Imputed income
Employer-paid group term life above $50,000 creates taxable income for the employee, which must be reported on their W-2.
All coverage
Coverage
Group Life
Term life and AD&D coverage that gives employees' families financial protection.
Who it's for
Group life gives employees' families a financial safety net, often at a far lower cost than individual policies.
- Employers who want to offer a meaningful benefit at a low per-employee cost
- Employees with dependents who rely on their income
- Workers who may have trouble qualifying for individual coverage
What it covers
Typical coverage includes
- Basic term life, usually a flat amount or a multiple of salary
- Accidental death and dismemberment (AD&D) paid in addition to the life benefit
- Supplemental life that employees can buy for themselves
- Dependent life for a spouse or children
How it works
How group life insurance works
Set the benefit amount
You choose a flat amount for every employee or a multiple of salary, usually with matching AD&D coverage.
Employees enroll and name beneficiaries
Coverage up to the plan's guaranteed issue amount needs no health questions. Employees name who receives the benefit.
Employees can buy more
With supplemental life, employees can add coverage for themselves, a spouse, or children through payroll deduction.
Beneficiaries file a claim
If an employee dies, the beneficiary files a claim with the carrier and receives a lump-sum payment.
Before you decide
Common considerations
Guaranteed issue and evidence of insurability
Coverage up to the plan's guaranteed issue amount needs no health questions. Amounts above it, or late enrollment, may require a health statement.
Portability and conversion
Employees leaving the company can often keep coverage by porting it to a group rate or converting to an individual policy.
Beneficiary designations
Encourage employees to name and update beneficiaries, especially after marriage, divorce, or a new child.
FAQ
Frequently asked questions
How much group life insurance do employers usually offer?
Common designs are a flat benefit, such as $25,000 or $50,000, or one to two times annual salary.
Are group life insurance payouts taxable?
Death benefits paid to a beneficiary are generally not subject to income tax. Employer-paid coverage over $50,000 does create imputed income for the employee while they're alive.
What is AD&D?
Accidental death and dismemberment pays an additional benefit if an employee dies or loses a limb, sight, or hearing in a covered accident.
Can a small business offer group life insurance?
Yes. Many carriers offer group life to businesses with only a few employees, often packaged with dental, vision, or disability coverage.
Is group life enough coverage on its own?
Often not. Employer-paid amounts are usually modest, so employees with dependents may want supplemental or individual coverage.
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