Group life insurance is typically offered through an employer or other organization, adding value or benefits to the job or membership. There are 3 basic types of group life insurance, Group Term, Group Universal, and Variable Group Universal insurance. Additionally, Group Term can be divided into 3 distinct types again, amounting to a total of 6 types of group life insurance available.
Group Term Life - Group Term Life is the most common type of group insurance. This type of policy is typically an employment incentive, where policies are purchased in 1-year increments that can be renegotiated at the end of each term. There are 3 types of Group Term available:
- Basic Group Term - Typically offered as a tax-free benefit to employees, this is the most common type of group life insurance and is often purchased in policies equal to or less than $50,000 in value.
- Supplemental Group Term - This type of group life insurance is typically offered to employees who receive the Basic Group Life benefits. With this rider, the employee can increase the value of the policy and pays the difference in premium costs.
- Portable Term Life - This allows policyholders to take the coverage with them if they leave the employer where the policy was purchased. Once the policy is taken away from the initial source, the policyholder is responsible for all premium payments.
Group Universal Life - This type of policy combines the benefits of term life with the advantages of Universal life insurance. Under this policy, the policyholder can choose to accept the basic coverage or to contribute more into the policy, building cash value that can be used by the policyholder tax free. Among the advantages of this type of policy are such things as lower premiums, coverage that can be extended to age 100, and dependent coverage riders.
Variable Group Universal Life - This type of group life policy is often used in executive settings. It provides flexible life benefits, a guaranteed face value, and optional investment choices which contribute to a cash value. The disadvantage of this type of policy is that it can entail high processing, handling and investment fees. Even with bad investment options, the face value of the policy will remain constant, while the accumulated cash value may lose value.