Group Life Insurance

Mitch Ramsbotham

Financial Expert Updated on June 20, 2023

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

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If you hold insurance with your employer or through your super funs, it’s likely you have group life insurance.

Life insurance products provide financial security for yourself and your loved ones in the most challenging times.

With so many Australians already holding life insurance policies, it is always advantageous to regularly review your policy to ensure that your insurance product’s current level of cover fits the needs of your life stage and is relevant to your needs.

One of the available life insurance options on the Australian market is group life insurance, a policy involving a single contract covering a large group of individuals. 

This guide discusses:

  • What group life cover is
  • Group life insurance advantages and disadvantages
  • How to find out if you hold group life insurance
  • What happens to your group life insurance policy if you no longer remain part of the insured group

What Is Group Life Insurance and What Are the Requirements?

Group life insurance, as the name suggests, involves an insurer offering life insurance to an entire group of people, usually employees under a single loan contract, typically held by the employer who acts as the policyholder.

As the insurer is insuring a large number of people at the same time, they make certain assumptions about the health condition of that group of people as a whole. This means the insurance company takes this group of individuals collectively to be of good health, and the insurer does not assess each individual in terms of age, health or smoking status.

It was made available, and in some situations still is, to large-scale organisations to offer life and TPD insurance to the company’s employees. Income protection cover was sometimes also offered separately to the life and TPD insurance. Group life insurance offered by your employer is considered an employee benefit.

This arrangement also means your group life insurance policy premiums may be cheaper. However, this may also mean your cover can be quite low. Depending on the size of the group, your life insurance cover may only provide financial support for one year’s worth of income.

Advantages and Disadvantages of Group Life Insurance

The fact that the insurance provider is collectively insuring a group and does not require each employee’s personal information to confirm eligibility are some of the most significant advantages of group life insurance. Acceptance is automatic. 

Other benefits of group life policies include: 

  • Your premium payment price is cheaper than individual life insurance due to the bulk nature of the group policy.
  • Ease of acceptance, even for those older or who have extensive health issues.
  • In some cases, you will not need to pay the insurance premium for the policy as this will be attended to by your employer. 

There are, however, some disadvantages to group life insurance policies, and these include: 

  • Group insurance normally has lower payouts than traditional life insurance policies.
  • The policy is not transferable, meaning it cannot be taken away from the current group and place of employment, especially since the policy owner is the employer and not the employee.
  • The policy is general in nature and not tailored insurance personalised to your individual needs, such as the level of cover you would require to meet your financial obligations or considering personal circumstances that often influence premiums, such as age, gender and smoking status.
  • Premiums can and do increase within your group coverage.

How Is Group Life Insurance Paid?

The policyholder can pay group life insurance plans in a variety of ways. These include:

  • You can make the premium payments as an individual OR
  • The premiums can be paid for by your employer

Payments of group life insurance premiums made by your employer generally form part of your income package and are most common where insurers provide group life insurance policies as an employee benefit. 

What Happens to Your Group Life Insurance if You End Your Employment?

One of the disadvantages of group life insurance is that if you leave your employment, your group life insurance will end, and you will lose your insurance coverage. 

As the insurance coverage is for a group of people collectively, the policy is unable to be transferred to a new employer, nor are you able to continue to be part of the group and continue the insurance by making individual payments. 

Given that this type of life insurance effectively terminates when your employment ends, you must ensure you look into alternate insurance options if you are considering leaving your current position. This will ensure you are adequately covered at all times no matter what life throws your way. 


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Can You Receive Group Life Insurance Through Superannuation?

It is possible to receive a form of group life insurance through your superannuation.

Some superannuation funds offer life insurance as a default option, which is essentially a group life insurance offering. 

Super funds offer the following types of life insurance:

  • Life cover
  • Total Permanent Disability (TPD) Insurance
  • Income Protection Insurance

If you hold insurance through your superannuation and leave, your insurance will not remain in effect. Similarly to when you leave your employment, when you leave your superannuation fund provider, such as by switching to another super fund, your group life insurance entitlement will also cease.  

Group life cover is an extremely handy option for those of advanced age or who have existing health conditions, regardless of their personal circumstances or financial situations. It is also an extremely attractive employment benefit, particularly for conditions where your employer covers the premium cost as part of your employment income package.

Employers interested in applying for a group insurance policy for their employees should first seek advice or a quotation from a financial adviser or insurance issuer.

Additionally, the employer should read the policy’s relevant product disclosure statement (PDS) to ensure that the cover is suitable for the business requirements or if the employer needs additional coverage.

A PDS provides essential information such as the estimated amount of coverage, premium rates, exclusions, and other underwriting terms.

Insurance companies can also provide a comprehensive financial services guide (FSG) and target market determinations (TMD) for each product for excellent customer service.

Reputable providers have to operate legally and have a legitimate Australian business number (ABN) and an Australian financial services licence (AFSL).

Some insurance providers include free financial calculators as features on their websites for customers to calculate potential premiums and payouts by themselves conveniently.

Still not sure where to start, or want help securing the right insurance faster? 

That’s okay!

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