What is group life insurance?

Group life insurance covers a number of people under a single policy. It's usually offered through a job, union or other professional association and provides much less coverage than a policy you'd buy on your own.

And when you leave your company, your policy terminates.

Fortunately, having a group life policy doesn't prevent you from buying additional life insurance. 

CNBC Select explains what you need to know about group life insurance, including what it is, who is eligible for coverage and the benefits and drawbacks of a group life policy.  

• What is group life insurance?  
• Who is eligible for group life insurance?  
• Pros and cons of group life insurance 
• Does group life insurance make sense for you? 
• Group life insurance FAQs

Group life insurance is a type of coverage that's purchased for individuals through a larger association or corporation, oftentimes as a workplace benefit.

, typically one or two times your salary. Since the rule of thumb for how much life insurance you need is ten times your salary, that's not going to be enough for most people.

These are typically yearly renewable term (YRT) life insurance policies — meaning, if you're still with the company after 12 months, your employer can extend coverage. Since it's term life insurance, though, it doesn't include any cash value, like a permanent policy would.

You may be able to purchase supplemental coverage for yourself at a discounted rate, as well as coverage for a partner or child. Your group life insurance may also include an accidental death and dismemberment (AD&D) rider.

Group life insurance is typically offered as a workplace benefit to full-time employees. You may need to work a certain number of hours a week to qualify, and some employers only offer enrollment after a probationary period.

Group life insurance is attached to your employer, so your coverage will terminate either immediately after you leave or shortly thereafter.

If you're not sure about group life insurance eligibility at your workplace, ask your human resources department about the options available to you.  

Group life insurance can be beneficial but, depending on your situation, it's probably not the only policy you'll need. Here's what you need to know:

Pros 

• Affordability. Employers usually offer group life policies for free or at a very low rate, making them much more affordable than an individual policy in some situations.
• No medical exam. Insurance plans offered through work are guaranteed, so you're typically approved without the need for a medical exam. That can be a big benefit if you have preexisting health conditions.

Cons

• Limited coverage. Group life insurance that you're given as a benefit typically caps out at a low limit, sometimes one to two times your annual salary. If you have dependents, you'll likely have to buy supplemental insurance to be adequately covered. 
• Your policy is tied to your job. While some types of group life insurance are portable, most policies terminate when you leave the company.
• No cash value. Unlike a whole-life policy, you can't borrow against a group life insurance policy.

If your company offers group life insurance as a free benefit, it's almost always worth taking advantage of. You'll simply need to elect coverage, usually during your onboarding, and designate beneficiaries to receive the death benefit.

Supplemental coverage from your group life provider may make sense if you are older or find it hard to qualify for coverage, since medical exams and health questionnaires aren't usually required.

Getting your own standalone policy in addition to your employer-sponsored plan is a good option, especially if you want flexibility in the type and amount of coverage. Guardian and Northwestern Mutual are two of our top picks for life insurance, with options for whole and universal life policies.  

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