Group term life insurance
[social_share]Group term life insurance is life insurance that is offered to a group of people, or more accurately to a person as a member of a group. These policies can be considerably cheaper than individually purchased policies, and in this way the life insurance can be provided on a per-person basis.
The most common type of group term life insurance is the policy an employer takes out for their employees. Although the employees will often pay for this insurance (sometimes through a direct deduction from their salaries) because of the way the policies are provided, the life insurance is usually considerably cheaper than other, similar policies. There are some disadvantages to this; particularly the fact that it can be a one-size-fits-all sort of policy without the flexibility of an individually-purchased life insurance policy.
In many cases the company provides the life insurance as a part of the employee’s remuneration. There can be some tax advantages to this for the company, but it’s usually done because of the lower cost than for any other reason.
There is an important point about life insurance that should always be remembered: it functions over groups of people, called pools. Life insurance deals with risks. An individual person does not know if he or she will suffer a particular loss, but when measured over a larger group of people, statistics can give a good idea as to how often that risk will occur. This means that, when writing an individual policy, the life insurance company will need to know many details regarding the health and lifestyle of the applicant so they can assign him or her into the most appropriate pool. With group term life insurance, the group is already in place. The fact that the group is large means that much of its risk is already measured and predictable.
In this situation, a young, fit, and healthy person may be charged a higher rate for group term life insurance, than if he or she purchased an individually-tailored life insurance policy.
Another important point about group term life insurance is that it’s renewed on an annual basis, sometimes making it considerably cheaper than longer term life insurance.
