A Quick List of Common Types of Insurance Offerings

The article below gives a list of insurance types commonly offered through a business.

Employee Term Life Insurance

This is the most basic form of life insurance found in American businesses. Employers will either provide at no cost or offer on a payroll deduction basis, group term life insurance in conjunction with the company’s health insurance program. Amounts are often stated as a multiple of payroll. Amounts up to $50,000 can be provided as a tax- exempt employee benefit.

Key-Employee Insurance

When a single employee is so valuable to a company that loss of that employee would cripple the company for a period until a suitable successor could be found, it makes sense to insure that employee’s life. Such insurance is call “key-employee” insurance.

Survivor-Income Insurance

This form of insurance will provide the surviving dependents of a deceased employee with a monthly income – either for a stated period or for the life of the survivor.

Funding a Buy/Sell Agreement

Closely held companies use buy/sell agreements to maintain order upon the death of a key shareholder. By using life insurance to fund the purchase of the stock from the estate of the deceased, the company is able to continue without disruption to management.

Executive-Bonus Insurance

An individually owned cash value policy paid by the company. The executive is taxed on the policy, but typically gets taxed deferred income stashed away for retirement.

Split-Dollar Insurance

Split-dollar insurance is owned partially by the executive and partially by the company. The company pays the premiums and gets no tax deduction for the payments. The company is typically entitled to the cash value of the policy up to the amount of the premiums paid. The executive is taxed on the value of the death benefit, but is entitled to the cash buildup in excess of the company’s portion.