Group life insurance is usually offered by an employer or business to its workers or members.
It is typically much cheaper than an individual life insurance policy – but it is not tailored to your specific needs.
It usually requires minimum or no personal information to apply.
What is group life insurance?
Group life insurance is when a single insurance contract covers a group of people. In Australia, these are typically employees of a large-scale business or organisation, or members of a super fund.
Unlike other life insurance cover, they typically don't require much personal information on each person's health status. Instead, a series of assumptions are made on the health condition of the collective group.
The payouts are usually lower than standard life insurance policies but premiums are cheaper thanks to a "bulk discount".
What is the difference between life insurance and group life insurance?
Group life insurance
Group life insurance is usually provided by an employer or super fund. Policies are bought in bulk so are generally cheaper. However, the payouts are often lower and the benefits smaller. Payments are often deducted from your salary or included in your income package.
Life insurance
Standalone or individual life insurance cover is something you buy directly from an insurer or broker yourself. Unlike group life insurance, you'll be asked questions about your health, occupation and lifestyle. As a result, the payouts are generally bigger and the benefits are better – but it's usually more expensive.
Group life insurance vs individual cover
Differences
Group life insurance
Individual life insurance
Level of cover
Automatically set by the group policy
Decided by you
Automatic acceptance?
How are premiums paid?
Typically, contributed by your employer or deducted from super contributions
Paid by you directly
Is the policy transferable?
Your cover may not be transferable
Yes, the policy can usually be taken with you if you change jobs or super funds
How are group life insurance premiums paid?
These are the 2 main ways group life insurance premiums are generally paid:
Through your super
Premiums are automatically deducted from your superannuation contributions on a monthly basis, eating into your retirement savings but it's one less bill coming out of your bank account.
By you or your employer
Many employers pay the full premiums to make a more competitive offer; others will require you to pay it yourself. Some employers and employees will share the costs as part of a salary sacrifice arrangement.
What happens to my group life insurance if I change jobs?
It's likely that you'll lose your life insurance cover. This is because group life insurance often isn't transferable since the policies were bought in bulk. If you're worried about losing cover, speak to your employer and see if you can make an arrangement with them.
How do I get group life insurance?
You'll commonly find group life insurance offered:
Through super. Group life insurance in Australia largely consists of policies taken out through compulsory superannuation.
Through employees remuneration. It can be a competitive addition to employee remuneration packages and can also help protect workers.
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.
Pros and cons of group life insurance
Pros
Cheaper premiums than standard life insurance.
Automatic acceptance with most groups.
It's often easier to get covered if you have health issues.
In some cases you don't need to pay the premiums.
Cons
The payout is often low – often only one or two times your annual salary.
It's often not transferable e.g. if you change jobs, you'll no longer be covered.
It's not tailored to your financial needs e.g. the payout may not be enough for your loved loves to get by on.
Group life insurance may be worth keeping if you're having difficulty finding a standard insurer that will cover you – most likely because of your health or age. Similarly, if your employer is paying your premiums, there's little harm in you keeping cover in place as you could use the group life insurance policy as a supplement to your own individual life insurance cover. Keep in mind though that if you change jobs, you'll likely no longer be covered.
Overall though, group life insurance policies often aren't tailored to your financial situation which means there's a risk that you won't leave enough behind for your loved ones to pay for everything.
FAQs about group life insurance
Yes. Most superannuation funds automatically include life insurance when you open an account. These are usually group life insurance or TPD insurance policies.
Yes, group income protection is a safety-net for employers to help cover for their employees. Some of the main features can include:
A variety of options for waiting periods. A waiting period is a time a policyholder has to wait before receiving the payment for the benefits. Employers are given the choice how long the waiting period will be after a claim. Payment could begin after 13, 26, 28, 41, 52, or 104 weeks. The longer the deferred period is the lower premium you pay.
Benefit payment terms option. This sets the length of time an employee can receive the payment for benefits. Most funds offer benefit periods of 2 years or 5 years.
Protection against inflation. This guarantees that any benefit will increase over time at a fixed rate or in line with the Consumer Price Index (RPI) which could reach a maximum limit of 5%.
Yes, the vast majority of group life insurance policies pay out a death benefit to your beneficiary or beneficiaries, so long as the policy is still active when you pass away. 97.9% of claims for life insurance policies bought through a superannuation fund paid out between 1 July 2020 and 30 June 2021.
Yes. Fringe Benefit Tax (FBT) applies to life insurance premiums paid by employers, for insuring employees. It counts as an external residual fringe benefit. The taxable rate is the employer's arm's length purchase price, minus any employee contributions.
Yes. Premiums paid on all types of cover are generally tax deductible to the employer, although FBT may apply. In the event of an income protection claim, the payment of benefits from the employer to the employee may also be tax deductible, although the initial payments from the insurer to the employer generally count as taxable income.
Benefits paid to the employer by the insurer are generally assessable as taxable income for all types of cover. Certain benefits paid from the employer to the insured employee may also be taxable depending on:
The type of cover: Income protection type benefits that take the form of an income stream, when paid to an employee, are typically taxable for that employee.
The employment benefit termination payment (ETP) breakdown: Claims paid for permanent disability, death or terminal illness will be taxable as ETPs. The tax obligations vary depending on a range of factors, including the total termination benefits paid, the ETP laid out by the ATO at the time of payment, the relation of the beneficiaries to the insured, and more.
The information on tax above general in nature only, and only applies to life insurance offered by employers as part of a remuneration package, and owned by the employer. Conditions may vary depending on which types of cover are included in the policy being offered. It can be a good idea to speak with a specialist to see how it may apply to the policy you are offering employees and your business' circumstances.
Gary Ross Hunter was an editor at Finder, specialising in insurance. He’s been writing about life, travel, home, car, pet and health insurance for over 6 years and regularly appears as an insurance expert in publications including The Sydney Morning Herald, The Guardian and news.com.au. Gary holds a Kaplan Tier 2 General Advice General Insurance certification which meets the requirements of ASIC Regulatory Guide 146 (RG146). See full bio
Gary Ross's expertise
Gary Ross has written 699 Finder guides across topics including:
James Martin was the insurance editor at Finder. He has written on a range of insurance and finance topics for over 7 years. James often shares his insurance expertise as a media spokesperson and has appeared on Prime 7 News, WIN News, Insurance News, 7NEWS and The Guardian. He holds a Tier 1 General Insurance (General Advice) certification and a Tier 1 Generic Knowledge certification, both of which meet the requirements of ASIC Regulatory Guide 146 (RG146). See full bio
James's expertise
James has written 247 Finder guides across topics including:
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