What does a group life insurance cover?
Death of the employee regardless of cause except suicide during the first year or sometimes the first two years. It can cover death outside working hours or outside the place of employment. It may cover both accidental or natural death such as by sickness.
- In a non-contributory plan, meaning employees’ compensation are not deducted, 100% of the group members must be included.
- Most group policies pay dividends to employer
Questions: What if an employee leaves the company when the company has availed for them a group life insurance plan for several years?
Group life will cover him for a reduced amount of paid-up term insurance until the end of the current policy year.
Let’s call him Mr. Santos, for example. If Mr. Santos is employed by Company X, and Company X availed group insurance with P1M death benefit for each employee for 10 years term. If Mr. Santos left at the 2nd month of the 5th policy year of the group life insurance, the payment for his premiums ceases and Mr. Santos will be covered from the 3rd to 12th month of the 5th year with a reduced face amount. Meaning, the life insurance will be reduced only based on the equivalence of the premium remaining. (Exception: If the company pays annually, then the face amount remains the same until the given policy year terminates)
But generally, a covered employee who terminates his employment continues to be covered for 31 days after the termination date.