What Factors Affect the Cost of Group Life Insurance?

Group life insurance is a plan which can cover an employer and their employees, protecting the families or dependents of these individuals in the event of death through a tax-free lump sum payout. 

This is a great way for an employer to show employees that they appreciate their hard work, and is often seen as a very desirable job perk. 

However, the cost of group life insurance can vary based on a few different factors, and it’s vital that you know upfront how your prices might be affected.

How are group life premiums calculated?

Group life premiums are calculated based on the overall perceived ‘risk’ of your group. This differs from individual insurance policies because it’s much simpler to understand the risk involved with an individual based on medical history, lifestyle, age and existing health conditions. 

Whilst group policies may take these things into account, one person might be much younger, have a much healthier lifestyle and have no claims history, whilst another on the same team is older, in poor health and has an extensive claims history. 

The calculation of group life insurance premiums would take both these people (as well as the rest of your team) into account, and try to calculate the overall risk of your group. 

Check out our blog on how to get covered with life insurance.

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Why does the cost of life insurance vary so much?

The cost of life insurance varies so much because it’s largely dependent on the level of ‘risk’ the insurer deems you/your group to be at.

Each insurer will conduct their own risk assessment based on the information you give them, and offer you a policy as a result. 

• As an example, if your workforce is in the construction industry (higher number of fatalities), they all smoke regularly and have poor medical history, you’ll be seen as a ‘higher risk’ group than one who works in an office, all with perfect health records. Thus, you’ll likely be charged more. 

Now, this doesn’t mean that life insurance isn’t worth it if premiums are higher. In fact, they’re higher because there’s more chance you or an employee will benefit from the coverage.

What factors affect the cost of a group life insurance policy?

Group life insurance costs are calculated based on a variety of factors, primarily:

• The number of employees;
• The average age of the employees;
• The occupation you work in;
• The level of coverage you’re after.

Naturally, businesses with more employees will cost more to fully insure, but (usually) less per person. Older employees are usually more expensive to insure, because they’re seen often as higher risk. Equally, if your industry is particularly dangerous, or has a high mortality rate, group life will probably be significantly more expensive. 

Other factors can include:

• Health status – Whilst group life insurance typically doesn’t include health underwriting for each individual, factors such as long term smoking and pre-existing conditions can raise premiums. This usually depends on the insurer. 
  

• Policy duration – The intended length of your policy, as well as the cease age, will impact the cost. A higher cease age is a higher risk for the insurer, increasing costs in most cases.
  

• Underwriting type – A benefit of many group life insurance policies is the lack of medical underwriting, also known as ‘medical history disregarded’ underwriting. However, in some cases, if your team generally has a very positive medical history, it can actually be beneficial to declare this as part of the policy, leading to decreased prices.
  
  There are three main types of underwriting, known as moratorium underwriting, full medical underwriting and medical history disregarded. Dragonfly Crowd can advise as to the best option for you. 
  

• Claims history – As above, you can, in some cases, declare a positive claims history to reduce the cost of premiums as you would be regarded as a lower risk group to the insurer.
  

• Group size – Large workforces will cost more overall, but you’ll likely be offered a discount per person as the number of employees increases.
  

• Location/place of work – Life expectancy differs based on specific location. As a result, your location may have a slight impact on policy prices.
  

Dragonfly Crowd can advise you on the best course of action when looking for a group life insurance plan, and we have access to a wide panel of insurers, ensuring you get the best possible deal. Get in touch with us for more information. 

We Can Secure you a Great Group Life Insurance Deal

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