Statistics show that many Americans are very under-insured or have no life insurance at all for their families. Most rely on their employer to provide at least a basic amount of coverage in the event of their death, and many times the employer-provided life insurance is the only coverage that employees have.
Group Life Insurance is probably the least expensive benefit an employer can purchase on behalf of their employees at pennies per $1,000 of coverage.
Up to $50,000 can be purchased by an employer for an employee without any taxes incurred by the employee. Any amount purchased over this amount has an IRS table I tax that needs to be added to the employee’s W2 in order for the benefits to be paid out tax free.
Having said this, many employers still provide life insurance coverage as a multiple of earnings up to a set limit on the group plan. In addition, many employers also offer the employee an option to purchase additional life insurance coverage at a low group cost through payroll deduction for themselves and their family members.
We recommend that employees with families have 7 – 10 times their annual income in life insurance coverage, depending on their family financial assets and debt.