A group life insurance program is a convenient way for employees to obtain a basic amount of life insurance. Coverage is provided by an insurance company through a policy that covers all eligible employees of your company.
The coverage is guaranteed-issue, meaning your employees don’t have to disclose health status or otherwise furnish evidence of insurability. Instead, the group life insurance is active as long as the employee is actively at work on the date that coverage would become effective. (The specific coverage rules and guidelines are contained in the group insurance policy between you and your insurance company).
Generally, the business pays the total cost of this insurance — customarily, a set fee per $1,000 of total death benefit. Your specific rate is determined mostly by the following factors:
- Type of business
- Risks involved in your business
- Number of employees
- Employees’ average age
- Employees’ gender
- Employees' salary
The premiums for the first $50,000 of group life insurance per employee are deductible by the employer. Also, premiums for the $50,000 coverage are nontaxable to the employee.
A typical group life insurance plan pays benefits equivalent to a multiple of employee’s annual salary – for example, 1 times or 2 times salary. Beyond this basic coverage, many group life plans allow employees to arrange for additional coverage on themselves or family members. In those cases, the employee pays the premium for the additional coverage and might be required to sign a statement attesting to good health.
Technically no. Unless obligated by an agreement with your employees (such as a collective bargaining agreement) you don’t need to sponsor a group life program. But group life insurance is a benefit that most employees have come to expect. So you run the risk of alienating your employees if you do not offer a program.
Generally a business owner secures group life insurance as part of their total employee benefit program. The insurance representative that you work with on your group health program or other employee benefit plans should be able to compile a number of group life options that can satisfy both your budget and the needs of your employees.
If you already offer group life, you may wish to re-evaluate whether you are getting the best and most affordable plans. If you have added staff or the makeup of your staff has changed, it would be a good time to discuss with your insurance representative whether to re-think your group life policy.
Feel free to contact your Marsh SBI Insurance Representative for assistance in the analysis of your group life program.