Group life insurance can be a tremendous benefit to any company. It provides additional incentives to potential new hires and it offers a sense of security to longtime employees. Although these benefits are undeniable, there are many things a company should consider before deciding to offer or not offer a policy. The key to making an informed decision that will benefit everyone involved is to understand the process, the costs, and the benefits.
Group Life Insurance Basics
Group term life insurance is similar to, but distinct from, traditional term life insurance. In this type of situation, the entire group is covered by the company, which can lead to lower premiums per individual. On the flipside, employees do not have an option for how much coverage they'd like to purchase. Most companies choose a set amount of coverage per person which, most commonly, is set at an amount equal to the person's annual salary.
One unique aspect of a group policy is the group application process. Instead of depending on each individual's medical history, the cost is calculated based upon the general demographics of employees. Each individual will not have to be examined. Instead, the underwriters will ask a series of general questions, such as age and gender. Size and company history will also be a factor. Perhaps most important will be the occupation of the covered individuals. If your company is involved in an industry known to present particular occupational hazards, a higher premium is to be expected.
Determining Whether Your Business Qualifies
Not every business can qualify to offer a policy for its employees. In order to determine whether your business is or is not able to qualify, you'll need to talk to a qualified insurance professional. Although there are many things you can learn on your own and many things you can check independently, only a professional knows the specifics of regulations in your area and your industry. Talking with a qualified agent will make it easy to get your questions answered, and can also easily be turned into a discussion about purchasing a policy should you decide it will be a favorable option.
The main reason an established business cannot obtain group coverage is because the company's group is determined to be overly high risk. There are a number of reasons for this, ranging from participation in an industry that is particularly hazardous to simply having too few employees. If you are too small, your company may be unable to acquire coverage and your employees may need to seek individual term life insurance.
As with most plans, there is no one standard rate which will fit every situation. Although employees will not be individually screened, their overall demographic information will still be factored in to the cost. In many instances, the company pays around 5 cents per $1,000 of coverage provided. This is typically much lower than what your staff would pay if they obtained that much independently, which makes it attractive for them. This number may be suitable for your preliminary calculations, but remember to account for any substantial differences in your demographics from the norm. For instance, if your staff has many very senior members who have been with the organization for years, you may see higher premiums due to a higher average age and should account for that in your estimation.
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