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Group term life insurance is a policy that applies to everyone in a group in the exact same way. In some cases, this type of insurance may be provided at an employer at a very small cost, or even no cost, to the employee. This type of life insurance policy is one of the most common types of benefits offered by an employer.
The attraction for employers to group term life insurance is in its affordability. Due to the fact that the life insurance policy covers a broad group of people, it is relatively inexpensive. The risks are spread out among a larger group of people. Therefore, the insurer can afford to charge a lower premium than it may with many other types of life insurance policies. Even when the employee must pay a portion, it is generally a very small amount each month that will go toward premiums.
One of the key things most employees should remember about this benefit is that it is generally used as a supplemental life insurance policy. The payout is not enough to truly take care of a family for very long, if the major breadwinner is lost. Rather, group term life insurance will generally only pay one to two year's salary of the deceased individual. After funeral expenses, this may not amount to a great deal of money for many people.
While many people may not worry about the term portion of the name, group term life insurance, like an term insurance policy, must be renewed every so often or it will expire. Often, this is an annual policy, which may require a premium adjustment every year or so. In most cases, the company administration, likely the human resources section, will take care of this without the employee being involved. However, if the employee does contribute to the premium, he or she will likely be given the option to renew or not.
Employees who are in a group term life insurance policy should be careful to keep information up-to-date. For example, if a beneficiary needs to change, that should be taken care of. In some cases, because the policy is one of minimal maintenance for the insured, it is easy to forget some of these details. However, this could result in the benefits being paid to a person that should no longer receive them. Or, if that person is also gone, there may be a legal battle over the rightful beneficiary.
@indemnifyme - I have group term life insurance through work. I always thought it would be enough to take care of my family for quite awhile in the event of my death but after reading this article I double checked my policy. I don't pay much but the pay out is also not that big!
The cheap term life insurance will be helpful I'm sure but I'd like to get my family covered a little bit better. I think I am going to look into getting another type of life insurance and keep the group term life insurance as supplemental.
Group term life insurance very common, probably because it is the simplest kind of life insurance. It simply pays money to the beneficiaries in the event of the insureds death.
Interestingly enough group term life insurance rates are usually the same for all members of the group. For most types of insurance the rates fluctuate widely for various reasons such as health, credit score, etc. However there is a trade off because the group term life insurance payout is usually not as much as other types of life insurance.
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