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May 12, 2002 at 08:00 PM
Have you ever heard an executive at one of your client companies mention that he needs more insurance?
Or, have you ever felt, while you are enrolling a group case, that you might be able to make additional sales–if you only knew more about individual insurance?
Here is something to consider: You may think you need to know a lot about an individual product in order to make an individual sale, but that is not always the case.
For example, you can easily increase an executives “group” insurance coverage with an individual term life policy. The rules for doing so are not simple, of course. But they are not so overly complex that they will keep you from making the sale.
To see how this works, lets review the basics of group term life insurance. These are straightforward.
An employer may provide up to $50,000 of group term life insurance each year without cost to employees. The cost of the coverage is deductible by the employer, and not reportable as income by employees. The death proceeds may be excluded from the beneficiarys income.
To qualify as group term life insurance: 1) the plan must provide a general death benefit; 2) the benefit must be provided to a group of employees; 3) the benefit must be provided under a policy carried directly or indirectly by the employer; and 4) the amount of insurance must be computed under a formula that precludes individual selection of the benefit amounts.
[Remember, though, that if the plan covers fewer than 10 employees during the calendar year, or if it provides permanent life insurance, additional requirements apply. These rules are beyond the scope of this article.]
In addition to the above rules, the plan must not discriminate in favor of key employees. If it does, the key employees must include the cost of the entire coverage in their incomes–but the employer can still deduct the cost of benefits under a discriminatory plan.
Benefits will not be considered discriminatory if the amount of insurance bears a uniform relationship to the compensation of the employees. So, a plan with an insurance amount equal to a multiple of compensation should be acceptable.
The end result is that you may sell additional individual insurance outside of the group plan. The policies may be any kind of coverage that fits the customers needs.