Group Life Insurance

"Aero Manufacturing Corp. has been working with Jean for many years... In an ever-changing environment with spiraling health care costs, Jean has managed to consistently cut costs and also increase benefits for all"

Jeannine Gaudette
Controller
Aero Manufacturing Corp.

Group Life Insurance is usually provided by companies to provide death benefits. The most popular type is the group term life insurance plan. It is a renewal life insurance program with insurance companies renewing every 1 to 3 years.

There are many life insurance programs in the market place. This is a list of the kinds of life insurance programs:

Group term life insurance
Group universal life insurance
Group survivor income benefit insurance
Group dependent life insurance
Group Accidental Death and Dismemberment (AD&D) insurance.
Group travel accident insurance
Group voluntary life insurance

Group Term Life Insurance:

Group term life insurance may be financed on either a contributory (where the employees share the cost of the coverage with the employer) or a non-contributory basis (where the employer pays the total amount for the insurance).

There are many advantages for offering the group term life insurance on a noncontributory approach:

All eligible employees who have completed the waiting period and are actively at work have coverage.
There are tax advantages for the employer.
The plan is easier to administer since all employees are covered and there are no payroll-deduction procedures.
The employer may have more control over the changes in benefits because employees are not sharing in the cost of the plan.

Here are the advantages for offering the group term life insurance under the contributory approach:

Because employees are sharing in the cost of the premium, the benefits can be richer.
Contributory plans allow the employer's funds to be used more effectively.
Contributory plans allow employees to have more control since the employees are paying part of the cost.
Contributory plans create greater employee interest because they are making a contribution.

Accidental Death and Dismemberment (AD&D) Insurance:

Employers offering a group life insurance coverage will usually provide accidental death and dismemberment insurance. The AD&D benefit is usually some multiple of the amount of group term life insurance plan. AD&D insurance is payable only if the employee's death is a result of an accident. In addition, certain percentages of the AD&D coverage amount are payable for certain dismemberment conditions as stated in the policy contract or employee booklet. If an insured dies due to an accident, the benefit will be paid to the beneficiary named in the life insurance. If an insured suffers any other loss, the benefit will be paid to the insured. {The handbook of employee benefits by Jerry S. Rosenbloom) The group AD&D are usually subject to the age-based reduction schedule (i.e., at age 70 the benefit is reduced to 50% of the face amount of the policy). Typically there are general limitations under the AD&D policy. No benefits will be paid for any loss caused by or in connection with suicide, intentionally self-inflicted injury, ptomaine poisoning, bacterial infections, war or any act relating to war, any form of disease, physical or mental infirmity, the medical or surgical treatment of a disease or infirmity, and commission of a felony. It is advisable for the employer to review all of the limitations and exclusions because it may vary from insurance company to insurance company.

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