Group life insurance is often offered by employers as part of a benefits package, and over half of Americans who have life insurance own a group policy, according to LIMRA. While it’s much cheaper and easier to qualify for than an individual policy, it’s often limited to small amounts — which means it may not provide enough coverage for your needs.
If your workplace offers this perk, it’s worth making the most of it — but in many cases, it’s best to treat it as a supplemental life insurance policy.
What is group life insurance?
Group life insurance is a single life insurance contract that covers a group of people. It’s often used by employers to cover employees and is offered as part of a benefits package. While the employer is the policyholder, the employees are the insured individuals and can each name their own beneficiaries.
Some of the key features of group policies include:
Cheaper premiums. Group insurance policies are usually offered at competitive rates thanks to a bulk discount.
Subsidized by your employer. Depending on your policy, your coverage may be paid in full by your employer or you may both contribute to it. Otherwise, the payments will be deducted from your paycheck.
Open to everyone. Most group policies will automatically accept applicants regardless of medical history.
Basic coverage. Group policies often offer a low amount of basic coverage. In some cases, you may have the option to purchase additional coverage, though you’ll likely be the one to pay for it — not your employer.
What happens to my group life insurance policy if I leave my job?
If you’re changing jobs and your policy includes a portability rider, you’ll have the option to take your current coverage with you to your next employer. However, if you port your coverage and your original employer changes or cancels its group coverage, your coverage will end. If you have a conversion rider listed on your policy, you’ll be able to convert it into an individual policy once you leave your job, but your premiums will likely increase.
Some policies may automatically be canceled when you leave your job. Talk with the benefits coordinator at your job to find out your policy details.
Does group life insurance end when you retire?
Generally, yes. But in some cases, you may be able to convert your coverage into individual life insurance.
What types of group coverage are available?
Some employers will bundle multiple types of coverage into a group policy, which can include:
Life insurance. A traditional life insurance policy pays out a lump sum if the insured dies or is diagnosed with a terminal illness. This is the most common benefit type.
Critical illness insurance. This pays out a lump sum if you’re diagnosed with a serious medical condition such as cancer or stroke.
How is a group policy different than an individual policy?
Group life insurance
Individual life insurance
Level of coverage
Automatically set by the group policy
Decided by you
Medical underwriting required
No
Yes, for most policies
Premium payment
Subsidized by your employer or deducted from your paycheck
Paid by you directly
When you leave your job
Lose your coverage, or convert to an individual policy with revised premiums
Nothing — your coverage won’t be affected
Pros and cons of group life insurance
Pros
Cheap and convenient. Employers offer group life insurance as part of their benefits package, so you typically won’t pay anything for coverage. If you want to buy more coverage, you might be able to purchase a supplemental life insurance policy too.
Automatic acceptance. Group life insurance policies don’t require a medical exam, which is ideal for those with serious medical conditions.
Cons
Rarely portable. Since this insurance is tied to your workplace, you typically can’t take the coverage with you if you switch jobs.
Expensive to convert. Some employers will let you convert your group policy to an individual policy if you leave – but your rates may rise significantly.
Basic and limited coverage. Group life policies are generally capped at low amounts. According to the Bureau of Labor Statistics, the median maximum face value of group policies is $250,000 — which may leave you underinsured.
Not as customizable. You can’t choose your level of coverage, and you may not have access to the same range of policy features of riders you could get elsewhere.
Free life insurance may be available depending on your line of work, your life circumstances or as part of a special program. Low-cost options can sometimes also be found, whether through a discount or special offer. Research companies and programs offering free life insurance online, and use the company’s website to check if you meet its qualifications.
Who offers free life insurance?
Some companies offer free life insurance through programs to specified groups of people, like low-income parents or healthcare workers. The following options are examples of the types of free policies you might find:
MassMutual LifeBridge. Low-income parents between 18 and 42 years old can apply for a 10-year, $50,000 term life insurance policy from MassMutual for free. The policy is designed to provide money for your child’s education if you die while the policy is active.
Avibra App. Download the Abriva app to sign up for either a free group term life insurance policy or low-cost policy offered through Abriva. The policy’s maximum benefit is $50,000, and the coverage ends once you turn 55 years old.
Globe Life Insurance. Globe Life offers whole life insurance policies worth $5,000 to $50,000 of coverage. And while the policy isn’t free, you don’t have to take a medical exam and the first month of coverage costs only $1.
Is free life insurance worth it?
While having some form of life insurance coverage is better than having none, keep the following drawbacks in mind before you jump into a free policy:
Not enough coverage. Free policies tend to have low death benefits that may only cover part of your funeral costs.
Strict eligibility guidelines. Free policies have strict income or situational eligibility requirements that you must meet to apply.
Free benefits may expire. Make sure you understand how long your coverage lasts, especially if you are asked to enter payment information. Just because a policy starts free doesn’t mean it will be free for the entire policy term.
Check for low insurance company ratings. Use AM Best or another trusted insurance rating company to make sure you’re not giving your information to a company that can’t be trusted to pay out the benefit or, worse, may scam you in some way.
Avoid life insurance scams. Signing up for a policy requires you to give out personal information that can be abused by identity thefts or other shady insurance companies. Understanding the known life insurance scams can help you avoid them.
Protect your privacy. Even if the company isn’t scamming you, make sure you know how it’s using your personal information. You may need to decide whether free life insurance is worth the insurer selling your data.
How to get employee life insurance
If your employer offers group life insurance, you should be able to enroll in the plan when you’re hired. Your HR team will walk you through the coverage and answer any questions you may have.
If you want to sign up or adjust your coverage, you’ll need to wait until your employer’s annual open enrollment period. However, if you’ve experienced a qualifying life event — like having a child or getting married — you’ll be eligible to enroll in group life insurance, even if open enrollment has passed.
Can I get life insurance through my work if I have a pre-existing condition?
Group policies generally don’t require medical underwriting, meaning you can get coverage if you have a preexisting condition. But some policies exclude preexisting conditions, which means that it won’t pay out due to death or illness resulting from that condition.
Talk with your employer and/or insurer to find out more about how your group policy covers preexisting conditions.
Should I get life insurance through work?
Yes, if your employer offers free group life insurance, it’s worth taking advantage of. Likewise, if you have a serious medical condition or only need a small amount of life insurance, it could be a good fit.
As for supplemental life insurance, weigh up the coverage and cost of the policy available through your work with individual policies from a range of companies. If you come across a company that offers the coverage amount and riders you’re looking for, consider taking out an individual policy instead. That way, your coverage will be portable – no matter where your career takes you.
Group life insurance can offer free or low-cost coverage to employees, but it may not be sufficient — especially if you have outstanding debt or a family or assets to protect.
To bridge any gaps in your coverage, compare life insurance companies to see if an individual policy may be better suited to your needs.
Katia Iervasi is a lead writer and spokesperson at NerdWallet and a former editor at Finder, specializing in insurance. Her writing and analysis on life, disability and health insurance has been featured in The Washington Post, Forbes, Yahoo, Entrepreneur, Best Company and FT Advisor. She holds a BA in communication from Australia's Griffith University.
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