Cheap Group Life Insurance Plans – How to Find the Best Option for Your Employees

Tuesday, June 28, 2022 17:01 Posted by Admin

As an employer, you need to strike a balance with the benefits you offer to your employees. On the one hand, you want to offer enough to make your company a desirable place to work. If an employee has to choose between two companies offering the same salary, the strength of your benefits package often makes the difference in their decision. On the other hand, you can’t offer so many benefits that they start having a substantial effect on your business revenue.

It’s all about balance.

While creating your employee benefits package, you may consider the idea of offering group term life insurance. The challenge here is that you need to find affordable life insurance. That involves following a process that includes understanding what group term life insurance is and knowing how to buy term life insurance online or off.

In this article, we explain what group term life insurance is, how it benefits your employees, and what you need to do to buy online life insurance without breaking the company bank.

What Is Group Term Life Insurance?

Group term life insurance is a form of benefit that your company can offer to employees. You also have the option of making it available to an employee’s spouse or dependents, though this isn’t a requirement. A group term policy allows you to provide employees with a set amount of coverage, which you determine, as part of working for your company. You may also offer employees the option to increase their coverage, often via payroll deductions.

As with most forms of life insurance, group term policies pay a death benefit to a designated beneficiary upon the passing of the policy’s holder. However, group policies differ because they provide coverage for a group of people, rather than a single individual. Still, their general mechanics are the same. When an employee who is part of a group policy dies, their dependents receive the benefit agreed upon when you invited them into the policy.

What Are the Benefits of Group Term Life Insurance?

Before you rush off to check out life insurance online, you need to know the benefits these types of policies offer to businesses and their employees.

Benefits to the Business Owner

As the business owner, you benefit from being able to offer life insurance as part of the package you provide to employees. This makes your business a more attractive place to work because employees can feel confident that their loved ones will be taken care of if they pass away or are unable to work anymore.

As a conscientious business owner, you may also feel happier knowing that your people are taken care of no matter what happens. Finally, offering benefits like life insurance makes employees happier and more engaged. According to the Saïd Business School at Oxford University, employees are 13% more productive when they’re happy. As such, offering life insurance may help you to motivate employees, leading to a more productive and profitable workplace.

Group policies also come with lower premiums than individual policies. Plus, you may not have to ask your employees to undergo health checks, assuming you offer the policy to a large enough group.

Benefits to the Employee

The main benefit of group term life insurance for employees is that it gives them access to life insurance without having to pay costly monthly premiums. This assumes the employee does not choose to add to their coverage, which usually incurs a paycheck deduction.

It also means they don’t have to search for affordable life insurance policies themselves. The employee gets covered by virtue of working for your business for as long as they’re employed by you.

These types of life insurance policies also come with tax benefits, with the most important being that the employee can get up to $50,000 of coverage without paying tax on it. However, the employee does have to pay tax on any benefit received above $50,000, which must be reported on their W-2 forms.

Interestingly, many group policies also don’t require the employee to undergo health checks. Eligibility requirements tend to relate to how long the person has worked for your business and how many hours they spend working per week. As such, a life insurance policy offered by an employer may provide employees with access to cover they may not be able to receive on their own.

The Steps to Buy Life Insurance Policy

Now that you understand why offering life insurance to your employees is a good idea, you need to know how to find cheap life insurance. The following are the key steps that help you secure an affordable term life insurance policy.

Step No. 1 – Understand the Rules for a Group Term Policy

The more employees you offer the group policy to, the lower your premium-per-employee is likely to be. Conversely, if you only want to offer life insurance to select key employees, you may have to invest in individual policies. That’s because many group policies come with non-discrimination criteria that you must meet to access them. These criteria usually include the following:

  • The plan must benefit a minimum of 70% of the employees in your organization.
  • Of that 70%, 85% of these beneficiaries must be classed as non-key employees.
  • The policy you create for inclusion into the group term insurance must meet IRS standards to count as non-discriminatory.

Determinants for whether an employee can take part in a group policy can include their job duties, length of service, compensation, and marital status. They may also be other employment-related factors, such as their participation in a company retirement plan. However, you may not exclude employees from a group policy based on their age, gender, religion, or race. Doing so is discriminatory because you’re basing inclusion on something the employee does not control.

Step No. 2 – Select a Policy Type

Though we’ve focused primarily on group term life insurance so far, there are several other types of life insurance you may offer to employees. If you have a small business, you may not be able to offer group term insurance. For example, the tax deductions associated with group term policies are not available if you have fewer than 10 employees. However, this restriction does not apply if you provide coverage to all of your full-time employees.

While group term insurance is the simplest, and often most effective, option, there are several others to consider.

Group Accidental Death And Dismemberment

This is a specific type of policy that applies if an employee passes away or loses a portion of their body as a result of an accident at work.

Split-Dollar Life Insurance

These policies pay benefits to both the employee’s beneficiaries and the employer upon the employee’s passing. Specifically, the beneficiary receives the stated benefit while the employer receives the premiums they paid into the policy. These types of policies are usually more expensive than group term policies. They also have a substantial investing element, which creates risk. As such, they’re best used for key employees who understand the risks.

