Loading the player...

What is 'Group Term Life Insurance'

Group term life insurance is a type of insurance coverage offered to a group by an employer, association or other organization. Coverage provides a benefit to the beneficiaries if a covered individual dies during the covered period. As with some types of group benefits, group term life insurance is generally less expensive than individual policy coverage. For this reason, group term life insurance is often a key component in employee benefit packages.

BREAKING DOWN 'Group Term Life Insurance'

Group term life insurance coverage is made available to eligible employees at the time of hiring or when a benefits open enrollment period begins; association or member group policies have more flexibility as to when members can obtain coverage. Most group term life insurance coverage is simple to secure, done either by checking a box on a benefits form or informing the organization's benefits coordinator. Individuals are not required to undergo medical underwriting to get coverage because the insurance company providing the policy pools the risk of all employees or members to adequately price the risk. Group term life insurance coverage is in place as long as the contract remains paid for by the employer and the employee continues to work for the company providing the benefit. The cost of any additional term coverage is paid for by the employee and generally shows up in box 14 on an employee's W-2 form. Once employment or membership ends, group term life insurance coverage expires.

Total Coverage Available

Employers or association groups that offer term life insurance coverage often limit the total amount of coverage available to employees or members based on a variety of factors, such as time in service (or membership), annual salary or number of dependents. Amounts are limited because insurance companies do not collect health risk data from each individual under the policy. An employer typically offers group term life insurance coverage at no cost to the employee up to $50,000, but the base amount varies by company. If the employee chooses to add supplemental coverage, he can do so up to certain limits, such as $500,000 or five times his annual salary. For dependent or spousal supplemental coverage, group term life insurance coverage is often capped at $100,000 per additional insured. Any group term life insurance coverage offered by an employer that exceeds the base benefit is paid by the insured employee through paycheck deferrals. Group term life insurance offered to members of an association typically does not offer an organization-paid base amount but instead provides a small discount on premiums to eligible members.

RELATED TERMS
  1. Group Life Insurance

    Life insurance offered by an employer or large-scale entity (i.e. ...
  2. First Dollar Coverage

    An insurance policy feature that provides full coverage for the ...
  3. Wholesale Insurance

    Coverage for employer groups that are too small to qualify for ...
  4. Prior Acts Coverage

    A feature of an insurance policy that extends the coverage of ...
  5. Term Life Insurance

    A policy with a set duration limit on the coverage period instead ...
  6. Coincidental Excess Coverage

    Insurance coverage that provides excess coverage for a specified ...
Related Articles
  1. Financial Advisor

    Buying a Life Insurance Policy? Read This First

    Knowing who needs life insurance, how it works and the different types of insurance can help consumers make informed decisions about this product.
  2. Insurance

    Is Your Employer-Provided Life Insurance Coverage Enough?

    Learn about the several potential problems involved with obtaining life insurance through your employer.
  3. Insurance

    Why Your Company Insurance Coverage Isn’t Enough

    Even if you have group life or disability insurance, it pays to have individual coverage too.
  4. Financial Advisor

    Is Life Insurance From Your Employer Enough?

    Covering the needs of the ones you would leave behind is not easy. But efforts to secure a life insurance policy outside of work should pay off.
  5. Insurance

    For Top-Notch Insurance Coverage, Compare Quotes

    Find out how to use and compare policy options to get the best coverage at the best price.
  6. Insurance

    5 Life Insurance Questions You Should Ask

    Confused about $1 million dollar insurance advertising claims? Decide whether they'll pay off for you.
  7. Insurance

    Sizing Up Your Life Insurance Needs

    There isn’t a one-size-fits-all answer for how much life insurance one needs.
  8. Managing Wealth

    6 Insurance Policies That Protect the Wealthy

    Here are six types of insurance that the wealthy use to protect their assets.
  9. Insurance

    Top 10 Life Insurance Myths

    The most difficult aspect of this complex product is determining how much coverage you need and why.
RELATED FAQS
  1. What are some examples of industries that practice price discrimination?

    Understand the various types of insurance coverage offered in the insurance marketplace, and learn why each policy should ... Read Answer >>
Hot Definitions
  1. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  2. Blue Chip

    A blue chip is a nationally recognized, well-established, and financially sound company.
  3. Payback Period

    The length of time required to recover the cost of an investment. The payback period of a given investment or project is ...
  4. Collateral Value

    The estimated fair market value of an asset that is being used as loan collateral. Collateral value is determined by appraisal ...
  5. Fiduciary

    A fiduciary is a person who acts on behalf of another person, or persons to manage assets.
  6. Current Account

    The difference between a nation’s savings and its investment. The current account is defined as the sum of goods and services ...
Trading Center