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Group Life Insurance Through Work? What You Need To Know, Part 1

On Behalf of | Oct 18, 2018 | Estate Planning

The following fictional story explores a common insurance situation that many families may face upon the death of a loved one.

Charles is 65 years old. Though he doesn’t know it, he will be dead in less than a year. What he also doesn’t know is that his loved ones will never get a nickel from his life insurance policy.

He has an ex-wife, three adult children, eight grandchildren, and a beloved terrier mix named Cooper that he takes to the office. That’s right: Charles still works a full-time job. The money helps, sure, but he’s in the workforce mainly because Charles is a “people person.” He enjoys the company of his younger co-workers, and they feel the same way about him. The cruel irony is that Charles works at one of the big, national, well-known insurance agencies.

Yes, even an employee at an insurance company—large or small—may not be aware of the stipulations of his own life insurance policy. How could this be? The answer is heartbreaking, but not uncommon.

But first, here are a few things you should know about different types of employer-offered life insurance and how it works.

“Group life” is a term you’ll hear referring to employer-based life insurance. Employers usually offer this benefit for free, so it’s a good idea to sign up. Keep an eye out for this offer when it’s open enrollment time at your place of business, and be sure to sign up before the deadline. No one is going to do it for you.

There are two types of group life: basic and supplemental. Basic group life coverage is often free and typically amounts to $25,000, $50,000, or an employee’s annual salary, rounded to the nearest $1,000. The form for basic group life is usually included with other paperwork at the time of your hiring, or is offered in an enrollment period. Watch for this document, sometimes a deceptively simple single page, which must have your signature and designated beneficiaries.

In addition to basic group life, your employer may offer an option for you to purchase supplemental coverage. This can be up to four times your yearly salary and usually has a mandatory health questionnaire, called an evidence of insurability form (EOI). This is essentially proof of good health that is approved by your insurance provider or carrier. It includes your medical history and current status based on a physical exam.

If adding supplemental insurance is a sudden change in your coverage, the insurer will want to know why. The insurer may also reject your request for supplemental coverage based on the information in the EOI. It’s important to make certain that your EOI is legitimate since anything that raises an eyebrow may lead to denial of supplemental coverage!

There’s a lot more to talk about, which we will cover next week in the follow-up to this blog. If you have any questions about your own life insurance, please feel free to contact our Pennsylvania life care planning attorneys at Kreisher Marshall & Associates, LLC at (570) 784-5211. There is no charge to sit down with us, and we only do elder law.