Types of Group Insurance: 7 Plans Every Employer Should Know

Employers offer seven common types of group insurance: health, dental, vision, life, disability, accident, and critical illness. Health insurance costs employers far more than the others. In March 2026, private-industry employers spent $3.41 per hour worked on health insurance, against $0.05 on life insurance and $0.15 on short-term and long-term disability combined. 

Most companies do not need all seven at once. What they need depends on workforce demographics, physical risk, the hiring market, and how much of the premium the employer intends to fund.

This guide covers what each type pays for, who typically pays the premium, what to compare before signing, and how the funding structure behind a plan changes its cost.

The 7 Main Types of Group Insurance at a Glance

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Health insurance has a reliable national benchmark because the Kaiser Family Foundation (KFF) surveys employers every year. The other six have no equivalent, so any national average you find for them describes a market rather than a price you can plan against.

Pro tip: Treat every broker quote as a price for your specific census. A national average tells you nothing about what a carrier will charge your team. 

Each Type of Group Insurance Explained

Each of the seven below follows the same structure: what the coverage pays for, who usually funds the premium, and the detail employers most often miss when comparing quotes. 

The first five are the ones most employers fund at least partly. The rest are usually voluntary, which means employees choose whether to buy them through payroll deduction, while the employer carries no premium cost.

1. Group Health Insurance

Health insurance makes up roughly 94% of private-industry employer spending on insurance benefits, calculated from BLS March 2026 figures of $3.41 per hour worked for health against $3.62 for all insurance. 

In 2025, KFF published the average employer-sponsored premium, which was $9,325 a year for single coverage and $26,993 for family coverage. Workers paid an average of $1,440 toward single coverage and $6,850 toward family coverage. That means employers covered the remainder on average, roughly $657 a month for a single employee.

Cost-sharing can change the value of an otherwise similar plan dramatically. In the same KFF survey, 88% of covered workers were enrolled in a plan with a general annual deductible for single coverage, and the average deductible among those workers was $1,886. At firms with 10 to 199 workers, the average was $2,631, compared with $1,670 at larger firms. The result is that two plans with similar premiums can leave employees with very different out-of-pocket costs.

Did you know? Carriers calculate a risk score from your workforce's age, gender, and location, and that score sets your quote. Most employers have never seen theirs. Ignition surfaces the Benefits Risk Score the carrier already holds before you go to market. 

2. Group Dental Insurance

Group dental insurance covers services such as examinations, cleanings, fillings, crowns, and other dental procedures. Employers may pay the entire premium, contribute part of it, or offer the plan on a voluntary basis with employees paying the full cost. Dental plans are generally much less expensive than medical insurance, but the headline premium can be misleading.

A plan may use the 100-80-50 structure: preventive services are covered at 100%, basic services at 80%, and major services at 50%, subject to the plan's deductible, annual maximum, network rules, and other limitations.

The annual maximum is what employers most often miss. Unlike medical insurance, many traditional dental plans cap what the insurer will pay in a year, so an employee facing several major procedures can reach that cap quickly and still owe hundreds out of pocket. Some plans also impose a 6–12 month waiting period before covering major work. 

3. Group Vision Insurance

Group vision insurance generally covers routine eye examinations and provides allowances or benefits toward eyeglasses, lenses, or contact lenses. Some plans also offer discounts on procedures such as LASIK rather than paying for the procedure itself.

Vision plans are inexpensive enough that many employers run them as fully voluntary through payroll deduction, which puts the coverage in front of employees at group pricing while the employer carries no premium cost.

The detail employers often overlook is benefit frequency. A plan might provide an allowance for new frames every 12 months, while another uses a 24-month cycle, a difference that matters more to employees who change prescriptions often than to those who don't. 

Employers should also compare the actual allowance rather than simply asking whether vision is "included," since a low-premium plan may offer a small frame allowance or narrow network that reduces its practical value.

4. Group Life Insurance

Group life insurance pays a death benefit to an employee's named beneficiary. Employers commonly fund a basic amount, set either as a flat dollar figure or as a multiple of salary, and let employees buy additional coverage themselves.

