# Group Life Insurance Explained: Types, Benefits, and Drawbacks

## What Is Group Life Insurance?

Group life insurance provides employees or members with life coverage through their employer or organization. It is typically inexpensive because costs are shared among all insured, and often does not require a medical exam. However, coverage limits are generally lower and terminate upon leaving the organization, highlighting the need for potential supplementary personal insurance.

### Key Takeaways

*   Group life insurance is typically offered by employers or associations and provides a low-cost or free benefit to members without requiring medical exams.  
    
*   Coverage in group life insurance is often basic, with death benefits generally limited to a fixed amount or a multiple of the insured's salary.  
    
*   Members may convert group coverage to an individual policy upon leaving an organization, but this usually results in higher premiums.  
    
*   Additional coverage beyond the basic plan can sometimes be purchased at group rates, though it might require answering medical questions.  
    
*   Group life insurance policies are controlled by the organization, meaning terms can change, and coverage may end if the member exits the group.

![Group Life Insurance: A single contract for life insurance coverage that extends to a group of people.](https://www.investopedia.com/thmb/BBZOXFUCKcNs2EjJ8BayqRJqTPA=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/group-life-insurance.asp-final-220d58106e9d4c42ac93581d9b3b8a0b.png)

*— Investopedia / Julie Bang*

## How Group Life Insurance Works

[Group life insurance is a single contract for life insurance coverage that extends to a group of people](https://www.investopedia.com/articles/personal-finance/122315/group-term-life-insurance-what-you-need-know.asp). Companies buy group life insurance wholesale, saving on costs compared to individual policies.

Those receiving group life insurance coverage may not have to pay anything out of pocket for policy benefits. People who choose to take more-advanced coverage alongside it may elect to have their portion of the premium payment deducted from their paycheck. Just as with regular insurance policies, insured parties are required to list one or more [beneficiaries](https://www.investopedia.com/terms/b/beneficiary.asp) before the policy comes into effect. Beneficiaries can be changed at any point during the coverage period.

Most group policies are [term life insurance](https://www.investopedia.com/terms/t/termlife.asp), renewable yearly during open enrollment. This is in contrast to [whole life insurance](https://www.investopedia.com/terms/w/wholelife.asp), which provides coverage no matter when you die. Whole life insurance policies are permanent, have higher premiums and death benefits, and constitute the most popular type of life insurance.

Employers or organizations keep the master contract for group life insurance policies. Employees opting for group coverage usually get a certificate to show if they leave and end coverage.

## Eligibility Criteria and Requirements for Group Life Insurance

Group life insurance policies often have conditions. Some organizations require [group members](https://www.investopedia.com/terms/m/member-month.asp) to participate for a minimum amount of time before they are granted coverage. For instance, an employee may need to pass a probationary period before being allowed to take part in employee health and life insurance benefits.

Coverage is normally only valid for as long as a member is part of the group. Once the member leaves, whether through resignation or firing, the coverage ends.

> **Important**
>
> Group life insurance policies remain intact until insured parties are terminated or leave the group.

## Pros and Cons of Group Life Insurance

Group life insurance appeals to employees because of its cost-effectiveness. Group members typically pay very little, if anything at all. Any premiums are drawn directly from their weekly or monthly gross earnings. Qualifying for group policies is easy, with coverage guaranteed to all group members. Unlike individual policies, group insurance doesn’t require a medical exam.

However, low cost and convenience aren’t everything. Group life insurance generally comes with only basic coverage, which means [it may not fulfill the needs of policyholders](https://www.investopedia.com/articles/personal-finance/022014/your-employerprovided-life-insurance-coverage-enough.asp). Typical amounts are $20,000, $50,000, or one or two times the insured’s annual salary. That’s why experts say it should be treated as a perk and supplemented with a separate individual policy, rather than being seen as sufficient standalone coverage.

Another drawback is that the employer controls the policy, which means your premiums can increase based on decisions that your employer makes. If an organization ends group life insurance or someone changes jobs, coverage usually ends. However, the former employee does have an option to continue coverage at the individual level. This means the policy is converted from a group life policy to an individual one, which comes with higher premiums. While the cost is higher, uninsurable individuals benefit from conversion as no exam is needed.

Some organizations allow group members to purchase more coverage than basic life insurance. Extra voluntary coverage can be financially sensible as its premium remains based on group rates. That part of the policy also may be [portable](https://www.investopedia.com/terms/p/portable-benefits.asp) between jobs. Unlike the basic group policy, additional coverage often requires applicants to answer a medical questionnaire, but it may not require an actual physical exam. That could be a good option for people whose health issues might make it difficult to qualify for an affordable individual policy.  

Pros

*   No medical underwriting
    
*   Inexpensive to buy (or paid by the employer in some cases)
    
*   May be able to add coverage for dependents
    

Cons

*   Relatively low death benefits
    
*   Not portable once you leave the organization
    
*   Organization controls the policy and its terms
    

> **Tip**
>
> When searching for a policy to supplement your employer's plan, thoroughly research and compare all of your options to make certain you're getting the best life insurance policy possible.

## What Is the Purpose of Group Life Insurance?

Group life insurance is a common employee benefit that provides a death benefit to the insured's beneficiaries if they die while part of the organization. The purpose is to provide financial support to the families of such employees.

## What Happens to Group Life Insurance Coverage After I Retire?

Once you leave the organization, group life insurance terminates (either immediately or after a short grace period). This includes being fired, quitting, changing jobs, or retirement. Certain employees may be able to convert their group coverage into an individual policy upon retirement, but the employer may not continue to pay these premiums.

## What Are the Types of Group Life Insurance?

The most common type of group life insurance is [group term insurance](https://www.investopedia.com/terms/g/group-term-life-insurance.asp) that renews yearly. This type of insurance provides only a death benefit and is the least expensive option. [Group universal life](https://www.investopedia.com/terms/g/group-universal-life-policy.asp) is more expensive, but offers the opportunity to build cash value alongside the death benefit. Variable group universal life is similar but offers an investment option for increasing the potential returns on the cash value portion.

## The Bottom Line

Group life insurance, typically offered by employers or large organizations, provides a cost-effective option for basic life insurance coverage as part of a benefits package. Although it often comes without the need for medical underwriting and at little to no cost to employees, the coverage is generally limited and not portable if you leave the organization. For comprehensive financial protection, consider supplementing group life insurance with an individual policy. Be sure to assess your coverage needs and explore additional options to ensure adequate life insurance protection for you and your dependents.