Life insurance, like any other commodity, is cheaper when you buy a lot of it (which is why $100,000 policies aren’t double the price of $50,000 policies), and cheaper when a lot of people buy it. When tens, or hundreds, or thousands of people agree to purchase policies from one company, that company can offer rates considerably less than if you buy a policy on your own.
Typically, group life insurance is arranged through your employer or an organization to which you belong. One of the key things to remember about group life policies is that you don’t own the policy! Although you’re the one who is covered, the policy belongs to your employer or organization, not you. If you find a different job, retire, or quit, or you no longer are a member in the organization through which you purchased the insurance, you can no longer buy the coverage. Be aware that you may suffer tax consequences when your employer pays for your life insurance. The premium that your employer pays for your life insurance coverage is, in effect, income.
Therefore, you’re responsible for paying taxes on that income. However, under the current tax rules, employers are allowed to provide up to $50,000 in term life insurance for you without your facing any tax consequence. Any premium paid for a policy above that minimum is considered additional income for which you must pay taxes. So if your employer purchases a $250,000 term life insurance policy for you, for which the company pays $850 per year (and the company can buy a $50,000 policy for $300), you must count the additional $550 as income on your tax return.
Typically, group life insurance is arranged through your employer or an organization to which you belong. One of the key things to remember about group life policies is that you don’t own the policy! Although you’re the one who is covered, the policy belongs to your employer or organization, not you. If you find a different job, retire, or quit, or you no longer are a member in the organization through which you purchased the insurance, you can no longer buy the coverage. Be aware that you may suffer tax consequences when your employer pays for your life insurance. The premium that your employer pays for your life insurance coverage is, in effect, income.
Therefore, you’re responsible for paying taxes on that income. However, under the current tax rules, employers are allowed to provide up to $50,000 in term life insurance for you without your facing any tax consequence. Any premium paid for a policy above that minimum is considered additional income for which you must pay taxes. So if your employer purchases a $250,000 term life insurance policy for you, for which the company pays $850 per year (and the company can buy a $50,000 policy for $300), you must count the additional $550 as income on your tax return.
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