Group life insurance is life insurance issued to people who belong to a group that has a common interest or association, such as an employer, a trade, or a school affiliation. Group life insurance offers financial protection against premature death (there is no cash value component with term insurance, as there is with permanent insurance). For an employer, group life insurance is a convenient way to offer employees easy-to-buy, affordable life insurance coverage.
While employers often provide a flat amount of coverage, many employers offer coverage that is a multiple of an employee's earnings, such as two times his or her annual salary.
An employer can choose to include all of your employees in a group term life insurance plan, or select only a specific class of employees, such as managers. An employer may also exclude certain employees from coverage. For example, you could require employees to work a minimum number of hours per week before they would qualify for coverage. You could also require that employees have to have been employed for a certain period of time before they are eligible to participate.
While a business could get group coverage with as few as 2 employees, most employers offer coverage when they have 10 or more employees as the number of employees may determine whether an insurer will offer immediate coverage without evidence of insurability. Some plans are available without any medical underwriting requirements while others may require employees to answer medical questions and satisfy underwriting requirements to be accepted.
The employer has the choice to pay all or part of the cost of group life coverage, and many employers pass on the costs of any additional features to their employees. It’s important to note that group term life premiums paid by an employer are tax deductible.
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