Insurance came into its own as a financial instrument in early nineteenth-century Scotland. The first insurance fund invested in equities and financed by premiums paid by the holders of policies was called the Scottish Widows Fund Life Assurance Society, and it was meant to pay for the expenses of widows, sisters and daughters of the male holders of the fund’s policies. Since then, insurance has expanded and multiplied into a multibillion dollar global phenomenon. There are several different types of insurance, ranging from car insurance to plane insurance to even life insurance. For life insurance, the policies can either be paid for by the employer of the policyholder or the employee can purchase a policy on their own.
Employer-Sponsored Group-Term Life Insurance
“Group-term” life insurance means that the premiums are split between the members of the group, which usually can exceed no more than ten, per the insurance company’s regulations. The employer purchases the policy on behalf of their employees, and the employees pay whatever the cost of the premiums are divided by the number of employees in their group.
Employer Paid Life Insurance Premiums
Companies usually purchase coverage equal to the employee’s yearly salary. For instance, an employee with a salary of $20,000 per year would receive coverage equal to that amount. What coverage means is that the employee’s family would receive $20,000 per year if the employee dies. The average life insurance policy costs about five cents for every thousand dollars of coverage provided. To take the previous example, if a group of ten employees purchased a life insurance policy, with each employee making $20,000 per year the total amount of premiums would cost the employer ten thousand dollars. This represents a huge benefit to the company because, since group life insurance is usually combined with group health insurance, the administrative and sales costs are kept to a minimum.