Life insurance benefits are the cornerstone to most benefit packages and are generally categorized into 3 types: Employer Paid, Voluntary Term and Permanent.
Employer Paid: Employers can pay for an insurance policy for their employees, referred to as non-contributory. Employer paid insurance usually comes in two benefit amounts, the most common being a multiple of an employees’ salary; for example, 1 or 2 times salary. The other benefit option is a flat amount per employee, for example, $25,000 for each employee. Riders can also be added to enhance the benefits, such as: Accidental Death and Dismemberment (AD&D), waiver of premium in case of disability, and accelerated death benefits for terminally ill employees. Federal regulations also allow employers to provide different coverage amounts for different classes of employees with certain limitations. For example, 2x salary for officers and 1x salary for all other employees.
Voluntary Term Life: Employers can also offer employees the option to purchase additional term life insurance on their own, called Voluntary Life. These policies usually limit the maximum benefit to the lesser of 5 times an employee’s salary or $500,000, and often require employees to qualify for coverage by completing medical questions for amounts over the Guarantee Issue Limit. Finally, most insurance carriers will require that a minimum of 20-25% of the employees participate in the voluntary life benefit in order for a policy to be issued.
Permanent Insurance: These voluntary insurance plans come with a higher premium than voluntary term life insurance plans, however, they also build up cash value. Many of these plans may be paid up at age 65, do not require additional premium payments after age 65, and/or may be retained by employees after their employment ends.