Life Insurance
What is life insurance?
Life insurance is a policy that people can pay for in order for their family, or other beneficiaries, to receive money when they pass away. People who have life insurance will pay a single premium or regular premiums during their lifetime to pay for their policy. Life insurance is intended to provide employees’ dependents financial assistance in the event of their death. The amount of the policy they purchase is intended to reflect the needs of their family. This includes paying off bills and debts like medical bills and funeral expenses. It can also be intended to provide funds to pay off a mortgage, estate taxes, or cover a child’s education.
Why is life insurance important to a small business?
Life insurance is a desired employee benefit that offers peace of mind to eligible employees and their families. Other advantages of life insurance are that it:
- Is usually affordable through group life insurance
- Serves as a talent attraction and retention tool through its connection to helping family and children
- Improves individual peace of mind and, thus, productivity
- May offer tax deductions for employers
Tax benefits of offering life insurance
Companies who meet the non-discrimination requirements for life insurance can generally exclude the cost of up to $50,000 for group-term life insurance from the wages of an insured employee. The company can also exclude the same amount from the employee’s wages when calculating social security and Medicare taxes. Additionally, the company does not have to withhold federal income taxes or pay the Federal Unemployment Tax on any group-term life insurance provided to an employee. However, if the cost of the group-term life insurance is more than $50,000 worth of coverage, the company must include it in the employee’s wages, minus the amount the employee paid toward the insurance.
What is the history of life insurance?
The earliest forms of life insurance began around 100 BCE in ancient Greece and Rome. Roman military general Gaius Marius created a “burial club” for fallen soldiers — if one was killed on the battlefield, the survivors would contribute to a pool to pay for funeral expenses. The idea applied to soldiers initially, but later became more widespread among everyday citizens. People started not just providing funds for funeral expenses, but financial safety nets for family members of those who fell in battle. These are the origins of life insurance.
Summary
Life insurance is a benefit that employees can enroll in that allows them to ensure their loved ones receive a financial payment when they pass away. This is a popular employee benefit that can help employers attract and retain talent and provide peace of mind for their employees.
