4 Best Reasons to buy Group Term Life Insurance

Life insurance has proven to be one of the most cost-effective ways to safeguard the dreams of many generations of families.

While you could never be replaced, life insurance can help your family handle financial pressure resulting from a loss of income due to premature death.

Usually passing to your beneficiaries free from federal income tax, life insurance proceeds can help preserve your family’s standard of living, cover outstanding debts, and keep their aspirations alive.

What is Term Life Insurance?

Term insurance is perhaps the most popular form of life insurance-and for good reason. It can provide affordable protection, often with a guaranteed premium for a set period of time. If you die while the coverage is in force, the face amount is paid to your named beneficiary. At the end of the premium guarantee period, you can continue coverage at a premium that’s higher, and can increase each year-but which starts lower than a comparable permanent insurance plan.

Term Life Insurance provides affordable protection for a specific period of time, usually during your working years. In some cases, coverage can even be extended past your original term.

  • Term Life is the ideal coverage for high-demand years when your loved ones most rely on your income.
  • It’s often the most affordable life insurance option for short-term needs.
  • Benefits are payable if you die during the term or period you select.
  • Payments stay level during the term period.

What is Group Term Life Insurance?

Group-term life insurance is coverage that employers offer to employees only. Coverage may be employer- or employee-paid. Often, employers offer a specified benefit (flat fee or percentage of salary) that is cost-free for employees, then offer the option for employees to purchase additional coverage.

Because spouses and dependents are not covered under this type of plan, some employers also offer a separate voluntary plan to cover these individuals if employees choose.

How Does Group Term Life Insurance work?

Group Term Life Insurance is a policy intended to last during your working years only.

It is a policy that is not an individual contract but one that is owned by your employer.

You are part of your employer’s group contract and can be covered under the group plan, if eligible.

Although it is inexpensive initially, your costs increase at each new attained age bracket (typically every 5 years), meaning your premium rates will increase as you get older.

It is low cost for higher benefit amounts, but only in your working years. Reduction of benefits occur once you reach a certain age (typically 65 or 70).

You must have coverage in order to apply for a Spouse or Child policy.

A group contract can be cancelled by the insurance company or by your employer.

The coverage will terminate if you leave your job.

Some group policies have portability options but contain exclusions or restrictions and premiums will increase.

Portability ends when you reach a certain age, and your coverage will cancel at that time.

Some group policies have conversion to individual whole life, if available.

However, premiums will increase significantly, so this option can often be unaffordable. 

4 reasons why you should consider Group Term Life Insurance:
  1. People rely on you financially: You want to make sure that your family is provided for, even after you are gone. When you expand your life insurance plan, you are expanding the care that you will offer them.
  2. You aren’t invincible: In the event of a fatal accident, group term life insurance through ACA provides your family with the amount of your life insurance policy. In the event of a fatal illness, up to 50% of the amount of your life insurance will be payable and can be used to cover your medical bills.
  3. You have debt: A group term life insurance policy will help your family to have the means to tie up loose ends for you.
  4. It’s easier, and the rates are competitive: Group term life insurance is priced based on the relative risk of the ‘group
Tax Implications Group Term Life Insurance

Group-term life insurance coverage is deductible by employers as a business expense, unless the employer is a beneficiary of the policy. Employees may also generally exclude coverage up to $50,000 from their income. Coverage above that amount must be included in an employee’s income and is subject to Social Security and Medicare taxes. There are some exceptions and special considerations to this rule; see the IRS website for more details www.irs.gov/pub/irs-pdf/p15b.pdf.

The plan may not discriminate in favor of key employees regarding their eligibility to participate or the amount of benefits available to them. If the plan does discriminate in favor of key employees, those employees are not able to exclude their first $50,000 in coverage from gross income.

Group-Term Life Insurance for an Employee

The value of the first 50,000 USD of group-term life insurance that a employer provides to a U.S. employee is not considered taxable income. The value of coverage in excess of 50,000 USD (computed according to Internal Revenue Service [IRS] regulations) minus premiums that the employee pays with after-tax dollars, is considered taxable income and is subject to social security and Medicare taxes. Although you must report the amount as taxable income on the employee’s Form W-2, the value of excess group-term life insurance coverage is not subject to federal income tax withholding.

Group-Term Life Insurance for Dependents

An employer can also provide group-term life insurance coverage for an employee’s spouse and children. Dependent group-term life insurance coverage up to a value of 2,000 USD for each dependent does not represent taxable income. However, if the value of the dependent group-term life insurance exceeds 2,000 USD for a dependent, the value of that dependent’s entire coverage amount (computed according to IRS regulations) becomes taxable income and is subject to social security and Medicare taxes. Unlike the taxable income that is attributed to the employee’s excess life insurance, it is also subject to federal income tax withholding.

Get A Free Group Term Life Insurance Online

For more information about group-term life insurance, contact one of our benefits specialists at Mintco Financial today by email at info@mintcofinancial.com by phone at 813-964-7100 or 716-565-1300

Get a free quote HERE!