Business Travel Accident Insurance

The narrowest form of life insurance, this type of policy only covers employees who pass away while traveling on business. It may be a good choice for employers who travel regularly as part of their work. However, you’ll likely waste money if you activate one of these policies for employees who don’t travel.

In most cases, group term insurance is the best choice for your business and your employees. The other forms are specialized types of life insurance that only apply in certain cases or to specific types of employees.

Step No. 3 – Determine How Much Cover to Provide

Most group term life insurance policies offer a set amount to the employee. For example, you may choose a policy that pays out $20,000 per employee. Others may be based on the employee’s salary, where the employee’s beneficiary receives a multiple of the individual’s yearly pay.

The critical point to remember here is that the more coverage you offer, the more you will pay for employee life insurance. It’s difficult to find affordable life insurance if you have a company that employs hundreds of people and you want to provide six or seven-figure benefits to all of them. Of course, a policy that offers minimal benefits is not attractive to employees.

It’s also worth keeping the $50,000 threshold in mind. Any benefit paid out beyond $50,000 is taxable to the employee. Furthermore, you have to pay payroll taxes on any premiums paid above the $50,000 limit.

As such, it may be worth offering a standard policy with a benefit of $50,000 or below while offering the employee the option of raising the benefit through their own contributions. This means you don’t saddle the employee with a tax burden on their benefit as part of your company’s standard group policy. Still, the decision depends on what your business wants to offer as a benefits package. It may be worth speaking to a professional advisor before making your choice.

Step No. 4 – Look for Cheap Life Insurance Quotes

Once you know what your want for your business, it’s time to search for a policy. Begin this search by looking for cheap life insurance quotes. Every company offers different premiums, meaning it’s not a good idea to go with the first quote you find. Gather as many quotes as you can so you can feel sure you’re getting the most affordable life insurance policy available.

There are several ways to do this.

You can search for life insurance online. Apply to the many price comparison websites available and they can provide you with a list of quotes. However, these websites have limitations. They’ll only offer quotes from providers they have agreements with, meaning you may miss out on cheap life insurance from a company that isn’t included in the aggregation.

You can also work with an insurance broker. These professionals have direct connections to insurance providers, meaning they can negotiate better deals than you may find online. However, they’re also restricted in the sense that they typically work with a select number of providers.

Finally, you can do the research yourself. This involves trying to solicit cheap life insurance quotes from providers via the phone or email. You get more control over the process and may be able to negotiate a better deal or a more flexible policy. But this process requires a large time investment. You may also be able to solicit recommendations from family and friends who have employer life insurance policies.

Once you’ve gathered a collection of quotes, decide which one to choose based on the needs of your business and its employees. Remember that cheap life insurance is not always the best life insurance. Try to find the balance between affordable life insurance policies and those that meet your criteria for what you want to offer to your employees.

Step No. 5 – Administer Your Life Insurance Policy

With your policy in place, all that’s left is to administer it. On the hiring side, this means advertising the policy as an employee benefit and explaining what an employee is entitled to if they join the group term.

Once your people know what they’re signing up for, your business needs to enroll them in the policy. Most insurers provide templated enrollment forms you can ask your employees to fill out, making this process fairly simple. However, there are two key pieces of information you need to provide for employees as part of enrollment.

First, all employees must designate a beneficiary. This is the person that the policy’s benefit goes to if the employee passes away. Some plans allow employees to assign multiple beneficiaries, with each getting a percentage of the benefit.

Second, the employee must provide proof of their insurability. As mentioned, this usually doesn’t mean they have to undergo a health check. In most cases, insurability is based on employment factors, which your business should already know about. But this proof can come into play if the employee wishes to purchase additional life insurance on top of your standard policy. In these cases, the insurer may ask the employee to undergo a medical exam.

Find Cheap Life Insurance

An affordable life insurance policy for your business benefits you and your employees. It makes your company more attractive to work for and provides employees with cover they may not be able to afford or access on their own.

When searching for cheap life insurance, you need to know what you want so you can gather as many quotes as possible from potential providers. You also need to understand how your company life insurance policy fits into your overall benefits package so you can use it to attract top talent to your organization.

Are you ready to start searching for a company life insurance policy?

Taylor Benefits Insurance can help. We’re a leading group health insurance broker that specializes in helping employers create employee benefit plans. If you’d like to find out more about the affordable life insurance policies we provide access to, contact us online or call us at 1-800-903-6066.

Written by Todd Taylor

Todd Taylor

Todd Taylor oversees most of the marketing and client administration for the agency with help of an incredible team. Todd is a seasoned benefits insurance broker with over 35 years of industry experience. As the Founder and CEO of Taylor Benefits Insurance Agency, Inc., he provides strategic consultations and high-quality support to ensure his clients’ competitive position in the market.

We’re ready to help! Call today: 800-903-6066