There are many ways to show employees that you care. By offering group life insurance, you give them peace of mind that if something happens to them, their loved ones are taken care of.
Group life insurance typically comes with a more expansive benefits package that may include health, dental, and other coverage for your team. Providing a robust benefits package can greatly improve morale, employee retention and engagement.
Learn more about group life insurance in this article to make the best decision for your business and employees.
What is Group Life Insurance?
When you buy a group life insurance policy for your employees, the company becomes the policy owner. As a policy owner, your company maintains control over the insurance policy, and the employees receive certificates verifying proof of insurance. It can be much easier for an employee to be accepted for group rather than individual life insurance.
With regard to other functional aspects, group life insurance works much like individual life insurance policies. Employees indicate one or more beneficiaries who will receive the life insurance benefit if the employee dies due to a covered cause of death.
Savvy employers add life insurance benefits to keep their employees happy and to compete with other employers who offer life insurance benefits.
Types of Group Life Insurance
Life insurance sold to groups is typically temporary monthly insurance. As an employer or human resources manager, it’s useful to learn about the types of group life insurance available, including the following:
Employee Basic Life
This policy stipulates an amount of money paid out to employee-designated beneficiaries if said covered employee died. The rating is renewed every year, and rates can increase based on actuarial review of your group and average age of members.
Premiums paid by the employer are taxable, while the benefits themselves are non-taxable. Additionally, employers may want to advise employees to name specific individuals as beneficiaries. Otherwise, the payout would pass through their estate, which may lead into probate and other fees at death.
Employee Optional Life
Some insurers allow employers to offer supplemental life insurance that will increase the benefit passing to their beneficiaries if they die. Typically, the employee will have to provide medical evidence, and coverage ends generally between age 65 and 75.
The primary factors in determining premiums include age, gender, and lifestyle habits such as smoking. Employees pay the full amount for optional life insurance, and many plans offer coverage in increments of $10,000 often up to and above $500,000.
Dependent Basic Life
If available, dependent basic life covers an employee’s spouse and, sometimes, their children. Some employers and insurers also have options to cover the employee’s children. Policies for children cost less than policies for spouses.
The benefit may only be available in flat amounts (for example, $5,000/$10,000 for spouse, $2,500/$5,000 per child). Coverage for children begins as soon as 14 days old and typically ends at age 21 or age 25 to 26 for full-time students.
Dependent Optional Life
Some employers offer supplemental coverage for the employee’s spouse and dependents. These are added on top of the base dependents’ life coverage.
As an employer, you can opt to pay part of the life insurance premium or pass on the total cost to employees.
So, what are the requirements for group life insurance? Many employers require employees to wait until after a probationary period before becoming eligible for group benefits such as health and life insurance. For most industries, the standard is a 3-month delay from full-time employment.
If an employee leaves the company voluntarily or involuntarily, they lose their eligibility to your company plan. Employees can then choose to convert all or a portion of their group insurance to individual insurance.
What if you could give your employees the opportunity to continue their life insurance coverage even if they leave the company? You may wonder why you should care about coverage for people who resign or are asked to leave. One key reason is that it’s a great selling point when you let new employees know that they have the option to continue their coverage after termination.
This opportunity is known as a group insurance conversion privilege. Although terminated employees no longer qualify for your group master plan, insurers will allow former employees to subscribe to an individual policy based on their previous group coverage, as follows:
- One-year convertible term policy (for those under 65)
- Term to age 65 policy
- Permanent insurance
The maximum coverage may vary from company to company or for different insurance providers. Typically, terminated employees can opt for up to $200,000 of coverage. Employees may have 31 days after termination to take advantage of conversion privilege.
Employees usually don’t have to provide medical evidence to exercise this privilege, a real advantage to conversion. However, their rates will depend on numerous factors including age, sex, and whether they smoke.
Earn greater respect and loyalty from your employees by offering group life insurance as part of a comprehensive group insurance plan like the one offered by the Chambers Plan. As an employer, you are investing in caring for your staff and they will reward you with quality performance and goodwill.
SCORE Financial Services offers group life insurance plans to small and midsize businesses looking for a way to enhance their employee benefits package. For assistance setting up a group insurance plan that includes group life insurance or for more information, please contact us.
Learn more about the Chambers of Commerce Group Insurance Plan.
Learn more about services offered by Maximum Benefit.