How are group life insurance premiums calculated ?

Like group health insurance premiums, group life insurance premiums are dependent on a number of criteria that decide how much your company needs to pay for the life coverage of your employees. Group life insurance is a valuable employee benefit that provides financial protection to a designated beneficiary in the unfortunate event of an employee’s death. Understanding how group life insurance premiums are calculated is essential for both employers and employees. These premiums depend on various factors, each playing a distinct role in determining the final cost. In this article, we will explore the intricacies of group life insurance premium calculation. So, what are some factors that affect group life insurance premiums?

1. Amount of Life Coverage

A term life insurance policy is the simplest type of life insurance plan that your employees can get, and it typically has cheaper premiums than any other kinds of life insurance. It usually provides you with life coverage for a set term between 5 to 40 years up to your age of retirement.

The amount of the death benefit is a key factor. Your life insurance premium will be lower with $5,000,000 life insurance policy than a $10,000,000 one.

2. Age

As a matter of fact, the younger your employees are, the less expensive the life insurance premiums of your company will be. This is because age directly correlates with mortality risk. Younger employees generally exhibit lower mortality rates, resulting in lower premiums. Conversely, older employees may face higher premiums due to heightened mortality risk.

This is simply due to a risk calculation of life insurance. If you are purchasing a 20-year term life insurance plan, the life insurance provider will consider the probability of you staying alive 21 years from now. The younger you are, the longer your lifespan will be, which means less risk for the life insurer to pay you the claim and hence lower premium for you.

This is the reason why some companies with single 20-something employees make up their mind to purchase a term life insurance policy to lock in a low premium early as a way to save later when they have a family in the future.

3. Gender

As a golden rule, women pay less for life insurance than men because women typically live longer on average than men. This is why ladies are perceived as a lower life insurance risk than men by life insurance companies. Apart from the lifespan, men tend to have more hazardous jobs and higher-risk hobbies such as drinking alcohol and taking drugs or even driving beyond speed limits. It is true that not every gent has a construction-related job and has an alcoholic issue. However, life insurance premiums are calculated based on averages, not individually.

4. Medical history

The healthier you are, the lower your premiums will be. A life insurance policy with the requirement of a medical exam is typically less expensive than the simplified one where no medical exam is needed because in this case the life insurance provider is taking an unidentified risk so premiums are higher accordingly.

All of your employees are advised to be open and honest about your medical history by declaring all of your diagnosis, surgery and prescription. If the life insurance company found out that you did not do so, your death benefit would not get approved.

How are group life insurance premiums calculated

5. Number of employees

The lower number of employees your company has, the lower the life insurance premiums of your company will be. This is simply because more people means a higher chance of making claims which in turn leads to a higher risk for the life insurers.

6. Occupation

The more life-threatening your occupation is, the higher the life insurance premium of your company will be. It can end up in a rejection of life coverage if the occupation has a high chance of fatality. If your employees work as one of the risky occupations such as chemical factory workers, scuba divers, skydivers, car racers, you may pay higher premiums than those who work in a typical office.

7. Hobbies

The more life-threatening your employees’ hobbies are, the higher the life insurance premium of your company will be. If your employees have hobbies like mountain climbing, skydiving, scuba diving, your company may have to pay a higher premium for it.

8. Drinking and smoking status

The more heavily your employees drink or smoke, the higher the life insurance premiums of your company will be. This is simply because heavy consumption of alcohol or heavy smoking leads to a higher chance of your demise causing a higher risk for the life insurance companies and hence a higher premium for you.

9. Location

If your company is in a country with a high risk that involves war, terrorism or natural disaster, the life insurance premiums of your company will become higher in this regard.

10. Payment schedule

The fewer payments that your company is able to make, the lower the life insurance premium of your company will be. If possible, select the option of paying premiums on an annual basis or a quarterly basis to save on your life insurance cost.

Our advice

Always make sure you examine financial and medical conditions whether they are in line with the level of coverage on your company’s current life insurance policy, otherwise switch it to the one that perfectly matches your specific life coverage requirements and those of your beloved employees. After all, it is never too late to plan for saving on your corporate life insurance premium your company deserve.

At i-Brokers, we pride ourselves on being transparent with our premiums. This is reflected in our insurance comparison tool which allows you to receive and compare insurance quotes in seconds! 82% of customers save money on premiums when comparing insurance with i-Brokers. Can you afford not to? Get a quote here.

How are group life insurance premiums calculated