Decipher the Language of Life Insurance!
Many employees are unaware of the difference in the life insurance plans provided and offered by their employer. We hope that you are not a part of this group. Just in case, here is an Insurance 101 review on the types of plans and the options available to valued employees:
There are two main types of Life Insurance:
Individual Life Insurance- This plan is owned by an individual. The employee is the contract or policy holder. These plans can be carried with the employee upon retirement or when employment ends.
Group Life Insurance- The employer is the policy holder on group plans. The employee/insured is a part of the employer's group plan. Group Insurance is designed to protect you when you are an employee of the providing employer. Typically, the coverage terminates when employment ends.
There are two types of Individual Life Insurance plans offered by most companies:
Term Life Insurance- This Individual policy is a low cost option where premiums remain level for a specific period of time. At the end of the initial term, the plan will renew at increased rates for an additional set period of time. Thereafter, the plans renew annually until age 95. These policies do not gain cash value, but provide a high level of death benefit at a low cost. Term policies are available on employee and spouse and typically offer a rider that can be added to cover any dependent children.
Universal Life Insurance- These Individual plans are a more costly option to term life insurance because premiums are designed to remain level for the life of the insured and policy. As premiums are paid, the policy accumulates a small amount of cash value on a tax deferred basis. The plans remain in force as long as the premiums are paid. Universal Life policies are available on employee, spouse, children and grandchildren.
There are two types of common Group Life Insurance policies held by most employers:
Basic Group Life Insurance- This coverage is provided to full time employees, at no cost, by employers. The policy is designed to cover a specific amount of insurance (example: $10,000) or an increment of salary (1X, 2X etc.). Typically, the plan includes or has an added rider to include an equal amount of Accidental Death and Dismemberment Insurance and a Terminal Illness rider providing a 75% living benefit if diagnosed with a terminal illness.
Employees designate a beneficiary to receive the proceeds. Beneficiaries should be reviewed annually to ensure the proper designee is assigned in the event of an untimely death. The policy is designed to cover you as an employee and typically will not be continued at termination or retirement. A conversion option is available but rarely utilized due to the extreme premium cost.
Supplemental and Dependent Group Life Insurance- This coverage is available as additional employee and dependent coverage. The policy allows for either an additional increment of earnings or an incremental amount. Plans have a certain amount of Guarantee Issue available as a new hire, or when the plan is first offered. Premiums are based on the coverage amount selected and the age of the employee. The Dependent plan allows group coverage to be elected on spouse and dependent children. Rates for Dependent Life are typically flat rates based on the coverage elected.
The Supplemental and Dependent Group Life Plans are low cost options that provide coverage while employed with the providing employer. If coverage is applied for outside of the initial offering, you must provide satisfactory Evidence of Insurability for the insurance company to issue coverage. A conversion option is available but rarely utilized due to the extreme premium cost.
How much Life Insurance does one need? 
The toughest part of purchasing life insurance is determining how much coverage to buy. Everyone's family financial circumstances and needs are different which makes it nearly impossible to provide a set number to cover all conditions. A good idea is to review the family income needs should you or your spouse pass away.
Group Life Insurance is a great low cost option to cover your debts while you are employed. The plans typically are not affordable for conversion and you will not have coverage upon retirement or termination, so a certain amount of Individual Life Insurance should be considered for continual coverage.
Universal Life Insurance should be considered for those immediate expenses such as funeral costs, uncovered medical expenses and taxes. Term Insurance is a good choice for those high ongoing expenses such as your mortgage and college. You assume that during your working years, your ongoing expenses will decrease as you get older.
