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How Much Does Group Life Insurance Cost?


According to the American Council of Life Insurers, 46 percent of life insurance policies came from group life insurance, with $8.2 trillion provided in protection. Most commonly offered by employers, group life insurance is often the most affordable method of obtaining life insurance.

What is Group Life Insurance?

Simply put, group life insurance is offered by a group (an employer, association, labor organization, etc.) to its employees or members. It is usually offered as part of a larger benefits package.

There are some key differences between group life insurance and individual life insurance, especially when it comes to risk calculation. With group life insurance, risk (and therefore premiums) is calculated based on the group as a whole by using general information about the individual members. With individual life insurance, premiums are based on detailed medical histories of an individual or family.

Group life insurance costs its members far less than if they had purchased an individual policy. An employee can have their portion of the premium deducted from their paycheck and, in some cases, may not have to pay out of pocket at all.

Pros and Cons of Group Life Insurance

As with anything else, there are upsides and downsides to group life insurance. It is important that you weigh the pros and cons of any purchase before making a final decision.

On the upside, it is much easier to qualify for group life insurance coverage than it is to qualify for individual coverage. Since the insurer bases premiums on the risk of the group as opposed to the whole, group life insurance is basically guaranteed. Attempting to purchase an individual policy comes with a higher chance of rejection. Also, group life insurance is often free when offered as a part of a basic benefits package, and higher levels of coverage are available at group rates.

Looking more to the downside of things, it is important to remember that group life insurance is a great (sometimes free) deal, but it should not necessarily be a replacement for an individual policy. This is mainly because, unlike an individual policy, you do not have control: your employer does. If you leave that job or your employer decides they no longer want to pay for group coverage, then you lose that life insurance. Beyond that, group life insurance generally offers a small coverage amount. Death benefits for group life insurance tend to be one to two times your annual salary, which may seem like a lot, but is not really enough to cover the average family's long-term needs.

Group Life Insurance Eligibility

Generally, if an employer offers group coverage to any full-time employee, they must offer it to all full-time employees. Whether an employer chooses to offer coverage to part-time (less than 30 hours worked per week) employees is up to them. But the same rules apply to part-time associates as they do to full-time associates: if it is offered to any, it must be offered to all.

These rules must be followed regardless of an employee's current medical state, previous medical state, or any pre-existing conditions. Dependents of eligible employees are typically covered under group plans, as well, though they cannot enroll for coverage unless the employee has. Children, spouses, and (in some scenarios) unmarried domestic partners all qualify as dependents.

What Is the Cost of Group Life Insurance?

Several factors influence the price of any life insurance policy, including carrier, location, the number of participants, and structure. That being said, what follows is a general pricing guideline of national averages to provide an idea of what you can expect to pay for group life insurance.

Single Coverage

  • The average group life insurance policy in 2015 cost $6,251 per year
  • The average cost for employers was $5,179 per year, or 83 percent of the premium
  • The average cost for employees was $1,071 per year, or the remaining 17 percent of the premium

Family Coverage

  • The average group life insurance policy for families in 2015 cost $17,545 per year
  • The average cost for employers was $12,591 per year, or 72 percent of the premium
  • The average cost for employees was $4,955 per year, or the remaining 28 percent of the premium

Getting Additional Coverage

Additional coverage may be something you can purchase through the group, with premiums for the additional coverage still being the price of the group rate. But remember that for additional coverage, you may need to answer questions about your health and medical history.

Always make sure to find out if your group life policy is portable, which means that it continues even after you leave the company. If you are using a group policy to supplement an individual one, this probably won't matter to you, but it is still a good idea to check.

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