Cassidy Horton is a finance writer covering banking, life insurance and business loans. She has worked with top finance brands including NerdWallet, MarketWatch and Consumer Affairs. Cassidy first became interested in personal finance after paying of.
Cassidy Horton Personal Finance Reviewer and WriterCassidy Horton is a finance writer covering banking, life insurance and business loans. She has worked with top finance brands including NerdWallet, MarketWatch and Consumer Affairs. Cassidy first became interested in personal finance after paying of.
Written By Cassidy Horton Personal Finance Reviewer and WriterCassidy Horton is a finance writer covering banking, life insurance and business loans. She has worked with top finance brands including NerdWallet, MarketWatch and Consumer Affairs. Cassidy first became interested in personal finance after paying of.
Cassidy Horton Personal Finance Reviewer and WriterCassidy Horton is a finance writer covering banking, life insurance and business loans. She has worked with top finance brands including NerdWallet, MarketWatch and Consumer Affairs. Cassidy first became interested in personal finance after paying of.
Personal Finance Reviewer and Writer Ashlee Valentine Deputy Editor, InsuranceAshlee is an insurance editor, journalist and business professional with an MBA and more than 17 years of hands-on experience in both business and personal finance. She is passionate about empowering others to protect life's most important assets. Wh.
Ashlee Valentine Deputy Editor, InsuranceAshlee is an insurance editor, journalist and business professional with an MBA and more than 17 years of hands-on experience in both business and personal finance. She is passionate about empowering others to protect life's most important assets. Wh.
Ashlee Valentine Deputy Editor, InsuranceAshlee is an insurance editor, journalist and business professional with an MBA and more than 17 years of hands-on experience in both business and personal finance. She is passionate about empowering others to protect life's most important assets. Wh.
Ashlee Valentine Deputy Editor, InsuranceAshlee is an insurance editor, journalist and business professional with an MBA and more than 17 years of hands-on experience in both business and personal finance. She is passionate about empowering others to protect life's most important assets. Wh.
| Deputy Editor, Insurance
Updated: Feb 1, 2024, 8:57pm
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Roughly two-thirds of Americans rely on group life insurance from work. However, nearly half of these people either don’t understand or only somewhat understand how it works, according to an Insurance Barometer Study by LIMRA and Life Happens, both industry-funded groups.
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Group life insurance is a single contract that provides coverage to a group of people, typically those who work for the same company. The employer owns the policy, which covers the employees. Your beneficiaries will get a payout if you pass away while covered by group insurance.
The most common group life insurance policy is provided by employers. However, some churches, professional associations, alumni groups, unions and other affiliate organizations offer group life insurance to members.
There are many different formulas used to calculate group life insurance benefits. Some of the the most common types are below.
These group life insurance plans tie your death benefit amount to a multiple of your wages, such as two times your annual salary. Because the payout is linked to your salary, the level of protection rises as your income increases.
These group life insurance plans’ benefits are based on multiples of your earnings at certain thresholds. For example, the death benefit might be equal to your salary if you make under a certain amount, or it might be two times your annual earnings if you make over a certain amount.
These group life insurance plans pay the same amount to all employees and are a fixed dollar amount. Payouts ranging from $10,000 to $25,000 tend to be the most common.
Variable-dollar-amount plan payouts can vary based on your earnings and length of service.
The purpose of group life insurance is to help provide peace of mind for employees and their families, knowing they will have some financial security if the person covered by group life insurance passes away.
Businesses offer group life insurance as a way to help attract and retain talent. For businesses, offering group life insurance can be an effective way to show employees that they’re valued and that their well-being is a priority.
For families struggling to make ends meet, group life insurance can be a lifeline. However, one thing you should know about group life insurance is that it often isn’t enough on its own. Group life insurance is also sometimes called supplemental life insurance because it’s meant to provide additional protection beyond an individual life insurance policy.
Our life insurance calculator can help you estimate how much life insurance you need.
Although group life insurance is a valuable perk, it has its pros and cons.
If your employer offers free group life insurance, it makes sense to opt into it. It usually costs you nothing and will provide a little more financial security to your beneficiaries in the event of your death. Even if you have to pay for group life, it’s usually cheaper than an individual life insurance policy.
Beyond that, group life insurance can be a great way to get coverage if you have trouble qualifying for an individual policy due to health issues. This is because the underwriting standards are often more lenient for group policies.
To qualify for group life insurance, you must usually be an active employee of the company that offers the policy. Some policies may require that you work a certain number of hours per week to qualify, while others may be available to all employees regardless of status.
Premiums for group life insurance are often paid in full or partially by the employer. If you pay a portion it can be deducted from your paycheck. Your premium can depend on factors such as your age, salary and whether you smoke. Your employer may also offer different levels of coverage at different price points, so you can choose how much coverage you want based on your needs and budget.
Group life insurance costs vary depending on your employer, the life insurance company and the characteristics of the group, such as the average age of employees. The average cost of group life insurance purchased through an employer is usually quite low.
For example, here’s a look at Walmart and Amazon’s group life insurance, two of the largest companies in the U.S.
Walmart gives full-time employees company-paid life insurance equal to their annual pay, up to $50,000. Beyond this, hourly associates can pay for up to $200,000 in group life insurance, while salaried associates and drivers can pay for up to $1 million in coverage.
A 40-year-old full-time Walmart employee who does not use tobacco pays $.0295 for $1,000 or $2.95 per biweekly pay period for $100,000 in additional coverage.
These additional premiums are deducted from paychecks.
Amazon gives most part-time and full-time employees free basic life insurance equal to two times their annual salary. Employees have the option to buy additional coverage up to 10 times their base annual earnings.
For example, a 40-year-old full-time Amazon employee will pay $0.059 for every $1,000 of additional coverage. If that employee wants to purchase $100,000 of additional group life insurance, they’d have a monthly premium of $5.90.
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