Group-term life is one of the least expensive benefits on the list, because the employer buys one rate for the whole group rather than underwriting each employee. Price changes based on the coverage amount and the age of the workforce.

The tax rule decides how most employers set the basic amount. Under IRS rules on group-term life insurance, the cost of up to $50,000 of employer-provided coverage is generally excluded from an employee's income. Above $50,000, the taxable cost of the excess is treated as wages and reported on Form W-2, which is why many employers cap employer-paid coverage at exactly $50,000.

Note: Employees rarely learn what happens to their coverage when they leave. Employer-sponsored life insurance generally ends with employment, though many policies include conversion or portability provisions. Ask the carrier what those provisions cost, because employees usually discover the price at the worst possible moment.

5. Group Disability Insurance

Group disability insurance replaces part of an employee's income when a covered illness or injury stops them working. It splits into Short-Term Disability (STD) and Long-Term Disability (LTD).

STD typically covers the first three to six months. LTD begins after an elimination period of 90 to 180 days, which is the waiting time before benefits start, and can run for years. Employers buying both should confirm the two elimination periods line up, because a gap between them leaves the employee with no income.

Access to disability coverage rises steeply with employer size. Bureau of Labor Statistics data for March 2025 shows short-term disability was available to 31% of private-industry workers at establishments with fewer than 100 employees, against 68% at establishments with 500 or more. For a growing company, adding disability coverage is one of the clearer ways to close the gap with larger employers competing for the same candidates.

Who pays the premium determines whether disability benefits are taxable. When the employer pays the premium and the employee does not pay tax on it, the benefits are generally taxable income. When the employee pays the entire premium with after-tax dollars, qualifying benefits are generally tax-free.

6. Group Accident Insurance

Group accident insurance pays a fixed cash benefit when an employee has a covered accidental injury. The payout is tied to the covered event, so the employee receives the same amount regardless of the medical bill and can spend it on a deductible, transportation, or household costs.

Accident coverage supplements a health plan. The accident policy pays its fixed benefit for the injury while the health plan handles the medical treatment under its own deductible and network rules. Employers should review covered events, the benefit schedule, exclusions, waiting periods, and family coverage before selecting a plan.

7. Group Critical Illness Insurance

Group critical illness insurance pays a lump-sum benefit after an employee is diagnosed with a covered serious illness, commonly cancer, heart attack, or stroke, though the exact list and definitions vary by policy.

Simplified-issue plans skip the medical exam and price on the coverage amount and employee age. Like accident insurance, this is usually voluntary and employee-paid. 

Diagnosis alone does not always trigger payment. The policy's definitions decide whether a specific medical event qualifies, so read the covered conditions, severity requirements, and exclusions before selecting a plan.

Health insurance is the line where a broker changes what you pay. Ignition Benefits runs a free audit on your medical plan, covering what your carrier charges, your risk score, and the full market quote for the same coverage. Request a free benefits review before your next renewal.

How Group Insurance Is Funded: Fully Insured vs. Level Funded vs. Self-Funded

The type of coverage you buy and the way you finance it are two separate decisions. The funding decision applies almost entirely to group health insurance. Dental, vision, and life stay fully insured at nearly every company size, and disability is rarely self-funded below several hundred employees.

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The National Association of Insurance Commissioners draws the line at where risk lands. A fully insured plan transfers it to the insurer, while a self-insured plan leaves the employer responsible for financing the benefits.

What employers report about these models is worth knowing before choosing one. In a 2026 survey of nearly 150 US CFOs by CFO Leadership and Ignition Benefits, 46% of self-funded or captive respondents said they were managing costs effectively, against 20% of fully insured respondents and 5% of level-funded respondents.

A captive is a group of employers that pool their money to pay their own health claims. Each employer funds its own smaller claims, and the group shares the cost of the largest ones. 

The pattern repeats on the question of whether employers feel they have options. 45% of level-funded respondents and 50% of those in a PEO said the market largely dictates what they pay and they have few real alternatives. Those were the highest rates in the survey.

