If you work for a large company or are part of an association or organization, you may have the opportunity to be part of a group life insurance plan. These plans are usually very affordable and sometimes are even offered free to employees or group members as part of a benefits package.
One of the biggest advantages of a group life insurance policy is that it’s low-cost to employees or group members, so you can get coverage at a much lower rate — or no rate — than if you were purchasing an individual policy. However, it’s important to look at what type of coverage you’re getting in return and make sure that it’s enough to meet your needs.
“Something that we see very often is that people don’t know what’s an appropriate amount of coverage to have when it comes to life insurance,” says Scott Limes, life product manager at Nationwide. “One person may be married with seven kids, someone else might be single and not have any dependents. Everyone on the policy is at a different stage in their life, but there’s not a lot of time or education set aside to look at what is provided.”
Adding to the challenge is the fact that, typically, employees are choosing their group insurance coverage on an annual basis during an enrollment period. They’re making multiple decisions about what kind of health insurance, vision plan and long-term disability insurance they want to include, often without much time or outside information.
“At that point, there’s not a lot of education about how the policy works and what they’re actually getting,” Limes says. “For example, what happens beyond this enrollment time? Are they getting a competitive rate? In some cases, they may be able to get that same amount of coverage for less money.”
The pros and cons of group policies
Among the benefits of a group policy is that, in addition to being low-cost, it can be easier to qualify for. Coverage applies to all members of the group. This differs from individual life insurance policies, which may require a medical exam.
“A group policy is not going to have the same benefits and support as an individual life insurance policy,” explains Limes. “The biggest thing that we see is that people have a lack of understanding about what that policy offers. If something happens, how much will go to their family? Will it be enough? What happens if they lose their job? These are things that are really important in the long run but oftentimes aren’t discussed.”
Knowing how much coverage the policy offers is significant because, in most cases, a group policy’s benefits will not be enough to adequately cover a family’s needs if the employee’s income is suddenly gone. For that reason, many life insurance experts advise that group insurance policies are used as supplemental coverage rather than depended upon as primary or sole policies.
In some cases, organizations or employers might offer the opportunity for group members to buy more coverage than the basic plan. While this could be a good deal, it’s still important to look into what the policy will pay out and how much the additional coverage will cost. Compare this with the cost and benefits of an individual plan. It’s also important to know if that coverage is portable between jobs if you decide to switch companies.
What to know before you enroll
One of the best things you can do before signing up for a group policy is to meet with an outside insurance agent to evaluate your actual needs.
“A lot of times, people really underestimate how much life insurance they need,” says . “But the time to learn how much life insurance is really required is always before you need it.”
When you meet with an insurance agent who has access to specific industry calculators, you can get a better idea of what it will take to make sure your family is taken care of in the event of your death. Limes says that those factors will change over time, so it’s something you can revisit and update as your stages in life shift.
“It comes down to being able to know that if something happens to you, the things that are important to you are taken care of. This is about being able to find something that provides a level of coverage that gives you peace of mind about the future,” he says.
Carefully reviewing your group life insurance policy with an agent could help you see where any possible gaps in coverage are and allow you to get the additional coverage that you need. Learn more about your insurance options and assess your needs by scheduling a review with your Nationwide agent today.