What Type of Life Insurance?

Most employers offer group-term life insurance as an employee benefit, although other types can be offered. Term insurance is life insurance that is in effect for a certain period of time only. Generally, in the case of employer-provided term life insurance, the term is for as long as the employee is employed. Group-term life insurance can be offered to employees only, not to their spouses and children.

Group-term life insurance tax deduction. To take advantage of the tax deduction for group-term life insurance (i.e., the value of up to $50,000 in insurance is tax-exempt for the employee), you must have at least 10 full-time employees. The 10-employee restriction does not apply if you provide coverage to all full-time employees, the method for computing the amounts of insurance is set (such as a uniform percentage of the employee's yearly salary), and no physical exams are required to obtain coverage.

Other types of insurance to offer. There are other types of insurance that you can offer besides group-term life, including:

• Group accidental death and dismemberment. Commonly known in the industry as "AD&D," this coverage pays benefits to the employee's beneficiary if death occurs due to an accident or if the employee loses use of portions of the body (loss of one arm and leg, for example, may result in payment of a percentage of the total benefits).
• Business travel accident insurance. This insurance covers only a narrow occurrence — the death of the employee while traveling on business. If your employees don't travel or don't travel much, this may not be worth your money.
• Split-dollar life insurance. This insurance pays the employee's beneficiary when the employee dies and returns the premiums paid to the employer. The insurance is paid by both the employer and employee and has a substantial investment element to it. It is something to consider for key employees only, as opposed to your entire employee group.

Riders. Plans can come with an infinite number of riders that you can add to your plan and that will allow you to customize your plan to a degree. A rider is an additional feature or benefit that you can add on to an existing insurance policy. For example, in the case of health insurance, you could purchase a mental health coverage rider that would add some coverage for mental health treatments to your basic medical insurance. In the case of life insurance, you could add an accidental death and dismemberment rider to a group-term life insurance policy that would pay double the death benefit if the employee was killed due to an accident. Your insurance agent can explain the various riders you can get in conjunction with a life insurance policy.