August 23, 2020
August 22, 2020
How Does Group Term Life Insurance Work?
What is Group Term Life Insurance?
Group term life insurance is a life insurance contract between an employer and an insurance company that covers the employees for a specific amount of life insurance.
Three Types of Group Term Life Insurance
There are three types of group term life insurance:
- Basic group term life insurance
- Supplemental group term life insurance
- Dependent group term life insurance
- Group accidental death & dismemberment insurance
Let's talk about each of these types of group life insurance.
Basic Group Term Life Insurance
Basic group term life insurance is an amount of life insurance that your employer pays for. It's often called basic group term life insurance but can be called employer paid life insurance.
Usually, basic group term life insurance is just on the employee in an amount of $50,000 or less. However, I've seen employers provide as much as $100,000 of basic group term life insurance.
Employers may also provide basic group term life insurance on spouses and children.
Supplemental Group Term Life Insurance
Supplemental group term life insurance is an additional amount of life insurance you as the employee can enroll in. But instead of the your employer paying the premiums, you as the employee pay them.
Supplemental group term life insurance is often called voluntary group term life insurance. The difference between the two is really behind the scenes. The difference is based on how the contract is set up with the employer.
It's called supplemental life when the insurance company also provides the underlying basic group life insurance. It's called voluntary life when the insurance company only offers the additional life insurance but does not offer the basic life insurance.
Employees can often get between $10,000 and $500,000 of supplemental life.
Dependent Group Term Life Insurance
Dependent group term life insurance is additional amount of life insurance an employee can purchase on their spouses or children.
Group Accidental Death & Dismemberment (AD&D)
Group accidental death & dismemberment
Flat amounts
% of income
Multiple of salary
Salary limits
Imputed income
Guaranteed issue
Initial enrollment
Annual enrollment
Qualifying life events
New hire enrollment
Attained vs issue age rates
Portability
Convertibility
Conversion
Age reduction schedule
Participation requirements
overall
employee must purchase
Certificate of insurance
No policy
Naming beneficiaries
Evidence of insurability
Takeovers
Benefit confirmation statement
Beneficiaries
Riders
Exclusions
Underwriting
Payroll deduction
Actively at work
Premium waiver
Advantages
Disadvantages
Termination
Sources:
IRS
ADEA
Limra
August 21, 2020
How Health Insurance Works
Health insurance has two parts
Health insurance is made of up of two parts:
- Medical benefits Medical benefits are benefits for things like doctor visits and hospital stays.
- Pharmacy benefits Pharmacy benefits are for medications.
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