Understanding Different Types of Life Insurance
Life insurance is one of the most common employer-provided benefits. This article covers the basics of life insurance and the different types employers can offer to employees.
Types of Life Insurance
Life insurance is divided into two categories: term (including group term life insurance) and permanent (also sometimes referred to as whole).
Term life insurance
Group term life insurance has a specified coverage period (term), but can usually be renewed or converted into a permanent policy at the end of the term. Premiums are generally affordable initially, but can increase substantially when renewed.
Whole life insurance
Whole life insurance is a type of permanent insurance that offers life-long coverage combined with a cash-value savings component. This type of policy has higher premiums than term life. Premiums remain constant throughout the policy and a portion is invested by the company, which becomes the cash value of the policy. Whole life insurance pays a fixed amount upon death.
Universal life insurance
Universal life insurance is another type of permanent insurance policy that combines term insurance with the ability to earn interest on the cash value, paying a market rate of return. Cash value grows tax-deferred, and can be withdrawn or borrowed from the policy. It is more flexible than whole life insurance as it also allows you to change your premium payments and death benefit, within limits.
Variable life insurance
Variable life insurance is similar to universal life insurance in terms of flexibility and an investment aspect. However, instead of simply earning interest on the accumulated cash value, policy owners have more control over how to invest that cash. The ability to invest in professionally managed investment options allows for the potential to accumulate cash value while providing death benefits protection. However, there is greater risk for loss due to this benefit.
Employers can offer a term or group term life insurance policy, permanent coverage or both. Cost-sharing also varies, as some employers cover the full cost, while some require employees to pay the full premium (or a portion of it).
For a better idea of the rates you can expect to pay for life insurance, contact Next Generation Payroll today. Rates for life insurance policies will vary. Women typically pay less than men, due to their longer life expectancy, and rates increase with age. Also, smokers pay more than nonsmokers.Virtual health care is on the rise fast, although that doesn’t change the fact that being fully insured can help lessen the cost of medical services. Reach out to Next Generation Payroll to learn more about how we can make self funded insurance vs fully funded easier for you to access and understand.
Next Generation Payroll is a local black-owned business in Dallas. We are one of the top payroll processing companies for small businesses based in Dallas, TX. Our services are centered around risk management, operational efficiency, and strategies that improve market penetration by helping you generate new business leads. We build up small businesses making sure your business is solvent, and it operates efficiently in all economic climates.
At Next Generation Payroll, we are not interested in fulfilling quotas and meeting monthly sales goals. We focus on goals that are centered around fulfilling our client’s aspirations. Our top priority is to simply provide a strategy to help your business reach full potential. For more information, feel free to reach out to us at 214-396-2200. Stay in touch with us by signing up below for our monthly updates and newsletters