poor health that prevents them from holding down a job.

Like many other types of life insurance, the members of the group covered under the group life insurance policy are allowed to specify beneficiaries who will receive a payout in the event of the member`s death. While the amount of the death benefit is selected by the policyholder, many group life insurance contracts allow the individual members to select a higher death benefit by paying a larger premium amount.

The most common form of group life insurance is term insurance, which provides a death benefit but has no actual cash value. For each member, the life insurance coverage remains in force while they are an employee or a member of the group and pay their portion of the premium, if any. When an employee or group member leaves the organization or association, the group life insurance coverage usually ends, although some policies have an option to extend the coverage if the individual member pays for the policyholder`s portion of the premium.