Please explain group coverage

Actually, it’s not an ‘either – or’ situation. But comprehensive, employer-provided group coverage is a valuable benefit, and you need to fully understand it in order to take maximum advantage of what is available to you.

When an insurer provides coverage for many people under a single master contract, the result is referred to as group insurance, which operates under completely different principles than individual insurance coverage does. Essentially, group insurance covers ‘classes of persons’, not individuals.

An employee group is the most common place to find a contract for group insurance, though group coverages can also be acquired through professional associations, alumni groups, and even from banks and trusts. The group insurance contract is between the insurer and the organization purchasing the group contract, usually the employer. You are covered under the policy, but you are not a party to it. Employees may join or leave the group, but the parties to the contract remain the same. The two main classes of group insurance are group life insurance and group accident and sickness insurance.

Group Life
Group life allows employeeto name the beneficiary of their choice. Nothing new there. But group coverage has no suicide clause, and the employees have a special conversion privilege upon departure from the group. The conversion privilege grants the right to the employee to convert the amount of their group coverage into an individual life insurance policy without any evidence of insurability. This can be an extremely valuable benefit, particularly if the employee has become uninsurable. Life insurance in small amounts may also be offered to the spouse and dependent children of the group plan members.

Group Accident and Sickness (A&S)
Group A&S has five major components. An income benefit called short term disability(STD), a reduced income benefit called long term disability (LTD), accidental death and dismemberment coverage (ADD), extended health care benefit (EHC) and dental care. The amounts and durations of the benefits, deductibles, and co-insurance amounts will vary considerably from plan to plan.

As valuable as this benefit is to employees, it would be unwise to rely solely on group coverages for life insurance. If you’re covered by any group insurance policies, you should invest the time to understand the extent of your coverages and determine the extent to which it is appropriate to supplement any coverage with privately owned insurance.