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Life Insurance Imputed Income – How it Works?

life insurance imputed incomeThere are many types of life insurance and the most popular are policies for individuals. However, if you are an employer, employee or a member of a group, you will be more interested in group life insurance policy or life insurance imputed income.

What is life insurance imputed income and how it works?

Life insurance offered to a group of people, members or employees is called imputed income life insurance. This kind of life policy is usually cheaper than life insurance policy for individuals mainly because it covers an entire group of people with a single contract. If you are an employer and you want to take out insurance on all your employees or members, life insurance imputed income is the right choice for you.

Interesting fact about imputed income life insurance is that it offers tax-free premiums; at least the first $50,000 of group life insurance is tax-free. It is also deductible for employers that bear the premium expense.

However, the cost of any additional coverage, coverage that excess $50,000, is a taxable value and it’s called imputed income. It is actually a certain amount of money established by the IRS that is determined by the age and schedule of the member.

Every company that’s providing basic life insurance to its members is obligated to pay income taxes on the value under current tax laws. Imputed income is usually included on the form W-2 and added to the gross wages, at the end of the year.

Life insurance imputed income is usually purchased through a provider on a wholesale basis, which is the main reason why it costs much less than if it was purchased as individual policy. It is usually offered as a piece of a membership benefit package.

The main difference between group and individual life insurance is that in case of a group policy, benefit goes to the beneficiaries if the covered individual (employee) dies while the policy is still valid. The policy owner is an employer or a labor organization, which basically means that they will also keep the master contract for themselves.

Each individual, a member that is cover with the group life insurance will receive a certificate of credible coverage. This certificate is important, especially in case of individuals leaving the company or if organization itself decides to terminate their coverage for some reason. This paper is basically the only proof of having life insurance.

The main advantage of life insurance imputed income is that premium payment can be deducted from the paycheck. It actually means that individuals may not have to pay anything out of their pockets.

However, if you are looking for life insurance imputed income for seniors over 70 you have to know that when calculating the amount of your imputed income, the retirement death benefit will be added to your total term life benefit.

If you want to shop for life insurance imputed income for seniors over 70, it is better if you check out a premium table published by the IRS first. In order to calculate your imputed income fast and easy, search around for online imputed income calculators.