"Switching funding models doesn't make the cost pressure disappear. What changes is whether you can see what's driving it. The self-funded and captive CFOs aren't paying less by magic; they have the data to act before the renewal shows up." — Nick Taranto, CEO and Co-Founder, Ignition Benefits

How Employers Actually Buy Group Insurance

Employers have four buying routes, and each carries costs beyond the premium itself. 

1. Independent Broker

A broker compares carriers, advises on plan design, and negotiates renewals.

Benefits: Market comparison, plan design advice, renewal support, no direct fee to the employer.

Watch for: Commission is a percentage of your premium, and carrier access varies by firm.

Ignition Benefits is an independent benefits broker that runs a full market audit at every renewal and shows you the risk score your carrier already holds on your workforce. Start with a free benefits review. 

2. PEO

A professional employer organization (PEO) bundles benefits with payroll and HR. It becomes the legal employer of your staff for those functions, while your company manages the day-to-day work.

Benefits: Administrative simplicity and access to a larger benefits pool.

Watch for: Per-employee administration fees and limited plan flexibility. PEO respondents in the CFO survey reported the least visibility of any group, with 43% saying they had limited or no basis for comparing their costs. PEO pricing is worth modelling before signing.

3. Direct From Carrier

The employer contracts with the insurer without an intermediary.

Benefits: A direct relationship and no broker commission built into the rate.

Watch for: You run the comparison, the renewal, and the administration yourself.

4. Benefits platform

Software handles enrollment, eligibility, and employee self-service.

Benefits: Cleaner enrollment and a better employee experience.

Watch for: A subscription fee applies. Better software does not make the underlying insurance cheaper.

The mistake is comparing these four on premium alone. Broker commission, PEO administration fees, software subscriptions, implementation costs, internal HR time, and compliance work all belong in the comparison. The question to ask any provider is what you are paying for besides the insurance.

How to Choose the Right Mix of Group Insurance for Your Company

Headcount is useful as a starting point, but it should not be the only factor. A 10-person software company and a 10-person construction company may have very different workforce risks. An employer should consider its budget, workforce demographics, physical risk exposure, local requirements, hiring market, and what employees actually value.

A practical sequence you can follow:

1. Establish the core: For most employers, health insurance is the first major benefit to evaluate, given its cost and importance to employees.
2. Add benefits employees are likely to use: Dental and vision round out a medical package at a much lower cost than health insurance and matter most when competing for talent against companies offering broader benefits.
3. Protect income and dependents: Life and disability insurance become more important as employees take on financial obligations or when the business would struggle if a key employee were absent for an extended period.
4. Add supplemental protection where it fills a real gap: Accident and critical illness insurance give employees added financial protection without requiring the employer to fund every premium. This makes more sense once employees understand these benefits complement, rather than replace, core coverage.
5. Reassess as the company changes: Growth, a shift in workforce composition, rising premiums, and new state requirements can all justify revisiting the mix.

There is also an important regulatory milestone at 50 full-time equivalent employees. Under the Affordable Care Act, an employer that qualifies as an applicable large employer (ALE) generally has responsibilities under the employer shared-responsibility provisions. 

That does not mean every employer below 50 employees is free from all insurance-related requirements. State disability and leave programs can apply regardless of federal employer size. Check your state's requirements before assuming federal law covers you completely.

Gut check: Would losing your highest performer to a six-month medical leave create a real financial gap? If yes, disability insurance belongs in your next renewal cycle.

Build a Group Insurance Stack That Actually Fits Your Business

Your next decision depends on which layer is missing. If you have health insurance and nothing else, dental and vision close the most visible gap for the least money. If you have all three and are hiring against larger employers, disability is the layer where the size gap is widest. If you already offer five or six types, the open question is your funding structure rather than your coverage mix.

Whichever layer is next, price it against your own employee list before your renewal quote arrives. A quote you receive 30 days out gives you no time to compare anything.

Ignition Benefits produces a benefits analysis report covering your current plan, your carrier's risk score on your workforce, and what the full market would charge for the same coverage. Request a free benefits review to start one.

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