3 - Offering Life Insurance: Benefits to You and Your Employees

Part 3 of a 3 part series…

Benefits to Employers

Tax treatment – Premiums for life insurance offered by the employer are generally deductible as ordinary and necessary business expenses (unless the employer is the beneficiary of the policy). In addition, the cost of employer-provided group-term life insurance is excludable from the employees’ gross income (up to $50,000 of coverage). The plan must meet special nondiscrimination rules, however, or key employees may not be eligible to exclude the cost of their coverage from their gross income.

Benefits for Employees

Though life insurance is an important asset for future financial security, many employees don’t realize its importance. Teaching employees about the value of life insurance may increase loyalty to the company as they better appreciate this benefit.

Ask employees to envision the debt and financial responsibilities that loved ones would face in the event of their death. If the employee is the primary household income, how will the family support themselves? If the employee dies and leaves behind a mortgage or substantial medical bills, who will have the burden of paying that debt? Many employees do not realize the financial benefits of a life insurance policy until they think through these issues. If you offer a permanent coverage option, also explain the value of having the cash benefit component to the policy.

Emphasize to employees that buying life insurance on their own is costly; even if your group coverage is employee-paid, you are still offering significant advantages:

Lower rates through a group policy than if buying individual coverage
Generally no medical review is required for group policies, as opposed to individual policies where an unfavorable medical exam could disqualify the individual or trigger extremely high premiums. (Be sure to inform employees on restrictions regarding this issue, such as a requirement to enroll when first eligible to avoid a medical exam.)
Convenience of payroll deductions for premiums

Educating employees on the benefits of life insurance in general and the advantages of purchasing through your group plan can help increase awareness and participation, boost loyalty, and support hiring and retention initiatives.

Once you have an idea about the type of coverage you’d like to offer, Murray can help you find a plan that meets your needs. For more information, contact Mary Lyons, GBA, Health Benefits Solutions.