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. Coordination Of Coverage

    A review or modification of an individual's or business’ insurance ...
  2. Group Life Insurance

    Life insurance offered by an employer or large-scale entity (i.e. ...
  3. Wholesale Insurance

    Coverage for employer groups that are too small to qualify for ...
  4. First Dollar Coverage

    An insurance policy feature that provides full coverage for the ...
  5. Term Life Insurance

    A policy with a set duration limit on the coverage period instead ...
  6. Group Carve-Out Plan

    A type of group term life insurance designed to appeal to well-paid ...
Related Articles
  1. Financial Advisor

    Group Term Life Insurance: What You Need to Know

    Is group term life insurance really a good deal? What you need to know about employer-sponsored group term life insurance coverage.
  2. Insurance

    4 Reasons Why Waiting To Buy Life Insurance Is a Bad Idea

    Understand the benefits of applying for and securing life insurance coverage while you are young and healthy, and learn the cost of waiting to get coverage.
  3. Insurance

    When Should You Get Supplemental Life Insurance?

    For individuals with larger families and responsibilities, supplemental life insurance may bridge the shortfall in coverage from term or whole-life policies.
  4. Financial Advisor

    Who Should Buy a Guaranteed Issue Life Insurance Policy?

    Guaranteed issue life insurance policies have added costs and reduced benefits that make them suitable for only a limited pool of buyers.
  5. Financial Advisor

    7 Issues to Consider When Determining Life Insurance Coverage

    Seven issues to consider when buying life insurance to ensure the coverage is tailored to meet your personal financial situation.
  6. 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.
  7. Insurance

    Is Your Employer-Provided Life Insurance Coverage Enough?

    Learn about the several potential problems involved with obtaining life insurance through your employer.
  8. 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.
  9. Insurance

    4 Types Of Insurance Everyone Needs

    Here are four forms of insurance that are vital to have.
  10. 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.
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. Dumping

    In international trade, the export by a country or company of a product at a price that is lower in the foreign market than ...
  2. Tender Offer

    An offer to purchase some or all of shareholders' shares in a corporation. The price offered is usually at a premium to the ...
  3. Ponzi Scheme

    A fraudulent investing scam promising high rates of return with little risk to investors. The Ponzi scheme generates returns ...
  4. Dow Jones Industrial Average - DJIA

    The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange ...
  5. Revolving Credit

    A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is ...
  6. Marginal Utility

    The additional satisfaction a consumer gains from consuming one more unit of a good or service. Marginal utility is an important ...
Trading Center