Basics of Total Rewards

Life Insurance

In a life insurance contract, the insurer agrees to pay a stipulated sum in the event of the death of the insured. Payment is made to a designated beneficiary, which could include the organization paying for the insurance in the case of employees who are critical to its success. The insurance company receives payments of a premium (usually at stated periods).

Companies offer term life insurance plans to employees with preferential group rates. Full-time employees typically become eligible for life insurance plans. In some cases, part-time employees are also covered. Life insurance coverage is structured so that in the event of a claim, the benefits are received free of any income tax liability.

In organizations today:

• More organizations provide some life insurance.
• The amount of life insurance coverage commonly has a compensation basis.
• Group rates are based on a company's demographics, so a younger workforce on average should mean a lower group rate.
• Most organizations pay for a set amount of life insurance coverage and offer group rates to employees to procure any supplemental life insurance coverage at their cost.
• The new trend is to use group universal products, where employees select and purchase individual products.