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 to consider:
• 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.