As the name denotes, “group term life insurance” provides insurance for your employees at group rates for the “term” of their employment. In almost all cases, this benefit is offered to your employees on a non-contributory basis. This means that the employer pays for the entire premium. According to current IRS standards, the first $50,000 in life insurance benefits can be provided tax-free to your employees. Benefits greater than $50,000 are taxable to the employee based upon an IRS formula.
Regardless of how the benefit amount is structured, a stated amount of the benefit will be offered to all of your employees on a guaranteed issue basis. That is, there are no medical questions or exams that are required to qualify for the insurance benefit. Amounts over the guaranteed issue amount will be subject to evidence of insurability.
Benefits are usually offered based upon a multiple of salary or on a flat-amount basis. The benefit can be offered with or without a matching Accidental Death & Dismemberment (AD&D) benefit. Also, many carriers offer the opportunity for you to offer your employees (and their family members) the chance to purchase additional insurance at group rates.
