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Group term life insurance is a type of insurance offered to a group of individuals through their employer. As with other types of group benefits, it is generally less expensive compared to an individual policy, making it a key component in an employee benefit package.
The reasoning behind why group life insurance may be less expensive is because the life insurance company is setting the price based on the overall risk of the group, not on an individual basis.
Coverage will be provided to the beneficiaries if the covered individual dies during the defined period of coverage.
There is no cash value buildup with this type of policy, but individuals can enhance their policy through personal savings, an additional individual life insurance policy and/or Social Security benefits.
Unfortunately, in today’s work environment, it can be slightly dangerous to solely rely on your group term life insurance policy. This is because of the unpredictable nature of today’s economy and the fact that group life insurance may not cover all of your insurance needs.
For example, the life insurance offered through your place of employment may only cover one to two times your annual salary while the recommended amount is seven to ten times your annual salary.
Purchasing an individual life insurance policy in conjunction with your group insurance may help to fully satisfy your life insurance needs. When figuring out your life insurance needs, it is advisable to consider what would happen to your family if your group term life insurance policy ceased to exist.
There are in fact a number of situations that may cause this to happen:
· Mandatory early retirement
· Workforce reduction
· Company/business closing or bankruptcy
· Reorganization after a merger or acquisition
· Statutory banning of a product
· Chronic health impairment resulting from an accident or disease
· Job replacement/new job
Regardless of your situation, it is always advisable to cover all of your bases, especially when it deals with the future well-being of your loved ones.