Business Life Insurance for Employees

As an employer, you can give your employees the ultimate incentive with help from life insurance. The key to providing policies that employees love and that you can afford is to find a good medium between the two.

To do that, you’ll have to determine who should be covered and what types of benefits to offer, along with a look at your budget and ability to manage the rollout of a new policy.


Who Should Be Covered?

If you are a small business owner, you can have insurance for your entire crew. However, if you’re a larger company with all kinds of employees, you might need to reconsider. One popular option that Canadian businesses of all sizes choose is group-term life insurance, providing it as an option to all full-time and salaried employees.

One key thing to note is that it’s better to group up employees than to offer to only a select few. In doing that, you not only risk discrimination but you also will not get any deductions for federal taxes, including premiums. In order to avoid discrimination and ensure that you’re moving in the right direction, you should aim to meet the following conditions.

  • Choose a plan in which at least 70% of all employees are eligible
  • Make sure that at least 85% of those who qualify are not key employees (owners, business partners, etc.), separate life insurance for company partners can be purchased for that.
  • The CRA agrees that there is no discrimination toward employees and no favoritism toward higher-ranking employees


Subgroups of Coverage

Because choosing who you’re going to cover is key, it’s a good idea to start thinking ahead to how you’re going to separate them. There are ways that you can provide coverage among employees with the help of subgroups as long as the distinctions are based on:

  •  Marital status
  •  Job titles and duties
  •  Salary or per hour pay
  • Pension or stocks

While there are a few other factors that come into play when putting employees into groups for life insurance coverage, the one thing to keep in mind is that you cannot discriminate. Any form of discrimination is punishable by law and, as an employer, you should avoid it at all costs.


Types of Life Insurance Employers Can Offer

Group-term life insurance is by far the most popular form of business life insurance for employees. However, there are many others that employers can offer. Term-life insurance is what most companies choose, which is meant to last within a certain term. That term typically extends throughout the employee’s time with the company, ending only when employment terminates.


Group-term Life

Group-term life insurance also comes with a tax deduction of up to $50,000, as long as certain conditions are met. Some conditions include staffing requirements where employees have to have 10 full-time employees. With this type of insurance, there are no physical exams and coverage is simple to obtain.


Group Accidental Death Insurance

This type of insurance is a great thing to offer when working in a risky atmosphere. Employers may choose this if employees work with lots of machinery and/or chemicals that could cause harm. With this group accidental death insurance and term life insurance, the coverage would pay benefits in the event of accidental death, or the employee losing limbs while on the job.


Business Travel Accident Insurance

Perfect for employers that deal with travelling employees, this life insurance will cover those who travel, paying out to beneficiaries if an accidental death or any other type of accident occurs while travelling on the job.


Split-Dollar Life Insurance

Another popular type of insurance is split-dollar life insurance. With this type of insurance, both the employee and the employer pay, building up a sustainable investment. In the case of the death of the insured employee, the beneficiary will be paid the premium. Because the employee is also paying into this policy, this is a type of insurance that’s extendable only to employees of your choosing.


Choosing a Provider for your Business

Employers have a lot on their plate when it comes to choosing a business owned life insurance provider. They not only have to ask the right questions, but they have to understand which type would work best for their company structure and why. To get on the right track, here are some questions to ask to start heading in the right direction.


Who Are Others Insured With?

Business owners often have networks where they pass along useful information for growth and development. Ask around and see who others are insured with.


Who’s their Agent?

An agent is a powerful thing, especially when it comes to navigating all the technical stuff. If other employers are satisfied with their agents, they will surely be more than happy to share them.


What Insurance Type Did They Choose?

Another key question to ask on your search for insurance is what type of coverage others have. The type of insurance that they have is one way that you can get more details about how their policies are working out for them, getting the true insight you won’t find anywhere else.


What Are Insurance Amounts Based On?

Insurance can be based on a number of factors and, finding out which ones are key to finding policies that fit your employees. Find out if the amounts are based on a percentage of salary, a flat amount, or in increments.


Terminating Life Insurance

As an employer, you know that employees come and go. Those that leave no longer qualify for the policy as it was originally, though there are other options besides just dropping coverage. Your former employees can stick with the policy, they may qualify for a private policy under your group-term policy.


Find your Policy, Today

Finding life insurance benefits that extend to your employees can be a challenge. Not only does it take time to find the right coverage but to read through all the fine print and explain to all those interested.

That’s where an expert agent like Sim Gakhar can come in handy. She knows insurance and investments inside out and can point you in the right direction for all your insurance needs.


Essential Planning for Financial Security

Helping business owners and self-employed professionals grow retained earnings tax-free, pass more wealth to the next generation, and protect their biggest asset – themselves, the executive of the business by acquiring a key person life insurance policy.



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