Read our complete guide to find out everything you need to know about group life insurance for your financial services business.
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What is group life insurance?
Group life insurance helps to provide security for your employees’ families or loved ones by making a payment if an employee dies. Companies pay premiums to an insurance provider on behalf of their employees. If an employee dies while employed by your financial firm, the policy provides financial benefits for their beneficiaries whether the death occurred on the job or not. Beneficiaries are stipulated by employees when they sign up for group life insurance. Employees can choose who will receive their money in the event of their death. Group life insurance may be part of a larger package that includes other employee benefits.
Who needs group life insurance?
While not required by law, group life insurance is a benefit that many financial services firms offer, as part of a larger compensation and benefits package, in order to attract and retain employees. In most cases, group life insurance through an employer ends up being significantly less expensive for employees compared to if they were to purchase life insurance on their own. Because of this, employees can see the tangible monetary benefits of an employer offering this coverage.
What does group life insurance cover?
Group life insurance is term insurance, which means it covers employees as long as they are employed at the company. When the employee leaves the company, coverage ends.
Group life insurance is also guaranteed issue. This means that employees qualify without supplying any personal medical information. There are two kinds of group life insurance plans:
- Flat-Dollar Benefit
- Multiple of Salary Benefit
Flat-dollar benefit plans offer a predetermined flat amount for each employee. This might be $10,000 or $25,000. It depends completely on the policy. These plans are often appropriate for part-time employees.
Multiple of salary benefit plans are appropriate for salaried employees. These plans provide a multiple of the annual salary of the deceased. This is usually one to two times the annual salary. Most financial professionals have salaried employees. This makes this type of life insurance an appropriate choice.
What doesn’t group life insurance cover?
While group life insurance is a great benefit that financial firms can provide, more often than not, these types of plans have low coverage amounts. As mentioned above with multiple of salary benefit plans, the death benefit is generally only one to two times annual salary.
Group life insurance plans are also at the will of the employer. If a company decides to cut the benefit, employees are suddenly without life insurance coverage unless they they’ve purchased their own individual non-employer plan.
How much does group life insurance cost?
The cost of group life insurance depends on a number of factors, including:
- Number of partcipants
- Types of occupations
- Company claims history
- Employee demographics
- Employee salaries
While the range of pricing can vary widely, most businesses can expect to pay $0.05 for every $1,000 worth of coverage. Costs will also vary depending on how much of the premiums you as an employer want to cover for your employees. Employers who are offering group life insurance as a benefit typically pay the premiums on behalf of their employees, but some may opt to have employees pay a nominal amount for coverage.
Generally, group life insurance policies are reevaluated by the insurer every five years, in order to account for changes in company demographics or claims history. Your premiums may rise as your company ages or claims increase.