Group life insurance is an affordable way to provide your employees with the coverage they need, but as with any major financial decision it’s important to weigh all of the benefits and drawbacks before pulling the trigger.
With this policy, you can choose the right coverage to meet the needs of your company and have peace of mind knowing that your team will be taken care of should something happen.
On the flipside, you need to consider drawbacks such as additional administrative costs and limited flexibility when it comes to plan customization.
In this article, we explore the benefits and drawbacks of these benefit plans for employees. Let’s dive in!
Benefits of Group Life Insurance
Convenience and affordability
Group life insurance policies are usually more affordable than life policies taken individually. This is because employers can negotiate better rates with insurers when they purchase coverage in bulk. In addition, the risk is spread out over a large group of people, which makes it cheaper for the insurance company.
For employees, they don’t have to worry about shopping around for the best rates or go through the process of applying for a policy. The employer takes care of everything, which makes it a convenient option to get covered.
Another key benefit of a group life insurance policy is that it’s often easier to qualify for coverage. These policies provide coverage for all employees, even those who may not be eligible for individual life insurance due to pre-existing medical conditions.
Individual life insurance policies typically require a medical exam, but this is not always the case with group policies. This can make it much easier to get the coverage without having to go through a lengthy and potentially expensive medical exam.
Access to additional benefits
Most group life plans come with added benefits, such as accelerated death benefits, estate planning services, access to a financial planner, and waiver of premium riders. These benefits may not always be available through individual policies.
In particular, having access to a financial planner can be an excellent way to get started on your financial planning without having to pay for additional services.
Companies can use the policy to attract and retain top employees
Group life insurance can be a valuable tool for employers trying to attract and retain top talent. Employees are often attracted to companies that offer good benefits, and group life insurance is a great way to show that you care about them.
It can also be used as a retention tool, as employees will be less likely to leave a company that offers this type of coverage.
Group life insurance can also offer tax advantages to both the employer and employees. For starters, the premiums you pay for your group company policy are typically tax-deductible. This can help to offset the cost of the policy and make it more affordable.
Additionally, any death benefit payout from a group life insurance policy is generally tax-free. This means that beneficiaries will not have to pay taxes on the money they receive from the policy.
Lastly, if there’s a cash value involved, its growth may be tax-deferred. This means you won’t have to pay taxes on any earnings made from it until you withdraw the money.
Drawbacks of Group Life Insurance
Limited coverage options
Unlike individual life insurance policies, which can be customized to fit your specific needs, group policies often have set coverage amounts. This can be a problem if you have unique coverage needs that can’t be met by a standard group policy.
In addition, most group life insurance policies only offer a death benefit, which pays out a lump sum to the beneficiaries upon the death of the policyholders. This means it doesn’t do much to help the employees while they’re still alive and need financial assistance.
Contingent on employment
Group life insurance policies are often dependent on the employer for renewal and continuation. This means that if an employee leaves their job, their policy will likely be canceled. This can be a major drawback for many, especially those with a family to support.
Group life insurance is an excellent way to provide your employees with financial protection in the event of death or disability. It can be an affordable option when compared to individual policies and also provides added benefits such as portability and coverage for dependents.
However, it’s important to be aware of potential drawbacks such as limited coverage options and dependence on the employer for renewal and continuation.
To be safe, consider taking out an additional policy of your own, after all, it doesn’t hurt having even more protection for the people you love.