What Companies Should Know Before Offering Employee Life Insurance

Companies offering employee life insurance as part of their employee benefits package is an excellent talent retention strategy. A life insurance policy will help protect the employees’ dependents from financial pressure when meeting outgoing expenses in the event of the former’s untimely passing. 

In this blog post, Pacific Prime will be going over employee life insurance for companies and what companies should know before offering employee life insurance as part of the employee benefits package. 

What is Life Insurance?

Life insurance is a popular benefit for both employees and their employers. In the event of an employee’s untimely passing, their dependents could be subject to financial stress when meeting outgoing expenses.

However, a life insurance policy can protect them by offering a lump sum payout agreed between the insured and the insurer at the time the policy was taken out. Below are some common options for life insurance policies companies can offer:

• Group Term Life Insurance: Term life insurance covers an employee for a specific term, in which a death occurring within the specific time frame is covered under the policy.

• Group Accidental Death & Dismemberment (AD&D): AD&D provides benefits to an employee or their beneficiaries in the event of the employee’s death resulting from an accident or one or more of their body parts getting severed. 
• Business Travel Accident Insurance: In case employees frequently travel overseas for business trips or conferences, these policies will provide coverage if an employee passes away while abroad.

How Does Employee Life Insurance Work?

Life insurance provides the beneficiaries (in this case, the employees’ dependents) with a lump sum in the event of the employee’s passing. However, this is only the case if the policy is in-force upon the employee’s passing, meaning the required premiums were paid off when they were still alive.

The beneficiaries can then use the money paid by a policy for whatever they’d like, along with some of the following:

• Living expenses previously covered by the insured employee’s income
• Credit card bills, medical bills, mortgages, or car loans 
• Funeral costs
• School and college tuition fees

What Does Employee Life Insurance Cover?

Life insurance usually covers all causes of death while generally excluding suicide within the first two years of the policy. Below are some general causes of death that a life insurance policy covers:

• Motor accidents such as car or motorcycle crashes
• Diseases
• Homicide (unless the insured is murdered by the beneficiary)
• Old age
• War or terrorism

What Does Life Insurance Exclude?

As mentioned before, most life insurance policies will exclude suicide, at least during the first two years of the policy. This means the company will not pay the beneficiaries compensation for the insured employee’s suicide attempt within that time period. 

What Do Companies Need to Know Before Offering Employee Life Insurance

Including life insurance in your employee benefits package will require some thoughtfulness to ensure the right level of coverage at an affordable premium for your budget. Below are factors companies need to keep in mind before offering employee life insurance.

Who Should be Covered?

Your company doesn’t have to offer life insurance to every single type of employee. Instead, you can offer employee life insurance to specific groups of employees, such as frequent business travelers, upper-level management, or those on full-time contracts. 

You also have the option of offering employee life insurance as part of a service benefit to reward employee loyalty. 

What Coverage Should We Offer?

Understanding your company and the employees’ needs matter when deciding between group term life insurance and its AD&D counterpart. For instance, if your employees travel frequently for business outings, then business travel accident insurance will be more appropriate. 

This is because this type of employee life insurance policy will cover an employee’s untimely death or injuries sustained due to an accident while abroad. 

What is the Right Benefit Limit for Employee Life Insurance?

Benefits are typically a set amount of compensation for employee life insurance, the premium of which can be calculated based on the employee’s salary. Some group life insurance plans can be adjusted based on the insured employee’s age.

The level at which you set the benefit and the way it’s calculated will affect the premiums paid by the company. Thus, it’s important to keep this in mind to ensure the sustainability of your employee’s life insurance.

Should Employees Get Group Life Insurance or Buy Life Insurance On Their Own?

In some cases, life insurance payments are treated differently across various countries and jurisdictions, which can significantly impact the benefits that individuals will derive from the insurance policy. 

Thus, it’s worth taking the time to review how employee life insurance might play out in case of a claim and weigh it up against how the employees might benefit if they purchased a plan on their own. 

Getting Expert Assistance With an Experienced Employee Benefits Partner

When it comes to employee benefits, Pacific Prime is ready to lend you a helping hand as your global partner. We are here to offer comprehensive employee life insurance solutions alongside our services for other forms of employee benefits.

If you are in need of guidance regarding employee benefits or life insurance solutions, Pacific Prime and our team of experts are more than happy to help you ensure all your employees’ voices are heard.

If you have any further questions, please get in touch with us.