Group Life Insurance

Gerri Robbins Blue Moon Properties, LLC

Basic employee benefit under which an employer buys a master policy and issues certificates to employees denoting participation in the plan. Group life is also available through unions and associations. It is usually issued as yearly renewable term insurance, although some plans provide permanent insurance. Employers may pay all the cost or share it with employees. Characteristics include:

1. Group Underwriting an entire group of employees is underwritten, unlike individual life insurance where under only the individual is underwritten.
2. Guaranteed Issue every employee must be accepted; an employee cannot be denied coverage because of a pre-existing illness, sickness, or injury.
3. Conversion at Termination of Employment regardless of whether termination is because of severance, disability, or retirement, the employee has the automatic right to convert to an individual life policy without evidence of insurability or taking a physical examination. Conversion must be within 30 days of termination. The premium upon conversion is based on the employee's age at the time (ATTAINED AGE).
4. DISABILITY BENEFIT available in many policies to an employee less than 60 years of age who can no longer work because of the disability. The benefit takes the form of waiver of premium, and the employee is covered for as long as the disability continues. The beneficiary will receive the death benefit even though the employee may not have been in the service of the employer for a long time.
5. DEATH BENEFIT Structure or Schedule is usually based on an employee's earnings. The benefit is a multiple of the employee's earnings, normally 1 to 2 1/2 times the employee's yearly earnings.

In many companies, if the employee dies while on company business, 6 times the yearly earnings are paid as a death benefit. For example, a $50,000 a year employee dies in an accident while traveling on company time; the beneficiary would receive $300,000. But if the same employee dies in his sleep at home, the beneficiary would receive $100,000 (assuming that the normal death benefit is twice annual earnings).