Group Employee and Dependent Life, Accidental Death & Dismemberment (AD&D)
In 1911, Montgomery Ward pioneered the group life insurance industry in negotiations on behalf of its employees. They realized that a lifetime of work may not be sufficient to provide a legacy. Today, group term life insurance is a popular way for an employer to provide a tax-deductible life benefit to its workforce. One feature that makes group life contracts attractive is that coverage is almost always issued without regard to medical evidence . Every employee can obtain a foundational life insurance plan.
There are limitations to be considered, however. IRC Sec. 79 applies an imputed tax to benefits provided by the employer in excess of $50,000 reportable on the employee's W-2. In addition, the $50,000 exemption will not be available for key employees if the plan is deemed discriminatory. The plan will pass the discrimination test if...
- 70% of all employees are eligible;
- at least 85% who are participating are not key employees and
- the participants comprise a class that the IRS deems not to be discriminatory.
The classes are described as a...
- flat amount,
- class. The classification rule is...
- 2.5 times rule - the amount of coverage in any one class cannot be more than 2.5 times that of the next lower class and
- the 10% rule - those in the lowest class must be provided with an amount no less than 10% of those in the highest class.
- uniform percentage of compensation.
An accelerated death benefit, called a living benefit , is included in most group life plans. If an insured is diagnosed with a terminal illness that will result in death within 12 months, a portion of the life insurance benefit may be payable prior to death.
Waiver of Premium for a disabled plan member is typically a provision within the contract. A conversion option to a whole life plan is often included.
Accidental Death & Dismemberment is automatically included for the employee coverage only. AD&D doubles the face amount of the primary life insurance benefit in the event of an accidental death. It also pays a portion of the principal sum for the loss of a limb or loss of eyesight.
Dependent Life may be an option available to a group term life applicant. Coverage for a dependent spouse and children may be purchased. The maximum sum for the spouse may be $5,000, while each child would have coverage for up to $2,000 with further limitations depending on the age of the child.
Supplemental Life may be offered on a voluntary basis to both employee and dependent for needs that exceed the Sec. 79 taxable limit. Supplemental Life is usually guarantee issue up to a certain face amount subject to meeting the carrier's participation requirements in the plan.
We represent many of the major Life and AD&D insurance carriers in the market place. Please refer to our Company Link tab in the Menu at the top our Home Page for links to American United Life, Guardian Life, Lafayette Life, Lincoln Financial Group, MetLife and Unum.
For a quotation or to apply for individual medical coverage, please visit the page "Contact Us".