Group Term Life Insurance Benefits
Group term life insurance is a type of policy that is purchased by your employer. Employees then subscribe to the policy. This life insurance gives you a way to purchase insurance without having to submit to any health exams, and the policy pays a death benefit just like any other life insurance policy. Additionally, there are several unique benefits to group term policies that are not available with individual policies.
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Tax Deduction
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Group term life insurance provides you with a way to pay for income tax on a pretax basis. This pretax benefit means you don't pay taxes on any premiums used to support a life insurance policy death benefit up to $50,000. This translates into a lower cost associated with paying for your life insurance since you don't have to pay taxes prior to paying your premium. You may be able to afford more life insurance than you otherwise would be able to buy on an after-tax basis.
Free Life Insurance
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Your employer may pay for your term life insurance policy as a fringe benefit. Employers are incentivized to do this since the premiums constitute a business tax deduction. This translates into free life insurance for you, as an employee, since you don't have any out-of-pocket expenses associated with the policy.
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Convertibility Options
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You may be able to convert your group policy to a private policy when you leave your place of employment. Employers normally only provide this option if you retire from your job. Convertibility means that your group term life policy is converted to a paid up whole life or universal life insurance policy. No further premiums are due when you convert your policy to a paid up policy. Alternatively, some employers allow you to convert to an ordinary policy in which you continue making premium payments. No further underwriting or health exams are required for the conversion, unless you wish to purchase more death benefit than what you had under the group plan.
Reduced Rates
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Group term life insurance provides reduced life insurance premium rates compared to individual policies. This is because the risk involved with paying claims is spread out over the entire group employed by the business instead of just one individual. This, in addition to any pretax benefits you receive, allows you to purchase more life insurance than you might otherwise be able to with an individual policy.
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