Life Insurance Plan Structure
| Coverage Type | Typical Benefit | Who Pays |
|---|---|---|
| Basic life (employer-paid) | 1–2x annual salary; $50,000 maximum for tax-free benefit | Employer |
| Supplemental life (employee-paid) | 1–8x annual salary; up to $500,000–$1,000,000 | Employee |
| Spouse life | $10,000–$100,000 in increments | Employee |
| Child life | $5,000–$20,000 flat amount | Employee |
| AD&D (employer-paid) | Equal to basic life benefit | Employer |
| Supplemental AD&D | Equal to supplemental life benefit | Employee |
Guaranteed Issue and Evidence of Insurability
Life insurance plans typically offer a guaranteed issue amount — the amount employees can purchase without providing evidence of insurability (medical underwriting). Coverage above the guaranteed issue amount requires evidence of insurability. The guaranteed issue amount is typically 3–5x salary or $300,000–$500,000.
The $50,000 Tax Threshold
Compliance Note
Employer-paid group term life insurance coverage above $50,000 is taxable to the employee. The imputed income is calculated using the IRS Table I rates. Employers who provide more than $50,000 in employer-paid life insurance must include the imputed income in the employee's W-2. This is a common compliance oversight — confirm your payroll system is calculating imputed income correctly.