Group Life Insurance Explained: Types, Benefits, and Drawbacks

Key takeaways

• Group life insurance is employer- or organization-sponsored coverage that typically costs little or nothing to members and often requires no medical exam.
• Coverage is usually basic—fixed dollar amounts or a multiple of salary—and may end when you leave the group.
• You can often convert group coverage to an individual policy, but premiums typically rise and conversion rules vary.
• Group plans are best treated as a foundation; consider a supplemental individual policy for broader, long-term protection.

What is group life insurance?

Group life insurance is a single life-insurance policy purchased by an employer, association, or other organization that extends coverage to eligible members or employees. Instead of individual contracts, the group holds a master policy and each participant receives a certificate of coverage.

How it works

• The employer or group negotiates a master contract with an insurer.
• Coverage is frequently provided at low or no cost to members; additional voluntary coverage can often be purchased via payroll deductions.
• Beneficiaries must be designated by the insured and can usually be changed while coverage is active.
• Most group plans are term-style—renewed periodically (often annually)—and provide only a death benefit rather than cash value accumulation.

Eligibility and duration

• Employers commonly require a waiting or probationary period before coverage begins.
• Coverage typically continues only while you remain part of the group; quitting, termination, or retirement generally ends the policy.
• Many plans allow conversion to an individual policy when group coverage ends; conversion usually avoids medical underwriting but results in higher premiums.

Types of group life insurance

• Group term insurance — the most common and least expensive option; provides a death benefit only.
• Group universal life — more expensive; combines a death benefit with a cash-value component.
• Variable group universal life — similar to group universal life but offers investment options for the cash-value portion.

Advantages

• Little or no cost to the employee.
• No—or limited—medical underwriting for basic coverage.
• Easy enrollment and guaranteed issue for eligible members.
• Option to buy additional coverage at group rates in some plans.

Disadvantages

• Benefit amounts are often modest (e.g., fixed sums like $20,000–$50,000 or a small multiple of salary).
• Policy terms are controlled by the employer or group and can change.
• Coverage typically ends when employment or membership ends; portability is limited.
• Conversion to an individual policy is possible but usually more expensive.

Portability and conversion

If you leave the employer or retire, you may be able to:
* Convert group coverage to an individual policy without a medical exam (subject to plan rules), or
* Elect portable voluntary coverage if the plan allows—sometimes retaining group rates but often requiring health information for larger amounts.

When to supplement group coverage

Consider buying individual life insurance if you:
* Need higher death benefits to cover mortgage, income replacement, or long-term obligations.
Want permanent coverage that continues regardless of job changes.
Prefer more control over policy terms, beneficiaries, and cash-value features.

Common questions

Q: Will group life insurance cover me after I retire?
A: Usually not. Coverage typically ends when you leave the group, though conversion to an individual policy may be available.

Q: Is a medical exam required?
A: Basic group coverage is often guaranteed issue without an exam. Voluntary or additional coverage may require health questions or underwriting.

Q: Is group coverage enough?
A: For many people, group coverage is a helpful benefit but insufficient as sole life insurance if you have dependents or significant financial obligations.

Bottom line

Group life insurance is a cost-efficient way to obtain basic life coverage through employment or membership in an organization. It offers convenience and minimal underwriting but tends to provide limited benefits and little portability. Evaluate your financial needs and consider purchasing an individual policy to fill any gaps for long-term protection.