Employer's Guide to Life Insurance
Employers often offer life insurance to workers as part of a larger employee benefits package. Group life insurance provides relevant and necessary financial protection at an affordable price, combined with a convenient purchasing procedure. By understanding the basics of how group life insurance works, employers can more easily decide whether or not to add this benefit to an existing package.
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Group Policy Basics
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Group life insurance coverage protects any and all company employees who meet predetermined eligibility criteria. Such criteria typically consist of a minimum number of hours worked each week, as well as the tenure of the employee. Those workers meeting eligibility guidelines can enroll in the group life insurance program and obtain a predetermined benefit amount.
Life Insurance Types
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Group life insurance programs may contain both term and permanent products. Employers maintain discretion over the type of policies made available to workers through the program. Term insurance policies are most common in group settings, typically due to the lower cost and simplicity when compared to permanent policy types.
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Guaranteed Issue
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Most group life insurance policies are issued on a guaranteed basis. Employees who choose to purchase coverage may enroll without fear of rejection based on health issues or other medical ailments that would otherwise jeopardize their ability to buy insurance. No medical exams, laboratory tests or physician visits are necessary to obtain group life insurance, resulting in an extremely simple and convenient method of buying a policy.
Payroll Deduction
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Premiums for group life insurance policies may come from the employer, the employees or both. Employers usually choose to pay for a fixed death-benefit policy for every eligible employee. Those workers who want or need coverage in excess of what the company provides may purchase larger policies at their own expense. Payment of premiums is made to the insurance carrier on a monthly basis with funds set aside by the employer and withheld from employee paychecks.
Portability
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In the event that a covered worker is no longer employed, the group life insurance policy may often be maintained outside of the group setting. A relatively simple process of informing the life insurance carrier of the new billing address must be completed within a defined time frame to avoid loss of coverage. Unfortunately, a large percentage of group life insurance contracts lack provisions that secure the premium upon an employee's termination. The result is often a significantly higher cost to maintain the coverage; just a small percentage of workers is usually willing and able to comply.
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