Group life insurance, also called group term life insurance, sounds favorable when your employer offers it at low or no cost. Employers offer this as an employee benefit. You can take advantage, but it’s good for you to understand what group life insurance entails.
Over 60% of NGO employees have access to insurance provided by their company. This is because group insurance has a low cost, and any employee can access it. Read on to understand what group life insurance is, what types of coverage are available, what the demerits of life insurance are, and who applies as a beneficiary.
Group life insurance provides insurance coverage to a group of people under a participating employer or organization. It allows you to choose a loved one as your beneficiary. You can access this insurance through your employer, church, an association, or as a veteran who served in the armed forces.
The cost of this insurance and its premiums are low, and it can provide coverage of $50,000 or of the sum of one to two times your salary.
Besides term life insurance, types of group life insurance include whole life insurance, universal life insurance, and basic group life AD&D (accidental death and dismemberment insurance). Make sure you understand what kind of insurance is provided through your group life insurance policy.
Group life insurance is renewable yearly; it will expire a year after you leave your employment.
The state of your health and policy conditions will determine whether you continue with the insurance after leaving the job. As you consider continuing with the insurance, compare other insurers and their rates if you are young and healthy.
When you leave, some employers give you a choice between portability or conversion.
If you are not as healthy, maintaining permanent group insurance after you leave can be expensive. Understand the terms of the contract and the cash value of your policy.
Your employer pays some or most of your coverage, but when it is above $50,000, you are required to pay tax. When your coverage exceeds that rate, the premiums your employer pays are known as imputed income.
The IRS considers these benefits as taxable. You will find the taxable income on your paycheck in the following ways:
Your beneficiaries will not pay income taxes in the case of your death. They will receive the death benefit. This is the payment beneficiaries receive after the death of a policyholder when the policy is still active.
Your primary beneficiary is the person who will suffer financially after your death. The secondary beneficiary applies when the primary beneficiary cannot receive the benefit for some reason. You can list several beneficiaries, even a charity.
This is also known as voluntary supplemental life insurance. It is the additional insurance you purchase on top of the one offered by your employer. You can get supplemental life insurance for yourself or a family member.
You buy it through your employer, which means there is no need for a medical exam. Most of these insurance policies are limited. Understand the extension of coverage before applying to one. The coverage comes in two forms: AD&D and burial insurance.
Supplemental life insurance is hardly portable. Since there is a difference between supplemental employee life and ad&d insurance, you could purchase a separate ad&d policy from your insurer.
If you purchase insurance separately, you will have more control over the amount of coverage you receive. This way, you can tailor the coverage to your needs and the number of family members you provide for. This will also ensure that you keep the insurance after leaving work.