Basic life insurance is a straightforward policy that is frequently included as part of a company's benefits package, alongside group health insurance, paid time off, and other perks. Employees frequently receive basic life insurance for free or at a low cost from their employers.
Here's what you should know about basic life insurance. Consider consulting with a professional financial advisor to determine how basic life insurance fits into your entire financial strategy and whether you should look into additional forms of life insurance plans.
Basic Life Insurance Definition Life insurance is one of the most popular benefits that employers provide to their employees. While there are various solutions available on the market, the most popular ones require employees to pay little or nothing at all. Furthermore, a plan is usually a set monetary amount or a multiple of a person's base pay. For example, an employer may provide each employee with a $100,000 life insurance coverage, or double the person's base yearly income. Basic Life Insurance Types There are two major types of life insurance.
The most common type of policy for employer-sponsored life insurance plans is term life insurance. Term life insurance provides coverage for a particular period of time. In employer-sponsored programs, the phrase only refers to the period a worker works for a corporation.
.jpg)
Employer-sponsored term insurance provides a specific amount, or death benefit, to the employee's beneficiaries if he or she dies while covered by term life insurance. The other sort of life insurance is full life insurance. Whole life insurance provides life insurance coverage for the insured's whole life. Because most people do not work for the same company for their whole careers, most employers do not give whole life insurance to their employees.
Some pension systems may provide life insurance to former employees, but when pensions become extinct, businesses who provide whole life insurance to their employees will as well. Basic Life Insurance Costs The employer usually covers the cost of basic life insurance. If an employee is required to pay for their life insurance, the costs are usually low because the insurance is part of a group policy.
Furthermore, some firms give their employees the option of purchasing supplemental life insurance coverage. Employees can typically add supplementary life insurance coverage for as little as a few dollars per month. Basic Life Insurance Advantages Employer-provided life insurance provides employees with life insurance that they would not otherwise have.
It also covers employees who have private life insurance policies but may require additional coverage. Some of the benefits of basic life insurance are:Low or no cost: Employees pay little or nothing for employer-sponsored basic life insurance. Protects persons who do not qualify for private life insurance: If your health prevents you from obtaining private life insurance, you may be able to obtain coverage via your employer's group life insurance policy.
Tax benefits: Employees insured by an employee-sponsored policy are only required to pay federal taxes on life insurance coverage payments in excess of $50,000 in benefits. Basic Life Insurance Disadvantages Although employer-sponsored basic life insurance can benefit many people, it also has certain drawbacks. Disadvantages include:
If you quit the company, you will lose coverage. The majority of employer-sponsored basic life insurance coverage is term life insurance. As a result, if you leave your employer, you will lose your life insurance coverage for retirement or a new career.
One size does not fit all. Each employee will have different life insurance requirements. As a result, while employer-sponsored life insurance is desirable, it may not meet the needs of everyone. It can be pricey. Group insurance has risen in price over the years. As a result, some firms may pass part of the costs on to their employees.
Source: SmartAsset.com