Types

• There are several types of insurance your employer may purchase for you. Term life insurance is most commonly available in group life insurance plans. Group term insurance provides basic death benefits in exchange for premium payments. Whole life or universal life may be included as part of a group life insurance policy but is more commonly found in executive bonus plans. Executive bonus plans with life insurance are policies that your employer pays for entirely while you retain control of the policy.
  
  

Significance

• When your employer pays for your insurance policy, you are receiving a benefit. This benefit may have tax implications. However, the employer is also providing you with free life insurance. In the case of cash value insurance, such as whole life or universal life, your employer is also contributing to a savings that you may be able to use in a limited fashion during your employment. After you retire, you will retain full use and control over the cash value of the policy.
  
  

Benefit

• The benefit of employer-paid life life insurance is that the death benefit is paid out to your beneficiaries on a tax-free basis. This makes the insurance policy the same as any other life insurance policy. Your employer pays to secure your family's financial future so that you don't have to.
  
  

Disadvantage

• The disadvantage of employer-paid life insurance is that the premiums paid for the policy may be taxable to you as income. While your beneficiaries receive tax-free death benefits, you must pay income tax on the money your employer uses to pay the premiums on the policy. The only exception to this is in the case of group life insurance where the employer pays premiums sufficient to pay for a death benefit up to $50,000. Anything over this amount is taxable to you as income.