Group life insurance is an important benefit for employees. It can provide peace of mind in the event of a death, and can also help protect the company’s most important assets—its employees. Here’s what you need to know about group life insurance, and how to choose the right policy for your employees.
Employee benefit packages typically include group life insurance policies these days. Group coverage is often much cheaper than what employees would pay for themselves, making it an affordable option that many companies think is a no-brainer to offer to their workforce.
Employers or organizations that offer the coverage, often keep the actual insurance policy, known as the master contract. All of those who are covered typically receive a certificate of insurance that serves as proof of insurance but is not actually the insurance policy.
What is Group Life Insurance?
Group life insurance is also known as employer-provided life insurance or group term life insurance. It offers members of a certain organization or company the protection and peace-of-mind that comes with life insurance policies, usually capped at a lower amount. It is an invaluable asset for those employed by small or mid-size businesses or those who are a part of any special interest group. Group life insurance provides comprehensive coverage at competitive rates, or for free.
How Much Does Group Life Insurance Cost?
Your group life insurance costs will be dependent on a variety of factors including your company’s industry, number of employees and their ages and genders. Hazardous industries, such as mining, will pay higher premiums than low-risk businesses like a consulting firm.
In September 2022, the Bureau of Labor Statistics reports employers paid an average of $0.05 per hour per employee towards group life insurance, just 0.1% of a civilian workers’ compensation. This benefit is as affordable as it is valuable to your employees.
Companies and organizations are often able to negotiate more favorable rates with insurers due to their policy having multiple participants. For your employees, this could mean their premiums will come at no cost or at reduced rates compared to an individual plan.
According to the Bureau of Labor Statistics, 60% of American workers had access to life insurance through their employment in 2021. For employees, group life insurance can be a great way to save on coverage costs while still getting the protection they need.
Life insurance premiums may be deducted as a business expense as long as the insured is an employee and your company is not the policy’s beneficiary.
Life insurance policies are tax-free for your employees as long as the death benefit does not exceed $50,000. But if a policy’s coverage surpasses that amount and an employee pays lower premiums than its actual worth, they will be liable for income taxes on any ‘imputed income’ above what was paid in premium costs.
Additional Types of Group Life Insurance
Group Accidental Death and Dismemberment Insurance
Group accidental death and dismemberment also known as (AD&D) coverage offers a vital layer of protection to employees, providing financial support for their spouse or family if they suffer death or loss of limbs due to an accident. This critical benefit provides security and peace of mind even under the most tragic circumstances.
Split-Dollar Life Insurance
Split-dollar life insurance pays out to the employees’ beneficiary upon death as well as reimburses premiums paid on behalf of employers – making it a valuable consideration for any organization’s team members that are vital components to success.
These plans are contracts designed to divide a policy’s benefits between beneficiaries and the business or employer. These arrangements terminate upon the employee’s passing or at an earlier date specified in their agreement, guaranteeing all involved parties receive due compensation when required.
Business Travel Insurance
Business travel insurance offers an invaluable layer of protection. It covers the unlikely scenario in which an employee passes during a business-related trip. If your staff frequently travels, this type of coverage can help secure peace of mind for all parties.
All business-related travel carries inherent risks. That’s why a lot of employers choose to take responsibility to ensure the safety of their employees on these trips. Some consider it essential that companies prioritize employee protection when embarking on any work excursions.
Key Person Insurance
Key Person Insurance, you can safeguard against any sudden death or disability for those indispensable figures within your organization (i.e. the CEO or president), providing support when it is needed most. With coverage for both death and disability, this policy is essential to safeguarding companies against losses due to an individual’s unfortunate circumstances.
Key person insurance provides the necessary financial cushion to facilitate a smooth transition if faced with an unexpected loss. Companies can use these funds as necessary. This could include recruiting, hiring and training replacements. It could also take care of paying off debts or providing severance benefits in an orderly manner.
How To Administer Your Policy
Administering life group-term benefits is a breeze as you don’t need to keep tabs on them or deal with too many claims. The insurance company you decide to go with will provide the proper forms for your staff. Just make sure to file away each employee’s enrollment form for future reference.
Some organizations or businesses require their group members to wait a minimum amount of time, i.e. a probationary period, before they are granted coverage. Group members’ life policies issued will often only remain in place until employment is terminated so there’s no need to worry about payouts or transfers.
Group life insurance is still considered an attractive benefit to candidates. Many younger professionals may not have life coverage yet if they’re not married or don’t have children. Since there’s no medical underwriting and it’s either free or relatively inexpensive. Group policies are also easier to enroll into than individual life insurance policies.
Overall, group term life insurance can help protect your company’s most important assets—your employees. If you’re looking for a way to offer your team this valuable protection, call (877) 658-2374 or enter your zip code in the bar above to get started. We’ll work with you to find the right policy for your business and make sure your employees are well taken care of in case something happens.