Employee Life and Disability Insurance

Group Life Limitations

The old adage tells us "not to put all our eggs in one basket" and it certainly rings true about group life insurance: depending solely on employer-provided life insurance could leave an employee in an undesirable situation. Remember that even the best employer-provided life insurance plans can have limitations. Know what you need, and know what your employer-provided policy does and doesn’t offer. Employees should be informed about what an employer-provided policy does and doesn’t offer.

Employer-provided life insurance policies are usually designed to fulfill basic insurance needs for a group of employees, thus leaving individual needs sacrificed for a more main-stream policy. These group policies are perfect for minimal coverage, but this is not enough for the typical employee. How much more is needed for adequate coverage?

An employer can cancel your life insurance coverage, so having a back-up plan is wise. Since there is no permanency to group coverage, think twice when searching for a new job outside the company. An employer-provided life insurance plan typically does not go with an employee to a new employer. Depending on the state and employer, it may be possible to change jobs and take a life insurance policy to the new job, but more often than not, the coverage will not continue. This also holds true for retirement. Group life insurance coverage usually ends upon retirement, and the older the employee, the harder it can be to find reasonable individual coverage.

Group Life Advantages

Employer-provided life insurance is a valuable benefit. Let's take a look at some of the advantages. A group plan allows for very reasonable rates. An employer buys life insurance collectively, resulting in reduced costs in comparison to individual life insurance policies. These policies have generous underwriting requirements so that even if an employee has trouble qualifying for an individual life insurance policy at regular rates, they should be able to obtain coverage through their employer-provided life insurance plan. There is also added security with group plans: covered individuals can't be removed from the group as long as the employer renews the policy.