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Life Insurance

Although not required to by law, many employers offer group-term life insurance coverage to their employees. Benefits under a group-term life insurance policy are paid only if the insured dies during the policy’s term.

Advantages of Group-Term Life Insurance

  1. Group-term life insurance generally features lower premiums than individual term life insurance.
  2. In general, the cost of up to $50,000 of group-term life insurance can be excluded from an insured employee’s wages for federal income tax, Social Security, Medicare, and federal unemployment tax purposes.
  3. Premiums paid by employers are tax deductible for those employers as long as they are not policy beneficiaries.
  4. Group-term life insurance can be offered as part of a cafeteria plan, allowing employees to contribute toward their coverage on a pre-tax basis.

Requirements for Employers

To preserve the tax exclusion mentioned above and comply with the Internal Revenue Code, employers generally must:

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