Group-Term Life Insurance As An Employee Benefit
Employers know that the employees of a business will effectively determine whether the venture will be a success or not. Committed employees who are satisfied with their jobs, and the rewards their jobs bring, are a significant asset of any successful business. That is one of the reasons employers seek out ways to reward employees for their hard work and loyalty.
At the same time, of course, employers have to consider the bottom line-and the cost of keeping it healthy. That means staying within a reasonable budget for compensation and benefits. If costs are not kept under control, the overall financial status of the business could be threatened. One particular employee benefit generally meets the necessary requirements and provides advantages for both employees and employers. That benefit? Group-term life insurance.
Essentially, group-term life insurance is a program of affordable renewable term life insurance that covers the lives of a group of individuals, such as the employees of a business. A formula that may be based on age, years of service, compensation or position is used in determining how much insurance coverage is provided. Coverage valued at twice an employee's salary might be offered, for example. Group-term plans are popular with employees for a number of reasons:
- Employees receive the insurance coverage at
no (or little) cost, depending on whether the
plan is contributory.
- Employees can secure coverage, in most cases,
without any physical examination. This can be
a substantial benefit for an individual who might
otherwise be unable to obtain coverage.
- The cost of the first $50,000 of life insurance
coverage provided to an employee is not included
in income for tax purposes. If coverage above
that level is provided, the taxable cost to the
employee is determined at reasonable rates.
- Employees may be permitted to convert their
group coverage into individual policies when
they leave their employer's workforce.
- As for employers, they too find much to appreciate
in group-term life insurance plans. Some advantages
- A high level of insurance protection for employees
can be secured at a reasonable cost, and the
insurance premiums paid for the coverage are
income-tax deductible by the employer.
- Employees who are satisfied with their benefits
are less likely to leave. That means lower turnover
and fewer resources spent locating and training
new employees. In addition, having a group-term
plan in place may make it easier to attract and
retain employees as a business grows.
- Group-term life insurance programs are relatively
easy and economical to administer, further easing
the burden for employers.