What Is Group Term Life Insurance?

By Bill Herrfeldt

  • Overview

    Group term life Insurance is a fringe benefit that employers often make available to their employees. Group term life insurance can also be available to members through associations and unions. The sponsor can pay all the premium, or the employees or members will pay a part or all of it. Most often, employers and other sponsors buy term insurance that can be renewed, but there are some that provide permanent life insurance, as well.
  • Size

    When group term life insurance is offered by an employer, the employee will be offered it in relationship to his earnings. Most often, one to 2 ½ times an employee's yearly earnings is offered to each employee. Furthermore, many companies agree to pay more if the death occurs on the job. For instance, the beneficiaries of an employee who earns $50,000 will receive five or six times that amount if the employee dies at work. When it is offered by unions and associations, their members usually can purchase up to a certain amount of coverage.
  • No Pre-existing Conditions

    Employees of companies and members of unions and associations pay the same premium per $1,000 regardless of their age or pre-existing condition because the sponsor's entire population is underwritten as a group. Also, any employee or a member of the organization sponsoring group term life insurance must be granted coverage without having to take a physical examination.


  • Features

    When an employer offers group term life insurance, a covered employee must have the right to take the coverage with him if his employment is terminated for any reason by converting to an individual policy. Also, he must be granted such a policy without demonstrating insurability by taking a medical exam. However, the premium for that policy will be based on his age at the time the conversion was made.
  • Benefits

    Many group term life insurance policies provide for waiver of premium payments if an employee is disabled and unable to work. That waiver will continue as long as the employee remains disabled, and his beneficiaries will receive the death benefit even if that employee has not worked for the company for years.
  • Considerations

    Group term life insurance may be the most valuable coverage you can get for two reasons. First, in many cases an employer will pay some or all of the premium. And, while a pre-existing condition might hamper your ability to purchase life insurance on your own, you will not be faced with that problem since group term life insurance must be offered to all employees without proof of insurability.
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