Insurance
What HR Teams Should Know About Group Life Insurance & Reinsurance
Group life insurance is a foundational component of most employer benefits packages — and one of the more straightforward benefits to offer relative to its value for employees. According to LIMRA, 98% of Fortune 500 companies offer group life insurance as a standard benefit. For HR teams responsible for managing and communicating this benefit, understanding how it works — and how it is structured at the carrier and reinsurer level — provides useful context for both administration and employee conversations.
How Group Life Insurance Works for Employers
In a group life insurance arrangement, the employer is the policyholder and the employees are the insured individuals. The employer purchases a group policy from a carrier, and coverage is extended to eligible employees — typically without requiring individual medical underwriting. This makes enrollment straightforward for HR teams and accessible for employees who might face challenges qualifying for individual coverage.
Coverage amounts are commonly structured as a multiple of an employee's annual salary — most commonly one or two times earnings — or as a flat dollar amount applied equally to all eligible employees. Premiums can be paid entirely by the employer, shared with employees, or structured as voluntary coverage that employees elect and pay for themselves.
Tax Considerations
Employer-paid group term life insurance up to $50,000 per employee is generally excluded from taxable income under IRC Section 79. Coverage above $50,000 results in imputed income to the employee — a taxable amount calculated using IRS Table I rates based on the employee's age. HR teams and payroll administrators should ensure this imputed income is reflected accurately in employee W-2s.
When Employees Leave
In most group life insurance arrangements, coverage ends when employment ends. Many plans offer portability — allowing departing employees to continue coverage by paying premiums directly to the carrier — or conversion options, allowing conversion to an individual policy without a medical exam within a defined window. Communicating these options clearly to departing employees is both a best practice and, in some states, a legal obligation.
What Reinsurance Means in This Context
Reinsurance is the mechanism by which a life insurance carrier transfers a portion of its risk to another insurer — the reinsurer. For group life policies in particular, reinsurance allows carriers to manage their exposure across large policy portfolios, maintain financial stability, and continue offering competitive group rates.
For HR teams, the presence of a reinsurance arrangement behind a group life policy is generally invisible — it does not affect the terms of the policy, the premiums paid by the organization, or the coverage available to employees. What it does reflect is the financial structure through which carriers manage and distribute risk across the industry.
Benchmarking and Staying Current
Reviewing a group life insurance offering periodically — including coverage amounts, carrier terms, and available supplemental options — helps ensure that the benefit remains competitive and aligned with the needs of a changing workforce. The 2024 U.S. Group Term Life Market Survey, published annually, provides benchmarking data on costs and trends that HR teams can use to assess their current program.
This article is provided for informational purposes only. Atlanta Life Insurance Company does not provide HR consulting, benefits advisory, or legal services. Organizations are encouraged to consult qualified professionals for guidance specific to their benefits program and workforce.