Group term life insurance is a popular benefit because the cost is relatively low and employees typically value the coverage highly, giving employers a big “bang for the buck.” Offering group term coverage provides basic financial security for employees and their families and helps to attract and retain the best employees.
Because group term life insurance is inexpensive and highly valued by employees, employers frequently pick up the full cost. In addition, the cost of the first $50,000 of group term insurance coverage may be provided tax-free to the employee.
The most common practice among employers is to provide employer-paid group term life insurance in an amount equal to a percentage of each employee's annual pay. There are numerous variations on this basic design, including:
• Higher benefits, such as 11/2, 2, or 3 times annual salary
• Flat-sum benefits in various multiples, such as $10,000, $25,000, $50,000, etc.
• Requiring employees to pay a portion of the premiums
• Allowing employees to purchase supplemental coverage at group rates
• Employer-paid, employee-paid, or shared payments for spouse and dependent coverage
• Additional group universal life insurance coverage giving employees additional portable insurance coverage and the ability to accumulate cash
Term insurance is the least expensive form of life insurance. A term policy covers only the “term”--usually a year--in which premiums have been paid, and it has no cash value, paying only in the event of the death of the insured. A term policy at group rates is less expensive per person than individual term policies would be for the same group of people, and a term policy is considerably less expensive than a “whole” ...