Group life insurance offers sponsored coverage that protects members and their families. The organization holds the master policy and spreads costs across all members.
Updated: February 26, 2026
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Group life insurance provides death benefits to members' beneficiaries at low or no cost through group rates.
The sponsoring organization, such as an employer, association, union or professional organization, holds the master policy while members receive certificates of coverage without individual medical exams for the guaranteed issue amount.
Group life insurance is typically offered by employers as part of the employee benefit package. Coverage ends when you leave your job unless you convert it to an individual policy within the conversion period.
Group life insurance is a policy that covers multiple people under a single master contract. Employers, associations, unions and professional organizations offer group life insurance.
Group term life insurance is the most common type, offering financial protection for a set period without cash value growth. Some companies offer group universal life insurance. This policy type builds cash value, but costs more.
The sponsoring organization buys coverage in bulk, which reduces per-person costs compared to individual policies. Insurance companies spread the risk across all group members, allowing guaranteed acceptance without medical exams up to certain coverage amounts.
Group life insurance has two main components:
Basic coverage is the foundation amount that the sponsoring organization provides, often at no cost to members. This equals one to two times your annual salary for employer plans or a flat benefit amount for associations and unions.
Supplemental coverage is an optional additional financial protection you can buy through the group plan at discounted rates. Members buy supplemental coverage to increase their total death benefit beyond the basic amount, with premiums deducted from paychecks or membership dues.
Members can enroll in group life insurance during several periods. Employees qualify at their start date, while association and union members enroll when they join or during open enrollment periods.
Workers experiencing qualifying life events get special enrollment opportunities. Organizations automatically enroll members in basic coverage when it's paid by the sponsor. Members must opt in to buy supplemental coverage.
You need to name your life insurance beneficiaries during enrollment. Choose who'll receive the death benefit. Most people choose their spouses, children or other family members, but charities and organizations can be beneficiaries too.
You can change beneficiaries at any time. Without a named beneficiary, the death benefit passes through probate, which delays payment and adds legal costs.
Sponsor-paid basic coverage costs members nothing. Organizations pay premiums as part of the benefit package. You pay for supplemental coverage through payroll deduction or membership dues.
Group rates are lower than individual life insurance policy premiums because insurers spread risk across all covered members.
Eligibility varies by sponsoring organization. Employers typically require full-time employment status and set probationary waiting periods before new hires become eligible. Professional associations and unions require active membership in good standing.
Part-time workers and contract employees are often not eligible for employer-sponsored plans. Active work or membership requirements mean participants must meet status criteria to enroll in coverage.
Eligibility requirements may vary by state and local regulations.
Employer-provided group term life insurance coverage up to $50,000 is generally a tax-free benefit that qualifies for an exclusion under current IRS rules. Coverage over $50,000 creates taxable imputed income that employers report on Form W-2, including Box 12 with Code C.
Employers calculate the taxable cost using the IRS Premium Table (Table I) based on age and the amount of coverage above $50,000. If employees pay part of the premium, that contribution reduces the taxable cost included in wages.
Tax laws may change, and circumstances vary. Consult a tax professional for personalized advice.
Weighing group life insurance benefits against limitations helps you decide if coverage meets your needs.
Limited coverage amounts
Tied to employment or membership
Sponsoring organization controls policy terms
Premiums can increase as the group ages
Limited customization options
Group life insurance provides one to two times your annual salary as standard coverage. This amount often falls short of comprehensive financial protection needs for families with mortgages, dependents and long-term obligations.
Financial planners commonly recommend coverage of at least 10 times annual income to replace lost earnings. Add debt obligations, such as mortgages, student loans and credit cards, to your income replacement target. Use our free life insurance coverage calculator to get a personalized estimate.
Young families with mortgages and dependents need more coverage than standard group amounts provide. Single-income households rely on one person's earnings, requiring higher death benefit protection. High earners may still need additional coverage based on family expenses. Parents planning for college funding should add education costs to their financial protection needs.
Group life insurance terminates when you leave employment or end your membership. Most policies offer conversion rights that let you buy an individual policy without a medical exam within 30 or 31 days from your last day.
Converted policies cost more because rates depend on individual underwriting. Apply for new life insurance before leaving to avoid gaps in financial protection.
Group life insurance provides financial protection at low or no cost through employers, associations, unions and other organizations. The guaranteed issue structure makes coverage accessible to members who might not qualify for traditional policies.
Group insurance works best as part of a comprehensive strategy. Evaluate your needs against what group benefits offer and add supplemental or individual coverage to fill gaps.
No. Members get automatic approval for basic coverage without medical exams. Supplemental coverage may require health questions or exams above certain benefit levels, with thresholds varying by insurer and sponsoring organization.
Sponsor-paid basic coverage is free to members. Supplemental coverage costs vary based on age, coverage amount and sponsoring organization subsidies. Group rates are lower than individual policies due to risk pooling.
Employer-paid coverage up to $50,000 is tax-free for employees. Amounts above this create imputed income taxed at your income tax rate. Member-paid premiums for association or union plans use after-tax dollars. Death benefits to beneficiaries remain tax-free.
About Mark Fitzpatrick
Mark Fitzpatrick, a Licensed Property and Casualty Insurance Producer, is MoneyGeek's resident Personal Finance Expert. He has analyzed the insurance market for over five years, conducting original research for insurance shoppers. His insights have been featured in CNBC, NBC News and Mashable.
Fitzpatrick holds a master’s degree in economics and international relations from Johns Hopkins University and a bachelor’s degree from Boston College. He's also a five-time Jeopardy champion!
He writes about economics and insurance, breaking down complex topics so people know what they're buying.
