2024 Employer Guide to Life Insurance
Reviewed by
What is group life insurance?
Group life insurance is a contract for providing life insurance as a benefit to a company’s employees – and the policy owner is the company they work for. The group can also be members of an association, which owns the life insurance policy.
Learn more about Guardian group life insurance
How group life insurance works
Some companies offer permanent whole or universal life insurance benefits -– but most employee plans are group term life insurance. Specifically, these plans are for "yearly renewable term" insurance, which means that employees are purchasing life insurance benefits for a year at a time. Coverage renews each year they're employed (unless they choose otherwise), but rates typically increase in five-year age increments.
Understanding the advantages of group life insurance
Individual life insurance is a contract between a single person and a life insurance company, and it takes a fair amount of time and effort to create that contract. However, one life insurance contract for 100 employees is easier to underwrite and administer than 100 individual contracts, so rates are typically lower. In addition, these policies often have automatic or simplified acceptance up to a certain amount, so they can be easier to qualify for without the need for a medical exam. If the employee wishes to purchase additional coverage, an employer can make that option available for an additional fee, which can be deducted from the employee’s paycheck.
How much coverage: Basic and supplemental protection
Many providers – including Guardian – give employers the option to provide workers two kinds of group term life benefits: basic and/or supplemental.
Basic coverage is an initial, limited amount of life insurance typically paid for by the employer. It could be a specific coverage amount (for example, $10,000) or tied to earnings (for example, 1X annual salary).
Most plans also let employees buy optional supplemental life insurance as a "voluntary " (i.e., employee-paid) benefit. Whether your company pays for some, all, or none of the cost, employees realize a number of advantages compared to purchasing individual life insurance:
Affordable premium payments: Group rates are typically lower than those for a comparable individual plan.
Simple qualification: Employee eligibility is rarely an issue, and there's usually no need for a medical exam, and there may not even be health questions. The application process is also simple because the employer already has most of the personal information needed.
Easy payroll deduction: The employee doesn't have to worry about paying premiums – it's automatically taken out of their pay.
Life insurance is among the most important employee benefits. Here's why.
Life insurance, along with group disability insurance and retirement benefits, all work together to foster essential financial well-being for employees. But especially for those with families, many feel the need for life insurance coverage has never been greater. In fact, recent LIMRA research shows increased recognition of the need for life insurance among Gen Z and Millennial adults, with almost 53 million saying they believe their life insurance coverage is insufficient.2
Why should employers offer life insurance in their benefits package?
Because group coverage is usually the easiest way for employees to get it – almost three-quarters (73%) of working adults who currently own life insurance obtained their coverage through their place of work.1 Still, nine in 10 workers have insufficient coverage,2 and 35% of millennials forego life insurance because they think it’s too expensive.3 Most don't realize that the average monthly premium can be as affordable as a daily cup of coffee – and group rates can help make it even more affordable.
What to expect with group life insurance from Guardian
Your business is unique, and your Guardian group life plan will be tailored to your unique needs. To start with, our group offers a choice of rate class options: there can be one class of rates for all employees – "Uniclass" – or separate Preferred and Standard rates that make policies less expensive for non-smokers.
Portability
Guardian provides the option to include "portable" coverage, which means employees can take their life insurance with them if they leave the company. If that happens, there's no added cost to you (the employer), and you'll no longer have to pay for any life benefits provided.
Tax considerations
As an employer, you can provide employees with up to $50,000 of basic group term life tax-free, meaning they don't owe payroll taxes on the premium amount, and their beneficiaries won't pay taxes on the death benefit. However, premiums for any employer-paid life insurance over $50,000 are considered a taxable benefit and reported on the employee's W-2 as "imputed income." This also helps ensure that any death benefit will be paid to the employee's beneficiaries without being taxed.
Guardian features that enhance employee protection – at little or no added cost
We offer a wide variety of products and optional features that address employees' needs:
Accidental Death & Dismemberment (AD&D ) – Help increase financial confidence for employees by offering AD&D insurance as a complement to a Guardian life plan to cover accidental death and injuries.
LifeAssistSM – Provide employees with the critical income should they suffer a severe or catastrophic disability.
Will Preparation Services – Offer employees complimentary access to estate planning professionals, online planning documents, and a resource library. Standard with all voluntary life plans.
Employee Assistance Program (EAP) – Our EAP gives employees the opportunity to access confidential, one-on-one, and web-based support on personal, financial, and legal matters. Workplace tools for employers are also available.
Enrollment support that takes the work off employers:
A wide array of product education and decision support resources like onsite meetings, phone help, and online tools
Multiple online enrollment options through proprietary systems or benefits administration platforms driven by the latest technology simplify the employer’s role
Re-enrollment options allow employees to increase coverage over time without medical exams