What is group life insurance?

What is group life insurance?

Group life insurance involves a single policy covering a group of people, typically an employer or large-scale organisation. In these cases, the insurer agrees to offer the insurance without collecting detailed personal information on each person’s current health status and previous medical history. As a result, the insurer will make certain assumptions about the health conditions of that group of people as a whole.

Group life insurance was originally made available, and in some situations still is, to large companies so that they could offer life and Total and Permanent Disability (TPD) insurance to their employees. Income protection insurance is also sometimes available in this way.

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How is group life insurance paid?

Group life insurance is generally paid for by the employer as part of the employee’s income package, or paid for partly by both the employer and the employees.

The cost of group life insurance is usually lower than if an individual person was to apply for a similar insurance policy themselves. However, the amount of cover (i.e. the sum insured and benefit amounts) can be quite low, depending on the size of the group, when compared to a direct life insurance policy. The same is typically true for group income protection insurance (sometimes referred to as group salary continuance), which may also come with fewer benefits and options attached.

What happens to my group life insurance if I end my employment?

One of the main issues with group life insurance is that if you leave the employer, you automatically lose your insurance coverage. If you’ve been with that employer for a considerable amount of time and have had some health issues occur during this period, then this could present a challenge, as you may find it difficult to obtain a new life insurance policy that covers these pre-existing conditions.

Can I receive group life insurance through superannuation?

Your superannuation fund may offer what’s essentially group life insurance in the form of default life and TPD insurance, and also in some cases default income protection. You may, however, lose this default insurance if you decide to leave the super fund.

You may be able to transfer your life insurance coverage between different super funds, but you would need to ensure that your current policy meets the specific eligibility criteria of your new super fund and that you have not made a claim against the cover or are not entitled to make one. Self-managed super fund insurance policies generally cannot be transferred.

How to choose life insurance

When considering your life insurance options, you could ask yourself:

• How much coverage do I need? Would the coverage offered by your super fund or group life insurance policy be enough for your needs, or do you need to consider a direct life insurance policy.

• Do I have any pre-existing conditions that need to be covered? A benefit of group and default life insurance is that you generally won’t need to undergo medical testing in order to be covered. When taking out a direct life insurance policy, you may be required to undergo tests and if you have any pre-existing conditions they may be excluded from coverage.

• How am I paying my premiums? Life insurance premiums through super funds may be taken out of your super balance or paid out of pocket, while a group life insurance policy through your employer may be paid for by them or by both you and your employer. Direct life insurance premiums are paid for directly by you, either monthly, quarterly, half yearly or annually.

You can also compare direct life insurance, direct income protection insurance and life insurance through super with Canstar. It’s important to read all relevant documentation, such as the Product Disclosure Statement (PDS) and Target Market Determination (TMD), for any policy you’re considering.

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