Shuman Roy is an entrepreneur, business owner, and musician. He started RoysNoys, LLC in 2013 as a music production and education service company. He also offers small business consulting and advisory services to help businesses get from start-up mode to turn-key operations. Shuman earned his M.B.A from the Stern School of Business in 2001 and has an undergraduate degree from Manhattan College in ...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Joel...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Sep 7, 2021

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group

While, technically, any number of people can be considered a “group,” including every person insured by a particular company, a “group life insurance” policy is generally meant to offer benefits for members of a particular company or association.

It is also not uncommon for a group of people who owe money to a particular organization, or whose lives directly benefit an organization financially (known as insurable interest), to be insured on a group life insurance policy.

Group life policies are affordable and sometimes even free. They have relatively low coverage and are typically offered by larger employers or as part of a membership benefits package.

How does a Group Life Insurance policy work?

Typically, the person or company who owns the policy is insuring the lives of multiple people at a discounted rate, due to the overall size and characteristics of the group.

With a group life insurance coverage, companies can lower the costs for each individual employee. The costs are much cheaper than buying individual policies.

The discounted rate may be a result of the insurance carrier being able to sell insurance to the whole group, while having a “mix” of the overall risk of paying out.

For example, a company with 3,000 employees can generally expect to pay a lower monthly premium than a company with three employees because the insurance company is collecting more monthly premiums and the historical odds suggest not everyone in the group will die while they are part of the group.

Premiums would likely be even more favorable for a group of people who are able to demonstrate they are historically healthier (less chance they will die in a given time period).

Those who are getting group life insurance for employees won’t have to pay anything out of pocket for policy benefits. More and more Americans are protected by this workplace plan rather than an individual plan. The coverage is mostly guaranteed, so you don’t have to take a medical exam or answer health questions to qualify.

For instance, you could expect lower premiums for a group of office workers than a similarly sized group of oil rig workers…

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Who pays for the Group Life Insurance policy?

There are multiple options here. Generally, the difference depends on whether or not you are purchasing the policy for someone else or yourself.

1. You may be able to participate in the group life insurance policy for free as an employee benefit of your organization.

2. You may split the premium costs with your employer covering most of the expense, or vice versa.

3. You may have to pay the entire premium yourself, commonly achieved by deducting the cost from your paycheck.

Who receives the benefits of a Group Life Insurance policy?

This depends on why the policy was purchased in the first place. Y

ou name the beneficiary in the event of your passing if you are participating in an employee sponsored program; meaning, your husband/wife, children or other family member would receive money in the event you die.

If, on the other hand, the policy was issued in the name of an organization that you owed money to for example, that company may collect the benefits in the event of your death.

The policy is ultimately protecting that organization from your default on a debt if you are no longer around to cover it.

Is it a good idea for me to participate in a Group Life Insurance policy?

As discussed above, there are normally discounts associated with participating in group life insurance plans.

It follows the concept of bulk purchase. Basically, if you can be part of a larger group, the cost associated with whatever you are purchasing is lower.

You would be hard pressed to obtain an individual life insurance policy at a lower cost than you could find with any group…regardless of the type.

However, these policies come with certain conditions. Some companies ask group members to participate for a minimum amount of time before they are granted coverage. Employees may need to undergo a probationary period before taking part in employee life insurance benefits.

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How much does a Group Life Insurance policy cost?

Get online insurance quotes or visit an independent agent if you do not currently have life insurance or if you think you might be paying too much.

A term life insurance policy is generally a good option for getting large amounts of life insurance for a lower cost than whole life insurance.

Guaranteed issue life insurance may also be an option for you if you are having trouble obtaining a life insurance policy in the standard market.

Just be sure to exhaust all other option before choosing this type of life insurance policy.