Group Life Insurance – What You Need to Know

Group life insurance is becoming very popular in the workplace lately as a means for companies to offset the loss or elimination (in some cases) of health insurance benefits. Before you consider signing up for your group life plan, you need to look at what you are actually getting.

Group Life Insurance- What Do You Get?

Yes, group life insurance is cheap so many employees might be tempted to just sign up without giving it further thought and  there is nothing wrong with that, but just know what you are getting for your money before signing up.

For most situations, the amount of group life insurance you get from your employer, relates to how much money you make. The percentage of coverage is usually one or two times your salary. Since group life insurance is so inexpensive, it doesn’t hurt to have some coverage anyway but for many people, this level of coverage is insufficient to cover family living expenses in the event of the main breadwinner passing.

The rule of thumb in the life insurance industry is that you need about 70% of your net income after taxes, to recover from the loss of income. Your family may even need more if there is still debt and especially if any member of the family has health issues as well.

What Happens To Your Group Life Insurance Policy If You Change Jobs?

When you change jobs, your group life insurance policy will be gone unless your new employer offers the benefit as well. In some cases, you may be offered the opportunity to convert the policy to your ownership, but for many people, they will find this option unaffordable.  Group life insurance rates are based on the mortality of whole group or all the employees and the odds of every employee dying are very low, this is the reason rates are so low.  Once you take responsibility of the policy on your own, you will find your rates will be very expensive.

Is Group Life Insurance Best For The Long Haul?

No. In order to properly prepare your financial future, it is best to have your own life insurance policy. Owning your own policy puts you in control and you can never lose the policy unless you stop paying your premiums. Group life is subject to the business owner. The owner can decide to no longer offer group life insurance and can cancel the policy at any time.  And as we already mentioned, if you lose or change jobs, you lose your policy as well.