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Insurance

What is group life insurance? Find out if it's right for you

Group life insurance is often included as an employee benefit, but it may not cover all of your needs.

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Group life insurance is just what it sounds likelife insurance for a group of people, generally offered through a job, union or other professional association. 

Group life insurance policies usually provide much less coverage than an individual policy, typically one or two times your salary. Since the rule of thumb for how much life insurance you need is ten times your salary, that's not going to be enough for most people.

Fortunately, having a group life policy doesn't prevent you from buying additional life insurance. 

If you're looking for coverage beyond a group life policy, we've chosen Guardian Life and Northwestern Mutual as some of the best companies for life insurance. We recommend Guardian for its flexibility, including a term life insurance poliicy that can be converted into whole life in the first five years at no additional cost.  

Guardian Life Insurance

  • Cost

    The best way to estimate your costs is to request a quote

  • App available

    Yes

  • Policy highlights

    Guardian offers a variety of policies, including term, whole and universal. It also offers term policies that can be converted into whole or universal life policies, along with strong financial strength ratings.

We also like Northwestern Mutual for its 160-year history and superior financial strength rating from AM Best.  

Northwestern Mutual Life Insurance

  • Cost

    The best way to estimate your costs is to request a quote

  • App available

    Yes

  • Policy highlights

    As the largest life insurer by market share in the U.S., Northwestern Mutual is an established choice with a proven record. And, it offers a number of types of policies across the country. 

Below, CNBC Select explains what you need to know about group life insurance, including what it is, who is eligible for coverage and the benefits and drawbacks of a group life policy.  

What we'll cover  

What is group life insurance?  

Group life insurance is a type of coverage that's purchased for individuals through a larger association or corporation, oftentimes as a workplace benefit.

These are typically yearly renewable term (YRT) life insurance policies — meaning, if you're still with the company after 12 months, your employer can extend coverage. Since it's term life insurance, though, it doesn't include any cash value, like a permanent policy would.

You may be able to purchase supplemental coverage for yourself at a discounted rate, as well as coverage for a partner or child. Your group life insurance may also include an accidental death and dismemberment (AD&D) rider.

Who is eligible for group life insurance?    

Group life insurance is typically offered as a workplace benefit to full-time employees. You may need to work a certain number of hours a week to qualify, and some employers only offer enrollment after a probationary period.

Group life insurance is attached to your employer, so your coverage will terminate either immediately after you leave or shortly thereafter.

If you're not sure about group life insurance eligibility at your workplace, ask your human resources department about the options available to you.  

Pros and cons of group life insurance 

Group life insurance can be beneficial but, depending on your situation, it's probably not the only policy you'll need. Here's what you need to know:

Pros 

  • Affordability. Employers usually offer group life policies for free or at a very low rate, making them much more affordable than an individual policy in some situations.
  • No medical exam. Insurance plans offered through work are guaranteed, so you're typically approved without the need for a medical exam. That can be a big benefit if you have preexisting health conditions.

Cons

  • Limited coverage. Group life insurance that you're given as a benefit typically caps out at a low limit, sometimes one to two times your annual salary. If you have dependents, you'll likely have to buy supplemental insurance to be adequately covered. 
  • Your policy is tied to your job. While some types of group life insurance are portable, most policies terminate when you leave the company.
  • No cash value. Unlike a whole-life policy, you can't borrow against a group life insurance policy.

Does group life insurance make sense for you?

If your company offers group life insurance as a benefit and pays for coverage, it's almost always worth taking advantage of — even if you have your own policy. Should something unexpected happen, this policy will pay out on top of any existing coverage. You'll simply need to elect coverage, usually during your onboarding, and designate beneficiaries — the people you'd like to receive the death benefit.

Buying supplemental coverage may make sense for those who are older or find it hard to qualify for coverage on their own, since medical exams and health questionnaires aren't usually required.

Getting your own policy in addition to group life insurance may be the right choice, especially if you want permanent life insurance. An individual policy will offer more choices in the type of insurance you can get, the amount of coverage available and the kinds of modifications you can make with riders.

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Bottom line

Commonly offered by employers, group life insurance is a great foundation for coverage, especially since it's easy to get and usually free. But you may need more coverage than the low limit offered by a group life policy.

Why trust CNBC Select?

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every insurance review is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of insurance products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
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