Paid Term Life Insurance: A Comprehensive Employee Benefit

Term life insurance is a type of life insurance that is in effect for a certain period of time. It is often offered as an employee benefit, with the option to add more coverage. Term life insurance as part of an employee benefits package is typically attractive to most employees since the cost is lower than purchasing an insurance policy on the open market. Employees can purchase additional insurance benefits, up to $50,000, using pre-tax dollars.

Group-term life insurance

There are various types of group-term life insurance policies. The most common include employer-paid term life insurance, where the employer purchases a single policy that covers all participating employees. This type of policy requires the employer to pay just one premium, not a premium per employee. There is also contributory term life insurance, which is a combination of employer-paid and employee-paid. Employees have the option to purchase additional insurance benefits, up to $50,000, using pre-tax dollars. There can be options to convert a group-term life insurance policy into an individual policy, should this be necessary.

Contributory term life insurance

As an employer, you must determine who should be covered, the type of benefits you will offer, and the optimal and most affordable amount of life insurance to provide. You can provide your employees with access to a standard amount of term life insurance coverage without paying any portion of the premium. Employees then have the option to purchase additional insurance benefits, up to $50,000, using pre-tax dollars.

Group-term life insurance policies are the most commonly offered type of employer-provided life insurance. They are in effect for a defined period of time, usually the length of the employee's employment. There can be options to convert a group-term life insurance policy into an individual policy, should this be necessary.

When employer-paid, the employer purchases a single policy that covers all participating employees. This type of policy requires the employer to pay just one premium, not a premium per employee.

Employer-paid term life insurance

Term life insurance is a type of insurance that is in effect for a certain period of time only. It is the most commonly offered type of employer-provided life insurance. When employer-provided, the term is typically the length that the employee is employed.

There are also contributory options, which are a combination of employer-paid and employee-paid. Term life insurance as part of an employee benefits package is typically attractive to most employees since the cost is lower than purchasing an insurance policy on the open market. Employees do not need to undergo underwriting and avoid feeling penalised or getting denied coverage for having a chronic or pre-existing condition.

As an employer providing group term life insurance, you must determine who should be covered, the type of benefits you will offer, and the optimal and most affordable amount of life insurance to offer.

Employee-paid term life insurance

Group-term life insurance is the most commonly offered type of employer-provided life insurance. It is in effect for a defined period of time, usually the length of the employee's employment. It can be offered to employees only, not their spouses or children. It is a popular option for employees as the cost is lower than purchasing an insurance policy on the open market. Employees do not need to undergo underwriting and avoid feeling penalised or getting denied coverage for having a chronic or pre-existing condition.

As an employer, you must determine who should be covered, the type of benefits you will offer, and the optimal and most affordable amount of life insurance to provide. To take advantage of the tax deduction for group-term life insurance (i.e., the value of up to $50,000 in insurance is tax-exempt for the employee), you must have at least 10 full-time employees.

Tax benefits of term life insurance

Term life insurance is a type of group-term life insurance, which is the most common type of employer-provided life insurance. It is in effect for a defined period of time, typically the length of the employee's employment.

Employee-paid term life insurance means that employees can access a standard amount of term life insurance coverage without their employer paying any portion of the premium. Employees can also purchase additional insurance benefits, up to $50,000, using pre-tax dollars.

There are several tax benefits to term life insurance. Firstly, the death benefit is generally paid to the beneficiary free of federal income tax. Secondly, the cost of employer-provided group-term life insurance on the life of an employee's spouse or dependent is not taxable to the employee if the face amount of the coverage does not exceed $2,000. Thirdly, similar to a Roth IRA, permanent life insurance allows you to access the cash value of your policy through tax-advantaged loans or withdrawals. Finally, until a withdrawal is made, you will not owe taxes on the growth of your policy's cash value, allowing you to accumulate more savings over time.

Frequently asked questions