Affordable Life Insurance Protection for Your Family

What is Basic Term Life Insurance?

Learn How Basic Term Life Insurance Works

 

Definition of Basic Life Insurance: 

Basic Life Insurance means life insurance provided to an Eligible Employee under a plan sponsored by the employee’s Parent Company or a subsidiary of the Parent Company equal to 1 times the employee’s "Base Pay" as defined under the life insurance plan in which the Eligible Employee participates, as it may be amended from time to time. However, some plans may offer up to 1.5 times the employee’s "Base Pay".

Basic life insurance is a simple life insurance policy, often offered as part of a benefits package at a company along with group health insurance, paid time off and other benefits common to employer provided programs.

Many companies offer basic life insurance to their employees at no cost to the employee, or a low monthly cost, as part of a group life insurance plan for employees. 

To better understand what basic life insurance provides, here are a few things you should know.


Basic Life Insurance Explained


Life insurance is one of the most popular benefits companies offer to their employees. While there are several options available on the market, the most common options either require the employees to pay little or nothing at all towards their group life insurance coverage. 

Also, a group provided employee life insurance plan is typically a fixed dollar amount, or a multiple of an employee’s base salary.

For example, an employer might offer each employee a $50,000 life insurance policy, or two times the person’s base annual salary.


Basic Life Insurance Types


There are two main types of life insurance. The most popular type of policy for employer-sponsored life insurance programs is called Term Life Insurance. 

Term life insurance covers a person for a specific term. In employer-sponsored programs, the term is limited to the time that a person works for a company. 

Employer-sponsored term insurance pays a particular sum, or death benefit, to the employee’s beneficiaries if he or she dies while covered by the term life insurance.

The other type of life insurance is called Whole Life Insurance.

Whole life insurance provides life insurance protection for the insured person’s entire life. Because most people do not work for a company for their entire careers, most companies will not provide whole or permanent life insurance to their employees. 

 

Basic Life Insurance Cost


The employer typically covers the cost of basic life insurance. If an employee does have to pay for the cost of their life insurance, costs are generally meager due to the insurance being part of a group insurance policy. These plans usually accept all employees, even those with pre-existing health conditions, who may be unable to get insured on their own.

Additionally, some employers offer their employees the option of paying for additional life insurance coverage, above and beyond the basic amount of coverage provided by the group plan. 

Usually for as little as a few dollars per month or more, employees can elect to pay for incremental life insurance additions to their base amount of coverage.

For Example: Some employees may want to add an additional $50,000 of coverage to the base amount of $50,000 provided by their employer. They pay extra for this additional coverage out of their own pocket.


Advantages of Basic Life Insurance


Employer-provided life insurance gives employees access to life insurance who wouldn’t otherwise have it. 

It also provides coverage to employees who have private life insurance policies but may need extra protection for their growing families. 

Some of the most common Advantages of Basic Life Insurance include:

  • Low Cost or No Cost for Employees. Employer-sponsored basic life insurance comes at little to no cost to employees.
  • Protects People Who Aren’t Eligible to Get Insured Through Private Life Insurance. If you can’t get private life insurance due to your health, you may be able to get life insurance through your employer’s group life insurance policy.
  • Tax Benefits of Group Coverage. Employees covered by an employee-sponsored policy only have to pay the federal taxes on any life insurance coverage payment that exceeds $50,000 in benefits.


Disadvantages of Basic Life Insurance


Although employer-sponsored basic life insurance can be advantageous for many people, there are some disadvantages as well. 

Some of the Most Common Disadvantages of Basic Life Insurance include:

  • Not Portable: If You Leave the Company, You Lose Coverage. Most employer-sponsored basic life insurance coverage is term life insurance. Therefore, when you leave your company, you will no longer have life insurance coverage for retirement or a new job.
  • Limited Amount of Coverage: One Size Doesn’t Fit All. Each employee will have different needs when it comes to life insurance. Therefore, employer-sponsored life insurance might be nice to have but may not be a match for everyone’s needs.
  • Costly: It Can Be Costly. Group insurance has increased in cost over the years. Therefore, some employers might pass some of the cost on to their employees.


Is Basic Life Insurance Enough?

Everyone has different needs when it comes to life insurance policy. 

Those different needs can be seen in the dollar value that’s needed and the specific type of policy that’s needed. Most people need far more than the $50,000 to $100,000 that many companies offer. 

It’s recommended that you take the time to calculate your need for life insurance. Figuring your coverage need will help ensure you have enough.

To calculate your need for life insurance coverage, consider how long you’d like to support your beneficiaries. 

You may also want to consider any upfront costs they may have without your income. While personal life insurance will be an out-of-pocket expense, it is often more comprehensive than basic life insurance.

Each individual has unique needs when it comes to life insurance. There’s not one specific type that’s right for everyone. Be sure you understand the various types of policies that are available.


Conclusion

Basic life insurance or employer-sponsored group life insurance plan are usually offered to all employees at a little or no cost. 

While these group policies are often helpful for boosting a person’s total amount life insurance protection, or providing coverage to people who might not otherwise be eligible to buy their own life insurance policies outside of work, they usually don’t provide not enough life insurance coverage, especially if you have a family. 

Therefore, employees are encouraged to take advantage of free life insurance coverage through work, and purchase their own individual life insurance policy that meets their family’s needs, separate from their employer provided coverage.

 

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