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Postmortem Bonus: Life Insurance as an Employee Benefit

As anyone who has ever been into a fast food restaurant during the wrong shift knows, it can be hard to find good employees. For this reason, the most successful companies will do everything in their power to keep the ones they have.

They know any business can offer a paycheck, and don’t want their key players jumping ship as soon as a competitor 935588_paper_money_peopleflashes a few more pennies in their direction, and so many companies also provide exclusive benefits packages to their most valuable employees to encourage their loyalty. Most of these benefits, such as paid vacation time, stock or a company expense card, come in handy while the employee is still living. However, one benefit that some businesses offer is most useful afterward: life insurance.

Life insurance as part of an employee incentive package provides a death benefit payable to a beneficiary when an employee passes away. Some policy types even allow the employee to draw money from the cash value of the policy for personal expenses or a retirement fund. Most such policies require that the employee remain with the company until retirement, as it is no longer obligated to care about your life should you seek outside employment. You can check out Suncorps new site at www.suncorp.com.au/insurance/life-insurance to learn more about how they can help you & your family.

Offering life insurance as a benefit to employees does both parties a favor, as employees get financial flexibility and peace of mind while the employer gets a nice tax deduction. One of the most popular forms of incentive-based life insurance is businessincubatorscalled a split dollar plan. Typically, in a split dollar plan the employer and employee share the premium payments, although the employer may also pay the entire premium and hold the policy for itself, paying out a benefit to the family in the event of the employee’s death. This plan has the advantage of providing permanent insurance at much lower rates than a whole life insurance policy, and it also gives the business a source of funding through the cash value of polices when the employer holds it.

A more lucrative option for the employee is the Executive Bonus Plan, commonly used only for the highest-earning and ranking members of a company. The employer pays the premium on a policy the employee holds and may even provide an additional bonus to negate the increased tax liability for the employee, effectively eliminating the cost of life insurance entirely. The premium payment made by the employer is considered a bonus and creates additional tax relief for the company, so this type of policy benefits employee and employer as well.

A company can also reward particularly patient employees with a Deferred Compensation Plan, in which an employee sacrifices any salary increases or cash bonuses to receive a guaranteed number of fixed payments at retirement. This kind of plan can give employees the best aspects of both a retirement plan and a life insurance policy, as the policy pays a death benefit if the employee never lives to see his gold watch, and after retirement the payments will continue to roll in whether the employee is alive to cash the checks or not.

Employers will go to great lengths to encourage their most trusted employees stick around. Most of the benefits are extremely attractive to breathing employees, but for the most outstanding team members, the benefits extend beyond life.



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