Group term life insurance

Group term life insurance is mainly available through employee benefits programs. An employer will usually offer this type of insurance at a group rate, which makes it less expensive for an employer and usually a free form of live cover for the employee. Term Insurance is without doubt the least expensive and easiest form of life insurance you can have. It will provide a cash lump should the insured person die within a specified term. That cash lump sum will then be paid to the beneficiary of the policy.

Many group term life insurance policies also offer disability, critical illness or severe injury benefits. If the insured person suffers some form of disability or illness that renders them unfit to carry out a number of pre-determined daily tasks, often the policy will release the designated benefits. Life insurance, in its simplest form, is designed to help pay for a deceased person’s final expenses and to support your family‚Äôs current residence and lifestyle.

Group coverage will typically cost less than an individual policy, however this may restrict the total amount of benefit payable upon death. It is often recommended that this type of life insurance should only be used as a supplementary benefit in conjunction with an individual life insurance policy. When a group policy pays out a cash lump sum, in most cases this will be tax free, but this is determined by the amount and the individual’s personal circumstances. Many policies not only pay out a cash lump sum, but they also offer a return premium benefit, so the beneficiary will eventually receive all the premiums back that have been paid towards this life policy. However, this is usually only applicable to a policy that has been running in excess of 10 years.

Group term life insurance is typically renewable every year through an employer’s group policy. Should you leave the company, you will be offered the option to renew the cover at the end of the term, but a higher premium may be applied. The cash benefits that are paid to beneficiary upon the insured person’s death can be used as they please. Unfortunately this type of insurance varies from whole life insurance as it does not carry any investment value. Therefore, you will not be able to surrender the policy for cash at a later date.

The majority of employers offer group term life insurance and it is advisable that you understand your policy before signing up. There may still be exclusions for pre-existing conditions, so if have suffered any health problems or serious illnesses in the past, this may well affect the contract and your ability to claim. Most individual term policies carry a longer term and can usually be taken for up to 35 years. However, a group policy will require you to constantly renew your arrangements each and every year.

A group plan may offer 2 separate forms of life cover. As mentioned, a term policy will merely provide benefit should you die within the actual term that the plan runs. However, you may also have the option of a whole life group policy. This is a continuous form of life insurance that will pay out a lump sum to your beneficiaries whenever you die, no matter when that is. These types of policies will also gradually build up a cash value that can be borrowed against or cashed in at a later date of your choosing. Unfortunately, as there is no specified end date, this may mean that your premiums can change or increase at any time.

For those of you on a tight budget or who cannot afford life insurance at this moment in time, a group policy can provide a much needed lifeline. This is a simple, low cost and straight forward plan that can provide your beneficiaries with some peace of mind, when they need it most. However, if you are in a position to purchase an individual policy, then you should. It is not recommended that you do not rely solely on a group policy as the benefits may not be enough to support your loved ones and their current lifestyle once you are gone.

Last updated on Feb 6th, 2011 and filed under Health Insurance. Both comments and pings are currently closed.

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