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Things companies should know about offering employee life insurance

Offering company life insurance for employees as part of your benefits package can be a great move. Regardless of career ambitions, many of your staff will be working to provide for their family; parents building a future for their children, or people looking to take care of their elderly parents. Employee life insurance provides people with an attractive extra incentive to either join or stay with your company, as it provides protection for those loved ones should some tragedy befall them.

This week, Pacific Prime discusses the ins and outs of life insurance as an employee benefit for companies looking to offer such perks.

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What is life insurance?

Life insurance is a popular benefit for both employees and their employers. When an employee dies unexpectedly, those that may rely on their income can be put under financial stress and pressure to meet outgoing expenses. A life insurance policy protects these people by offering a lump sum payout agreed to between the insured and the insurer at the time the policy is taken out.

When it comes to company life insurance for employees, the common types of options you can choose from include:

  • Group term life insurance: Term life refers to the coverage of an employee for a specific term, where a death occurring within that time frame is covered under the policy.
  • Group accidental death and dismemberment (AD&D): This policy provides benefits to an employee or their beneficiaries if they die by an accident, or they lose a limb or portion of their body.
  • Business travel accident insurance: For companies who have staff that travel frequently, these policies provide coverage if an employee dies whilst abroad for business purposes.

There are other forms of life insurance or life investment products that can be offered depending on your company needs. For us at Pacific Prime, our main focus is on group policies for AD&D and business travel accident insurance.

How does employee life insurance work?

Claiming against a life insurance policy usually means one of two things has happened; either a staff member has died or they’ve come to some serious harm involving the loss of a body part or function.

Death Dismemberment
Insurance action As long as the death is not caused by an event that has been excluded in the policy schedule, a lump sum is paid out to the identified beneficiary of that staff member upon approval of the claim. The AD&D policy schedule will outline the percentage of coverage the insurer will payout for specific injuries; such as 100% for loss of speech and hearing, 75% for paraplegia, to 50% for the loss of a complete limb, and 25% for a thumb or finger.


It’s worth noting that not all employee life insurance plan types cover the same thing. Many AD&D plans will not provide coverage for deaths or dismemberment occurring from illness or disease, whilst term life plans may exclude coverage for loss of eyesight, hearing or limbs. Business travel accident policies can offer optional add-ons such as cover for events of terrorism but it may not cover accidents or events that occur whilst enjoying leisure activities on business trips.

What do I need to know about offering employee life insurance?

Adding company life insurance for employees to your benefits package will require a bit of thinking to ensure you’re offering the right level of coverage, and at a sustainable premium for your budget. With this in mind, here are Pacific Prime’s quick questions to ask of your company before you sign a group life contract.

Who should be covered?

Like most employee benefits, your company isn’t obligated to offer them to all employees. You may want to restrict employee life insurance options to specific groups of employees (such as frequent business travellers or high-level management) or you might only want to offer it to those on full-time contracts. You can also choose to offer it as a length of service benefit to reward employee loyalty.

What coverage should we offer?

Understanding what your company and staff need is important to deciding whether a group term life insurance policy is better than an AD&D one. If you have employees travelling frequently for business, then you might want a business travel accident policy, or you might instead make your current company health insurance benefits an international coverage plan. Each come with their own pros and cons, and their suitability will depend on what your company needs.

What is the right benefit limit to set for employee life insurance?

Benefits are usually a set amount of insurance for company life insurance for employees or can be calculated based on their salaries. Some group life plans can also be adjustable based on the age of the employees being insured. The level you set the benefit for, and the way it’s calculated, will affect what your company pays as a premium. It’s important to remember this to ensure your employee life insurance policy remains sustainable.

Will my employees be better off with group life insurance or buying it individually?

In some instances, the way life insurance payments are treated by different countries and jurisdictions can significantly impact the actual benefit individuals will derive from the insurance. It can be worth investigating just how company life insurance for employees might play out in the event of a claim, and weighing it up against how they might benefit if they purchased their own plan. This can help you decide whether it’s worth even offering a group life insurance policy at all.

Getting expert assistance with an experienced employee benefits partner

When it comes to employee benefits, Pacific Prime is your best choice as a global partner. We offer comprehensive employee life insurance solutions alongside our exceptional services for other forms of employee benefits. Our experienced consultants can work with you and your company to determine your best option for company life insurance for employees. Our extensive administrative teams will ensure that your company and staff are always well supported when it comes to understanding, using, and working with your C&B plan, as well.

To organize a meeting or free market review of your complete employee benefits plan, contact our team today or visit our Corporate website for more information.

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