Home  >>  Financial Planning  >>  Individual Planning  >>  Financial Planning D...  >>  Tools to achieve you...  >>  Group Insurance

Group Insurance

Generally, group life insurance must meet certain basic requirements It should be provided only to a group of employees as additional compensation for their personal services. The insurance would be provided under a policy carried by the employer. The amount of coverage for each employee must not allow for discrimination of key employees. The formula to determine benefits must be based on age, years of service, compensation, etc., not solely identifying the key employees. Coverage may be employer or employee paid, or a combination of both.

Premiums paid by an employer for employee life insurance coverage are deductible by the company under a group policy. The value of the coverage provided by the employer is not taxable as income to the employee if properly designed, for up to $50,000 of death benefits. For amounts over $50,000 of employer-paid coverage the employee would have taxable income based on Table I rates, which are nominal age based rates per $1,000 of insurance under which the IRS computes the value of the coverage.

Death benefits of the policy are paid directly to the named beneficiary or estate of the deceased employee.

Group Medical Insurance

Premiums paid by the employer are both deductible by the business and non-taxable to the employee, if properly designed.

Benefits are often paid directly to the health care provider and are not taxable to the employee. If the employee is reimbursed for medical expenses he has paid, these proceeds are also non-taxable.

It is important that employees become familiar with their medical plan as many plans only pay benefits for services rendered by a particular group of health care providers or may pay a reduced benefit if non-contracted providers are used.

Group Long-Term Disability Insurance

Group long-term disability insurance can be a cost-effective way of providing protection for employees. The rates are generally lower than those that could be obtained on an individual basis.

The premiums are generally tax-deductible to the employer. Although the value of the coverage will generally not be taxable to the employee, benefits received by a disabled employee will generally be included as income. Benefits, which are usually a percentage of salary, may not be sufficient coverage. It may be necessary for an employee to obtain a personally owned disability insurance policy for complete coverage.