Taxation And Regulation
State insurance commissioners are responsible for regulating life insurance at state levels. The U.S. Tax Code Section 79 outlines regulations for taxing group term life insurance. As a rule, death benefits for life insurance are received by beneficiaries without tax penalties. Even if the payer is a small business, premiums are typically paid using taxable dollars. However, voluntary life insurance usually falls under a rule exception, which is that employer-paid premiums required to provide $50,000 in benefits to a worker are subject to maximums. For employers, they are also tax deductible.
Types Of Group Life Insurance
There are three different categories for group life coverage, which include full underwriting, simplified underwriting and guaranteed underwriting. With guaranteed underwriting, automatic enrollment is granted to all eligible employees who apply. However they must meet eligibility requirements that the employer and insurance company negotiate. As a rule, guaranteed underwriting is more expensive. It requires little paperwork, there is no medical exam and it is issued quickly. It is usually only provided for large groups where employees cannot be denied. To qualify for guaranteed issue, employers usually agree to a minimum percentage enrollment.
Simplified underwriting is less expensive, and there is no blood test, no urine test and no medical exam required. Each applicant usually answers several health-related questions in addition to agreeing to a medical record background check. Full underwriting is usually required with small groups, with individuals or on larger face amounts and is the most costly option. Medical exams are typically required, and a full examination is taken to satisfy the full records check requirement. Premiums are lower with full underwriting, but it takes longer to complete the application process and not all people will qualify. Employers can pay for the premiums or deduct them from workers' paychecks. In some cases, employers and employees may share the costs.
Voluntary life insurance is often the only coverage working families have. When face amounts are limited to $50,000 or to a lower multiple of a worker's annual salary, coverage is usually not enough to replace the main wage earner's income. However, $50,000 is better than leaving nothing to a surviving family. As a rule, experts recommend people purchase eight to 12 times their yearly wages in life insurance when working full time. If workers are young and have a long career ahead of them, experts recommend they purchase even more coverage. This is especially true for people with multiple dependents. Discuss your options with a HALO insurance agent, 314-351-HALO (4256).