Group Life Insurance Can Protect Your Employees and Their Families
When you choose to sponsor an employee benefits plan, supporting and protecting your employees is the name of the game. It’s pretty clear that life insurance is an important way to do this. There are many reasons why group life insurance is an important part of your benefits plan, and many ways that it can support your employees and their families.
Group life insurance explained
The goal of group life insurance is to give your employee a benefit that can protect their family from financial hardship in the event of the employee’s death. It’s a provision to replace the employee’s income.
Group life insurance usually pays out a flat dollar value (such as $25,000 or $50,000) or an amount based upon the employee’s salary (for example, two times the employee’s salary). The money is paid out in a lump sum to the employee’s beneficiary after the employee’s death. Often the beneficiary is the spouse or dependents, but it can be anyone.
Group life insurance usually requires no medical evidence or very limited medical evidence, provided the employee enrolls within the specified timeline.
Some plans also offer dependent life insurance. Dependent life insurance is for an employee’s spouse or dependents and is usually a flat amount (such as $5,000). This money is often useful for funeral or burial arrangements but is not significant in terms of replacing income. Some plans (like GroupHEALTH’s) offer dependent life coverage that includes coverage for a stillborn child.
As the employer, you can choose to pay for the entire premium for life insurance, or you can choose to split the premiums with your employees. If the employee is paying for part of the premium, payment is made through payroll deductions.
Protecting Employees and their families
The death of a loved one is catastrophic for most families. This is especially true if the person who dies is the main income earner in the family. Group life insurance provides the financial resources to help protect an employee’s family. It can be used to pay for day-to-day expenses (such as mortgage payments or childcare), or for things separate from the day-to-day (such as a child’s education, re-training the spouse or accumulated debt). Ultimately, the money helps preserve the family’s lifestyle.
There are many ways that a death can drain a family’s savings. Funeral and burial costs can be substantial (especially when unexpected). There’s also lost income for the spouse is they are off work dealing with the loss of their loved one. Group life insurance offers some protection by providing a financial benefit when it’s really needed.
This coverage protects the employee’s family, but it can also remove a weight off your employee’s shoulders. It can be a big responsibility knowing that a family relies on you – with coverage your employee will know that their loved ones will have financial help if they were to die.
Group life insurance and taxation
The death benefit paid out to the beneficiary is non-taxable. The premiums themselves are considered taxable income for your employee if they are paid for by you (the employer). They are a tax-deductible business expense for your company.
Portability and Termination
If you’re sponsoring an employee benefits plan and one of your employees leaves the company, what happens to their group life insurance policy? It’s actually not their life insurance policy – it’s held by you (the employer). As a result, a group life insurance policy cannot go with an employee when they leave the company – it is not ‘portable.’ Typically, the employee will have options offered by the insurance company to convert their group policy to an individual plan.
As far as termination goes, most life insurance as part of a group benefits plan automatically reduces the coverage amount at age 65. Coverage is usually terminated at age 70.
Optional Life Insurance
Your employees may have the option to purchase additional life insurance at reduced group rates. This gives the employee the ability to customize the coverage they have to best suit their circumstances. This is yet another way to protect your employees and their families by giving them access to better rates than if they purchased additional life insurance individually.
Optional life insurance is guaranteed issue with no medical evidence to a specified amount (for example, $50,000). This is important because it means employees with pre-existing medical conditions have access to coverage they may not otherwise be able to secure.
Living Life Benefit
The living life benefit is an important component to group life insurance offered by GroupHEALTH. It allows the employee to receive a lump sum payment from their life insurance policy after being given a terminal diagnosis. This allows employees to ‘live life’ to the fullest before they die. The money can be used for anything from medical expenses or renovations to better accommodate them during their illness, to going on a dream vacation or trip. It gives your employee the financial freedom to help them better enjoy their last days.
Recruitment and Retainment
Protecting and supporting your employees and their families is an important reason to provide group life insurance as part of your employee benefits plan; but it’s not the only reason.
Life insurance is important to current employees as well as prospective employees. This means a good group life insurance policy can help when recruiting new employees and retaining your existing employees. People want to know that their family will have support if they die. Group life insurance can be especially important for people with pre-existing conditions – they may not otherwise have access to affordable coverage. So it’s good to protect and support your employees, but it’s also good for business.
Good Advice is Key
Does your employee group benefits plan provide life insurance to protect your employees and their families? Can you give employees the means to live their life to the fullest after receiving a terminal diagnosis? If not, maybe you should. Review your options with one of our licensed advisors on the phone or in-person or contact us for a comparison quote.
Whether you’re looking for extended health and dental coverage, disability coverage, or life and critical illness coverage, GroupHEALTH has affordable benefits packages that work as hard as you do.
Related Projects
We’re proud to partner with Tree Canada to help compensate for our carbon footprint.
By visiting our website online, you are actively participating in our paper-free initiative—thank you!
Stay In Touch