Insurance Unfortunately, group term life insurance also has several serious weaknesses. Group term insurance can be quite cost-effective when predominantly younger workers are involved. However, costs increase every year. Premiums for employees in their 50s can be many times higher than the costs for workers in their 20s. By the time they enter their 60s, costs to continue providing this benefit can become prohibitive.
Costs rise with income.
Group term coverage works just fine when you are talking about incomes for lower-paid employees. Plus, since rates are pooled for the group, the cost for including even a small number of older, higher-paid employees can drive up costs across the board. Up to that point, the employee does not report the value of the benefit as income. The result can be an unpleasant tax surprise.