Term life insurance covers a policyholder for a set amount of time, while group term life insurance is a policy offered to a group, often by an employer, organization, or trade union, often at no cost to the employee. This article discusses the pros and cons of both types of policies.
Table: Pros and Cons of Group Term Life Insurance and Voluntary Term Life Insurance
| Pros of Group Term Life Insurance | Cons of Group Term Life Insurance |
|---|---|
| Cost; baseline policies are often free | Low payout; coverage is typically on the low side |
| Availability; there’s usually no medical exam or other strict requirements | Lack of choice; a single policy is typically selected by your employer to cover all members |
| Simple application; often employees just check a box or sign a form | Non-portable; if you leave your job, you lose your coverage |
| Coverage when you need it; families have some coverage in the event their main source of income is lost |
| Pros of Voluntary Term Life Insurance | Cons of Voluntary Term Life Insurance |
|---|---|
| Low cost; premiums are normally more affordable than for individual policies due to the employer’s group discount | Limitations; employees are limited to a single insurance company |
| No medical exam; no medical exam is required for less coverage | Short-term solution; employees who don’t plan on staying with their company long-term may be better served by an individual policy |
| Simplicity; employees just need to select the level of coverage they want | |
| More-complete coverage; because you can choose your level of coverage, payout benefits could cover loved ones completely in case of the policyholder’s death | |
| Portability; if you leave your job, you might be able to keep your coverage, but your premiums may rise significantly |
Group term life insurance is typically free through your employer, while voluntary term is an optional benefit the employee can purchase at a reduced rate. Also, voluntary term insurance usually offers different levels of coverage, while group is provided at one level for all employees. However, group policies can have limitations that make them less comprehensive than individual policies.
It’s important to note that coverage amounts for both group term and voluntary term life insurance tend to be much smaller than what experts recommend. You’ll need to use the insurance carrier chosen by your employer and, if you leave your job, you’ll lose the policy. Retirees likely have the opportunity to continue paying for their life insurance. Before you retire, explore your options, comparing cost and benefits.
Ultimately, it’s important to carefully consider your options and determine which type of life insurance policy is best suited for your needs.
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Article Sources
- Investopedia. Group Term Life Insurance: What It Is, How It Works, Pros ...
- SEC (U.S. Securities and Exchange Commission). Group Life Insurance: How It Works, Types, Pros & Cons
- SEC (U.S. Securities and Exchange Commission). What'S The Difference Between Term And Permanent Life ...
- Investopedia. Group Term Life Insurance: What You Should Know
- Progressive. Group Term Life Insurance Policies – Employer-Paid Premiums