Approximately one in every four working-age Americans only have life insurance via their workplace. While having some life insurance is preferable than not having any, group or employer-provided life insurance plans have tradeoffs that you should evaluate.
There are also particular considerations based on whether you are a military member or a civilian – in case you shift occupations.
How does life insurance for a group work?
Term life insurance and most group life insurance plans are the same. Group life insurance doesn’t earn cash worth and only covers you for a certain amount of time, usually while you’re working.
Life insurance that you buy from a different insurance company is usually more difficult to get approved for than life insurance that you buy through a group.
In the end, if you died during the covering time, your beneficiaries would get the money from the life insurance policy your company gave you.
What is group life insurance for the military?
Families and qualified service members can get low-cost group life insurance through Servicemembers Group Life Insurance (SGLI) and Family Servicemembers Group Life Insurance (FSGLI).
SGLI offers life insurance for up to $500,000 and a program called Traumatic Injury Protection that gives extra benefits to people who have been hurt badly. It’s only open to active-duty service members, but wives and children can be covered by FSGLI in $10,000 amounts, up to $100,000.
If you meet all the standards for SGLI, you will be covered immediately, but you can change your benefits if you need to. If your partner is in the service and qualified for SGLI, he or she can sign you and your children up for FSGLI. Neither insurance type needs you to go through a medical test or screening process.
SGLI stops when you leave the military, but senior service members are qualified for Veterans Group Life Insurance (VGLI), another group life insurance coverage that can be given in amounts of $10,000, up to $500,000.
How much does group life insurance cost?
This is different for each company and depends on the benefits you can get as an employee. Most companies who offer group life insurance will pay for a part of their workers’ benefits. Coverage is generally a number of the employee’s income, like two years of income, or a set amount, such as $50,000.
Some companies offer the choice to purchase extra group life insurance as part of their perks, up to a certain cap or factor of the employee’s annual income. If you buy extra coverage, your rate is the same as your peer workers. Group rates are usually good for young adults, but costs can rise as you age.
To determine your group policy prices compared to a personally owned policy, take the monthly payment cost and divide it by the amount of insurance units your policy offers — the amount of coverage split by 1,000.
For example, if your insurance costs $30 a month and has a $300,000 death benefit, you have 300 units, which comes out to $0.10 monthly per unit. This is called “cost per thousand.”
When you compare life insurance prices, you’ll also want to consider the changes between policy types. Group coverage usually stops if you change jobs, while private plans aren’t tied to your work.
Also, be aware of the covering types you’re considering. Most private life insurance plans have a fixed time in which the death benefit and the monthly costs don’t change. However, the rates on some term insurance, like yearly renewal term insurance, may grow every year as you age.
If you have SGLI or FSGLI coverage, the monthly payments are immediately taken from your base pay. Both plans are relatively cheap, as is Traumatic Injury Protection coverage. For $500,000 in SGLI and TSGLI coverage, you’ll pay $31 per month — $30 for SGLI and $1 for TSGLI.
If you add FSGLI coverage, you’ll pay an extra cost of up to $4.50 for those younger than 35, though your rate will increase every five years.
What choices do I have with a group insurance compared to an individual policy?
Group life insurance plans are usually simple. Some benefit plans may offer the opportunity to purchase insurance on a partner or on your children, which would have its own annual costs.
Group plans are not as customizable and may not be suitable to meet your needs.
On the other hand, individual life insurance plans can be customized through different riders or extra contract choices and benefits that are added to your policy.
Your life will change in the future, and so will your need for life insurance. Options may be built into your coverage to help you change the type or amount of insurance you have. Most term life insurance plans contain a conversion choice that allows you to change either a part or all your present coverage into a cash value policy like whole or universal life insurance.
What are my choices when I change jobs?
In most cases, your group life insurance stays with your company and not with you. This is the biggest drawback of group life insurance — especially because the usual job term for an American worker is about four years.
You don’t want a gap in your life insurance policy between jobs. There’s also no promise that your next job will give the same perks you have now.
Some group life insurance plans allow users to change their group policy to an individual policy. These new plans are usually guaranteed-issue, meaning you can’t be refused for them. This can be helpful in situations where applying for standard life insurance is a worry.
Alternatively, you can buy individual life insurance outside of your workplace. Most policies require you to go through medical screening, but you’ll have the ability to tailor the plan to your unique needs. You’ll also have the potential to save money compared to a non-underwritten insurance.
Individual life insurance plans take your age and health into consideration to determine your payment rate. Once gained, your rates are usually set for the sure times of your insurance.
What happens when I leave the military?
Your SGLI usually ends 120 days after you split from the service or retire from active duty. But as a warrior, you’ll still need life insurance. Your SGLI makes you qualified for VGLI, which offers term life insurance in $10,000 amounts, up to $500,000 in coverage.
Your coverage amount under VGLI is based on how much SGLI coverage you had when you left the service. nevertheless, if you feel you need more coverage, you can increase your life insurance by $25,000 every five years until you’re 60.
If you join in VGLI within 240 days of leaving the service, you won’t need to receive a medical test or take a health quiz. If you sign up after that 240-day time, you may need to go through underwriting.
Service members who split with duty-related health problems sometimes struggle to find or pay individual life insurance. If that sounds like you, VGLI can be a great choice, because you can sign up without a medical check.
But if you’re in good health, individual life insurance coverage may offer better terms and more cheap rates.
How can USAA help?
It’s unlikely you’ll stay with the same company for decades — and it’s possible that when you switch jobs, your new employer won’t offer the same benefits, including group life insurance. That’s why USAA thinks that group life insurance should be only one part of your general life insurance plan — not your main source of coverage.
Regularly review your life insurance needs — not just the amount of coverage for your case, but also the time in which you expect to need life insurance. USAA’s life insurance professionals can answer your questions and help you weigh the benefits of individual life insurance plans.
When it comes to SGLI, we encourage service members to keep the full amount of SGLI or TSGLI coverage during your time in the military. That’s likely more reasonable than individual life insurance, given the risks during your military service.
USAA also created life insurance product benefits with your service in mind — term life insurance plans that include the Military Protection Plus See note1, See note2 rider at no extra cost. The rider gives you the choice to replace some or all the SGLI you lose as a result of military separation or retirement, even if you’re handicapped. It also includes a severe accident benefit with up to $25,000 of security.
