The Timmermann Group on LinkedIn: TERM LIFE INSURANCE Protection when you need it most with term life… (2024)

FAQs

Is group term life insurance worth it? ›

Group term life insurance is a good benefit to have, but there are some limitations to keep in mind. Because group coverage is linked to employment, if you change jobs, stop working for a period of time, leave to open a business, or retire, then the coverage will stop.

Disadvantages of group life insurance

The death benefit of a group life insurance policy is usually lower than that of an individual policy. Most group life insurance policies don't have cash value, which means you can't borrow against it, as you can with permanent life insurance.

While some term policies can last as long as 30 years, group term coverage from your employer is typically " yearly renewable." In other words, the policy only lasts for one year but renews if you are still with your employer next year.

Up to $50,000 of coverage for each employee is usually considered a tax-free benefit. This makes group term life a particularly attractive benefit for employees.

Since a term life insurance policy doesn't come with a cash value component, it's not possible to cash it out. This policy solely includes a death benefit that your beneficiaries may receive if you die before the end of the policy's term.

If you see GTL or a similar reference to group term life on your paycheck, that means it's included as part of your employee benefits package. Though your employer may pay the premiums for the insurance, you could owe tax on it depending on the amount of coverage you're provided.

If your health declines, you may not be able to get another policy after your term ends. Term life does not have cash value that can be tapped into while you're still alive.

There are no tax consequences if the total amount of such policies does not exceed $50,000. The imputed cost of coverage in excess of $50,000 must be included in income, using the IRS Premium Table, and is subject to social security and Medicare taxes.

You can typically take out loans against permanent life insurance policies, but not term life insurance policies. Life insurance loans use cash value accounts as collateral. Term life insurance policies do not come with a cash value account, so policyholders can't borrow money from their insurer against these policies.

Therefore, if you're buying term life insurance primarily to replace your income, you may not need it after retirement. Once your kids are grown up, the house is paid off and you're living off your retirement savings, life insurance is one more thing you no longer need to worry about.

What age does most term life insurance end? ›

Extend your current term life coverage.

For most policies, this age is in the 80s or 90s, but some policies without a medical exam expire at a much younger age.

Generally, when term life insurance expires, the policy simply expires, and no action needs to be taken by the policyholder. A notice is sent by the insurance carrier that the policy is no longer in effect, the policyholder stops paying the premiums, and there is no longer any potential death benefit.

Like its name suggests, group term life insurance provides term life insurance as a benefit to eligible, enrolled employees or group members of an organization at a lower cost than what they would pay for an individual term life policy.

In most cases, you can sell a life insurance policy but it doesn't make financial sense. A life insurance policy sale is called a life settlement or viatical settlement. Life settlement brokers and companies usually buy policies from older and critically ill people in exchange for cash.

When you retire, you may or may not be able to keep your coverage. Some companies will allow you to convert your group term life insurance to an individual policy when you retire. However, employers typically will not cover your premiums after that point.

Group term life insurance through your employer or an association offers affordable, easy-to-get coverage that provides financial protection for your family if you die. However, employment-based group life is temporary coverage that may not provide a sufficient death benefit to meet all your family's financial needs.

Group life insurance is a common employee benefit that provides a death benefit to the insured's beneficiaries if they die while part of the organization. The purpose is to provide financial support to the families of such employees.

Term life is typically less expensive than a permanent whole life policy – but unlike permanent life insurance, term policies have no cash value, no payout after the term expires, and no value other than a death benefit.