What is group life insurance and who can it benefit?
Group life insurance is a single life insurance policy that covers a group of people. It's often used for members of large groups e.g. a employers and employees in an organisation. Some of the benefit of group policies include:
- Cheaper premiums. Group insurance policies are usually offered at competitive rates.
- Can be added to an employees remuneration. It is also a way for employers offer an incentive for their employees to stay with them.
- Can be offered as part of a union membership. Some worker bodies such as unions and associations also offer group life insurance to their members to attract and keep members.
- Terms can be transferred over. Some group policies offer the option to transfer the terms of an existing policy you have and provide you similar benefits.
There are some employers who are willing to pay the group life insurance premium on behalf of their workers to make it even more attractive, others are satisfied for the individual worker to pay the reduced individual cost, while still more subsidise their employee's premium costs.
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What are the key features of group life insurance in Australia?
In Australia, group life insurance usually has the following characteristics
- Majority taken out through super. Group life insurance in Australia largely consists of policies taken out through compulsory superannuation.
- Cheaper premiums. Organisations usually buy their policies in bulk, allowing for cheaper rates.
- Contributed by your employer. Your premiums are automatically deducted from your super or contributed by your employer.
- Automatic acceptance. Most group will automatically accept applicants.
- Basic cover. Policies offered through a group have set coverage amount e.g. lower sum insured.
How is group life insurance different to individual cover?
|Differences||Group life insurance||Individual life insurance|
|Level of cover||Automatically set by the group policy||Decided by you|
|How are premiums paid?||Contributed by your employer or deducted from super contributions||Paid by you directly|
|Is the policy transferable?||Your cover may not be transferable||Policy can usually be taken with you if you change jobs or super funds|
Why is a group policy cheaper than a standalone life insurance policy?
The reason life insurance companies can offer group life insurance at a cheaper rates individual policies due to these reasons:
- Policies are bought at a mass scale. Your superfund or employer will buy policies in bulk, allowing them to access premiums at wholesale rates.
- Set level of cover. Group policies will usually have a defined level of cover that employees can't individually modify.
- Payouts may be slower. When you claim you will need to go through both the insurance company and the party that handles your insurance e.g. super or your employer.
How do group life insurance policies make job conditions more attractive?
Group life insurance has been used by employers for many years as a means of keeping good employees by providing additional remuneration through:
- Life insurance
- Income Protection
This also allows for employees to obtain life insurance more easily than they would with a standalone policy, especially if they are involved in a high risk occupation.
Understand your group life insurance policies
As an employer, you need to identify your options and what is most practical for your employees and industry. For instance if you're employees are heavily concerned about protecting their income then a package that includes income protection may be most suitable. On the other hand if your workforce has a potential risk of injury you might want to consider adding trauma and TPD insurance do your group policy.