Some employers offer life insurance for domestic workers, including nannies. The main purpose of life insurance is to provide a death benefit to the nanny’s (or other household employee) dependents or beneficiaries, in order to help replace lost income and protect against the financial losses that could occur from the insured’s untimely death.
Generally, there are two types of life insurance: term and permanent (whole). Term life insurance pays a death benefit to beneficiaries if the insured dies during the term the policy exists. Permanent life insurance generally is designed to provide long-term life insurance coverage for the insured’s entire life—up to 121 years old. It has two components:
- the death benefit and
- a cash accumulation benefit, which differentiates it from term insurance. The coverage may vary, but commonly it covers either one full year of an employee’s salary (up to a specified limit) or double an employee’s salary (up to a specified limit). A policy with a death benefit up to $50,000 is tax deductible to the employer. This helps protect the policy’s designated beneficiary in the event of an employee’s death. Life insurance coverage is not mandated by law, but it is a desirable employee benefit.
An employer-sponsored life insurance plan takes the headaches away from a nanny who normally would have to independently purchase a high cost plan with stringent applicant requirements. Our partners at GTM Payroll Services offer a variety of life insurance coverage benefits, flexible to the needs of you and your nanny.