Employee Life & Health:
Group Term Life Insurance
Group term life insurance is essentially the same as individual one year renewable term insurance except it is sold on a group basis. It provides a lump-sum death benefit payable to the employee’s designated beneficiary in the event of the employee’s death from any cause while insured.
Group term life insurance may be provided for employees in a number of forms – basic (usually a predetermined flat amount), supplemental, and optional life insurance. Several limits are used in determining the amount of group life insurance. These limits are the nonevidence maximum (NEM), and the overall maximum (OM). The NEM limit is the maximum amount of insurance that is provided without the employee being required to submit medical evidence of good health. The OM is applicable to the combined amount of insurance up to and in excess of the NEM. It represents the maximum amount of life insurance the insurance company is prepared to issue on any one life in the particular group. The OM maximum is available on the submission of satisfactory medical evidence of insurability.
Why provide Group Life Insurance?
- Employee morale and productivity may be enhanced by offering this element of financial security
- This type of coverage is a competitive necessity, since most employers offer group life insurance benefits
- The life insurance protection is an aid to attaining good public and employer-employee relations
Benefits of Group Term Life
- It adds a layer of low cost protection to personal savings, individual life insurance, and government sponsored benefits, such as the CPP
- The benefit payment is not taxable to the beneficiary
- It offers the convenience of payroll deduction if employees contribute to the cost
- It allows employees to to obtain low-cost coverage for their spouses and children
- It helps reduce the anxieties about the financial consequences of the employees possible premature death
- The conversion privilege enables terminated employees to convert their group term life insurance without having to provide medical evidence of insurability
- Liberal underwriting standards provide coverage for those employees who might be uninsrable or subject to substantial ratings
Disadvantages of Group term life Insurance
- Group term life is only available so long as the employer continues the plan. While few employers would choose to terminate a plan, a business failure could leave employees without coverage
- Group term life insurance is not portable. Less than 1% of terminating employees use the conversion privilege when changing employers
- Group term life insurance offered by the employer may not be sufficient to cover a family’s life insurance needs. It is advisable to personally own the majority of your family’s life insurance needs
Be advised that an employee is only renting group term life insurance while they are employed by that particular employer. When the employees leaves the insurance is terminated for the employee.
Life Insurance, Critical Illness Insurance, Long Term Care Insurance: issued by Sun Life Assurance Company of Canada