Insurance
Understanding Your Group Life Insurance & Disability Benefits
Life insurance and disability coverage are among the most valuable — and most overlooked — benefits many employers provide. For a significant number of employees, employer-provided group life insurance is the only life insurance coverage they carry. Disability insurance, which provides income protection if an employee is unable to work, is frequently misunderstood until it is needed. Understanding the basics of both is useful for any employee who has access to them.
Group Life Insurance
What It Is
Group life insurance is a single contract covering a group of employees, with the employer as the policyholder. The most common form is group term life insurance, which provides a death benefit for a defined coverage period — generally, for as long as the employee remains employed. Because coverage pools risk across many employees, it typically does not require a medical exam. Up to $50,000 of employer-paid group term life insurance is generally excluded from taxable income under IRS rules; coverage above $50,000 may result in imputed income.
What the Benefit Covers
The primary benefit is the death benefit — a lump-sum payment made to the designated beneficiary upon the insured employee's death, generally income tax-free. Coverage amounts are commonly expressed as a multiple of annual salary — typically one or two times earnings — or as a flat dollar amount. Some plans also include Accidental Death and Dismemberment (AD&D) coverage, dependent life insurance, and supplemental or voluntary life insurance employees can purchase at group rates.
When Employment Ends
In most arrangements, coverage ends when employment ends. Some plans offer a conversion option — allowing conversion to an individual policy without a medical exam, typically within a limited window. Employees should speak with HR promptly upon separation, as conversion windows are time-sensitive.
Designating a Beneficiary
A beneficiary is the person or entity designated to receive the death benefit. Designations can be updated at any time and should be reviewed after major life events such as marriage, divorce, or the birth of a child.
Disability Insurance
What It Is
Disability insurance provides income replacement if an employee is unable to work due to a qualifying illness or injury. Short-term disability (STD) typically covers weeks to a few months; long-term disability (LTD) can cover extended periods — potentially until retirement age, depending on the plan.
Key Terms to Know
- Elimination period: The waiting period between when a disability begins and when benefits begin to be paid.
- Benefit amount: Most policies replace a percentage of pre-disability income — commonly 60% to 70%.
- Benefit duration: How long benefits will be paid during a qualifying disability.
- Definition of disability: Policies vary — some require inability to perform any job; others require inability to perform the specific job held at the time of disability.
Knowing What You Have
The specifics of an employer's group life and disability plans are detailed in the plan's Summary Plan Description (SPD), which employers are required to make available. HR departments can typically provide a copy upon request.
This article is provided for informational purposes only. Atlanta Life Insurance Company does not provide insurance advice or financial planning services. Employees are encouraged to review their plan documents and consult their HR department or a qualified professional for guidance specific to their benefits.