Group Life Insurance: How does it work?

Group life insurance is a commonly offered benefit in many workplaces, but not everyone fully understands how it works or what it entails. It provides financial protection to the employees of a company, in the event of death. This is also known as a death in service policy. 

In this article, we will explore the ins and outs of group life insurance, from how it functions to the advantages it offers. Whether you're considering getting group life insurance or simply curious about how it works.

How Does Group Life Insurance Work?

Unlike other types of policies, your employer provides cover. When you die, a cash lump sum is typically paid out to your family/loved ones. The amount that is paid out is based on the terms of your policy and the level of cover chosen.

Most group life insurance policies are renewable and can typically cover an employee up to their state retirement age. It's important to note that if you leave the company providing the policy your cover may end automatically. This is where having your own cover can be beneficial to help ensure you still have cover in place.

Group life insurance is often more commonly known as a death in service benefit.

Please note: The insurance products offered by Cavendish Online have no cash-in value at any time. If you stop paying your premiums your cover will stop, your policy will end, and you will receive no benefit. If you have not claimed before the end of your chosen policy term, the policy will end, and no benefit will be paid.

If you are facing financial difficulties and can no longer afford your premiums, please contact your insurer as soon as possible to stop the plan from lapsing automatically. They may have a scheme that allows you to keep the cover.

Benefits of Group Life Insurance as an employer:
 

Employee care

Offering life insurance is a great bonus for employers – it shows that you care about your employees and are willing to take extra steps to protect them. Advertising this could also be handy for attracting or retaining talent.

Cost effective

It can be a cost-effective way to offer protection to your employees, as premiums are often lower than individual life policies. 

Easy setup

It's often easier to set up and manage as this is taken care of by the insurer. This makes it a great option for companies with a large number of employees. In addition, fewer questions need to be answered.

Provides reassurance for your staff

If something were to happen and one or more of your employees lost their life as a result, you will have been able to provide them with financial stability. This can be a tremendous comfort to families who are grieving the loss of a loved one.

Benefits of Group Life Insurance as an employee:
 

Convenience

As an employee, you may find it helpful to have this type of policy, as everything is taken care of for you. This way, you don't have to worry about paying for the policy or making sure it's up to date.

Peace of mind

Having any kind of life insurance can provide peace of mind in the event of a death in the family. Not only will you have financial security, but your family/loved ones will know that they’re taken care of if anything happens to you.

If you die whilst employed by the company, the payout can help your family/loved ones with things like:

Added protection

If you already have a life insurance policy of your own, having an employer provided plan can help provide greater protection. It might allow you to reduce your cover, helping you save money on future premiums.

In most cases, it's wise to take your own policy, as your group life insurance may end if you leave your employer.

Read more: Can Changing Jobs Impact Your Life Insurance?

No medical needed

If you have a pre-existing condition, you may be able to get cover as most companies accept staff without medical underwriting. However, this will depend on the amount of cover you are requesting. 

If your employer offers group life insurance, speak with them to find out the full terms and conditions of the policy. Or, if you're unsure about your own options for life insurance, speak to our experienced advisers.