If your employer offers life insurance, you may have considered purchasing a policy. Or maybe you belong to another group that offers life insurance and you wonder if the benefits are worth signing up. You know it will help protect your family, should you pass away. But if you are like most people, you are unsure about the terms used to describe the life insurance policy that your group or employer offers. To help you better understand your group term life insurance policy and what it covers, a list of the most commonly used terms and their definitions can be found below.
What is Group Term Life Insurance?
Probably the most important term to understand is group term life insurance. Without a basic understanding of what it is you are being offered, you may opt out of purchasing this valuable asset. Term life insurance is a life insurance policy that has a set time period for coverage (e.g. 15 years). Group term life insurance is a policy that is offered only to groups, such as employers, at a discounted rate. This is the major benefit of obtaining a life insurance policy through your employer.
Veterans Group Life Insurance
Veteran group life insurance is offered to veterans until after one year and 120 days after their discharge from service. This enables the veteran to carry their life insurance policy from their Service members Group Life Insurance Policy to an individual life insurance policy, while still reserving the military insurance benefits. This type of insurance is a renewable term insurance policy. There is also a big advantage to choosing a veterans group life insurance policy. Unlike other insurance policies that figure in risks like smoking, drinking, age and overall health, veterans group life insurance does not use these factors to calculate your premium. If you have any of these issues in your past or present and still have the ability to take advantage of this opportunity, it would be a very wise decision to do so while you still have a chance.
Yearly Renewable Group Term Life Insurance
Yearly renewable group term life insurance is different than group term life insurance. With this type of life insurance, the policy must be renewed each year. This type of insurance reduced that amount of premiums that are paid by the employer, but it can increase the amount you must pay each year. The most common reason that employers choose this type of coverage is high turnover in the workplace. Once you no longer work with your employer, you no longer have access to their group term life insurance.
Note: Some life insurance companies will allow you to continue your coverage if you agree to pay the full amount for the policy. This amount is usually higher than the amount that you and your employer paid for the policy, but it does prevent a lapse in coverage.
Level Term Policy
A level term policy, unlike a yearly renewable policy, provides protection for a period longer than one year. Level term policies are most commonly offered for 5, 10, 15, 20, 25, 30 or 35 years. If you notice, this type of policy generally works in five year intervals. Some policies will allow you to convert your policy or renew it after the term is up, but there are no guarantees of renewal unless a guaranteed renewal is expressed within your policy.
Accidental Death
Unlike a full term life insurance policy, accidental death policies cover the insured only in the event that death is ruled as an accident. Payout for this type of insurance is very difficult to obtain because there are many exclusions and many families, amongst the pain and agony of dealing with the accident itself, forget to maintain the policy until death actually occurs.
Policy Not Taken (NTO)
This is the term used in your policy documents, should you decide not to accept the insurance offered through your group or your employer.
Death Benefit
The death benefit of your policy is the amount of money (otherwise referred to as face amount) that will be paid to your beneficiary in the event of your death. The beneficiary is named by you and can be anyone that you choose, but the beneficiary will have to provide legal documentation to prove that you have, in fact, died. In most cases, this is done through a death certificate. To change the beneficiary after the policy is initiated, you will have to contact the life insurance company.
Premium
Your life insurance premium is the amount of money that you must pay to maintain the policy. In a group policy, the insured is usually responsible for at least part, if not all of the policy premiums. If responsible for the full premium, you are receiving only the benefit of having a discount on your premiums by signing up under your employer or group.