The basic principle of group insurance is that it provides insurance coverage for a number of people under a single master contract or master policy. Because a group policy insures a group of people, it is the group – not each individual – that must meet the underwriting requirements of the insuring company.
Today, approximately 45 percent of life insurance in force in the United States is group life insurance and billions of dollars are purchased every year. In fact, as far as coverage amounts go, group life is the fastest growing life insurance line.
Group life plans may be contributory or noncontributory. If the employer pays the entire premium, the plan is noncontributory. If the employees pay part of the premium, the plan is contributory. Florida law requires 100 percent participation by eligible employees in noncontributory group life insurance plans. There is no requirement for minimal participation in contributory group life insurance plans.
Most group life plans are term plans, which use annual renewable term (ART) insurance as the underlying policy. This gives the insurer the right to increase the premium each year (based on the group's experience rating), and it gives the policyholder the right to renew coverage each year. As is characteristic of ART policies, coverage can be renewed without evidence of insurability. The prevalent use of ART insurance is another reason why the cost of group insurance is fairly low.