What is group life insurance?

You may not be familiar with the term ‘group life insurance’ but chances are, you might have some.

If you are a member of an employer superannuation fund, and if you automatically received life and total and permanent disability (TPD) insurance by becoming a member, then you essentially have group life insurance, although in that situation it is called default insurance.

What exactly is group life insurance, anyway?

Group life insurance involves a single contract 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 health history.

As the insurer is insuring a large number of people at the same time, they make certain assumptions of the health condition of that group of people as a whole.

Group life insurance has been around for many years before it was included in some employer superannuation arrangements.  It was made available, and in some situations still is, to large companies to offer life and TPD insurance to the company’s employees. Income protection insurance was sometimes also offered separately to the life and TPD insurance.

This arrangement also means the cost can be lower than if the individual employees applied for the same insurance themselves. However, the amount of group life insurance cover can be quite low (depending on the size of the group), often as low as the equivalent of one year’s worth of income.

Any income protection group insurance (sometimes referred to as group salary continuance) often offers a lower level of monthly benefit than income protection individually applied for, and also typically has fewer benefits and options attached.

How is group life insurance paid?

Regarding payment of the cost of the insurance, group life insurance can be paid for by the employer as part of the employee’s income package, or partly paid by both the employer and the employees to pay the total cost.

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

The main potential issue with group life insurance is that if you leave the employer, you automatically lose the insurance.  This may not seem like a big problem, but if you have been with that employer for a considerable period of time and have had some health issues occur during that time, then you may not be able to obtain new insurance to replace the cover that you have lost.

Can I receive group life insurance through superannuation?

In the superannuation fund context, as previously mentioned, you can receive what is essentially group life insurance in the form of default life and TPD insurance, and also in some cases default income protection.  The same scenario applies if you leave your employer and are also required to leave the superannuation fund. You will lose any default insurance.

However, if you decide you need to personalise your insurance, and apply for extra life, TPD or income protection insurance (this is called tailored insurance), you may be able to keep and transfer this cover to another superannuation fund if the same situation occurs.

It is important to consider your own situation and protection needs, and be aware of what type of insurance you may have through group insurance, or superannuation fund default insurance. Ask questions, be informed and make well-thought-through decisions.

Image source: Jacob Lund/Shutterstock.com

Roger Mai

About Roger Mai

Roger is the Wealth Product Analyst at Canstar. He has over four decades of experience in financial services, having worked for banks, life insurance and superannuation companies. He was a financial adviser for eight years, and is passionate about helping Australians make well informed financial decisions.



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This content was reviewed by Sub Editor Tom Letts as part of our fact-checking process.

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