How Employer Life Insurance Helps Attract and Retain Employees
Employer life insurance helps companies attract and retain employees by easing financial stress, closing widespread coverage gaps, and strengthening total compensation packages. By giving employees a simple, convenient way to protect their families, employers demonstrate a commitment to well-being that builds trust and workforce stability — making life insurance a meaningful differentiator in a competitive labor market.
Key takeaways
53% of U.S. workers receive life insurance coverage through work, and employers increasingly view it as part of a financial wellness and employee well-being strategy.
40% of U.S. adults say their loved ones would be barely or not at all financially secure if the primary wage earner died, making workplace coverage a critical safety net.
Employer life insurance removes common barriers to coverage, including cost, complexity and medical underwriting, that keep millions of Americans uninsured or underinsured.
45% of employees named life insurance as a top workplace perk, making it a meaningful differentiator in total compensation packages.
Clear, ongoing communication about life insurance options is essential, and many employees assume their employer-paid base coverage is sufficient and overlook voluntary options.
Employees with families have far more to worry about than their own personal needs. They may frequently wonder how their spouse, children or other loved ones would manage without their paycheck and support. That concern can quickly turn into financial stress and potentially make it harder to focus at work.
Employers can ease some of that stress with the right benefits package, including through employer life insurance. Having coverage in place helps give employees greater peace of mind by helping protect the people who depend on them.
For employers, providing life insurance is a simple but effective step for supporting employees in the workplace. Here's why this perk is taking on a more prominent role.
What is employer life insurance and how does it work?
Employer-sponsored life insurance is coverage offered through the workplace. Employees enroll through the group plan rather than contacting an insurance agent or company on their own.
How the benefit works depends on the plan design. Employers often pay for a base amount of coverage and give employees the option to purchase additional voluntary life insurance for themselves and their loved ones. As a relatively low-cost workplace benefit, life insurance gives employers a practical way to provide meaningful financial protection.
Employer-sponsored life insurance has long been a common part of workplace benefits packages. According to LIMRA, 53% of U.S. workers receive some life insurance coverage through work. What’s changing is how employers view the role and value of that coverage.
“As workforce needs become more diverse and employees place greater value on financial well-being, employers have an opportunity to offer benefits that provide meaningful protection and peace of mind," says Zafer Datoo, senior vice president, global total rewards at ADP. "Life insurance remains one of the most effective ways to help employees safeguard their families' financial future."
That shift reflects a growing emphasis on financial wellness across benefits strategies. According to ADP’s 2024 Employee Financial Wellness, Retirement Insights Survey, 90% of employers say financial wellness programs are more important than ever, while 89% believe the right programs can help attract and retain talent. That gives employers another reason to consider how benefits such as life insurance can support employees and their families.
Why life insurance matters to employees and their families
For employees with families who depend on their income, the consequences of an unexpected death can be devastating. In a 2025 LIMRA survey, 40% of U.S. adults said their loved ones would be barely or not at all financially secure if the primary wage earner died.
Life insurance can help families manage the financial impact of an unexpected death by providing a tax-free death benefit that can help cover costs such as:
Cover funeral expenses and remaining medical bills
Replace lost income
Pay off a mortgage and other debts
Fund education costs
Provide for child care and other household support
Give loved ones more time off work to grieve and adjust
Life insurance can also help employees who do not have a spouse or children. Coverage can prevent their parents, siblings or other loved ones from having to pay for a funeral and other final expenses out of pocket. It also means employees already have some in place if their family responsibilities grow later.
“Employees may not think about life insurance every day, but knowing their family would have financial protection builds trust in their employer,” says Datoo.
Addressing coverage gaps through workplace benefits
Despite the financial safety net life insurance provides, many Americans still lack enough coverage. LIMRA estimates that tens of millions of U.S. adults either have no life insurance (74 million) or believe they need more (25 million).
Employer life insurance helps close that gap by removing several of the barriers that keep people from getting enrolled on their own, says Datoo.
Simplify benefits administration with expert HR support
Workplace coverage simplifies a complicated decision
Buying life insurance independently can feel overwhelming. Employees have to compare policy types, coverage amounts, pricing, eligibility requirements and offers from different companies, all while trying to determine what their families actually need. That research takes up their limited time off, which is why it's easy to procrastinate.
The process to buy life insurance also often means coordinating with an insurance agent whose compensation depends on the policy sold. Even with strong industry oversight, that sales dynamic can make some consumers less comfortable with the process.
Workplace coverage simplifies the decision by putting life insurance inside a benefits system employees already know and trust.
Employer-sponsored coverage reduces the cost barrier
Employers often pay for at least part of the coverage, which lowers the amount employees have to spend themselves.
Employees who want additional voluntary life insurance protection may also have access to competitive group rates through the plan, potentially offering a discount versus the cost on the individual market. Together, those savings can make life insurance easier to fit into a household budget.
Workplace enrollment makes coverage easier to get and keep
Figuring out life insurance is easy to postpone while employees focus on more immediate financial priorities. Annual benefits enrollment gives them a clear opportunity to consider coverage alongside their other workplace benefits.
Group plans can also make enrollment easier. Employees may be able to sign up with limited or no medical underwriting, which can help those who might have trouble qualifying on their own because of pre-existing health conditions.
From there, employees can pay premiums directly out of each paycheck instead of having to set up and track a separate bill.
Life insurance as part of a broader employee support strategy
57% of employees said that finances are their top source of stress, making it the top category by far in PwC’s 2026 Employee Financial Wellness Survey.
"Employees who worry about their future experience higher stress, which can affect productivity, overall health, and relationships at home," says Datoo. "Greater financial security helps employees focus more on their work and personal lives."
Life insurance does not solve every financial concern, but it addresses one significant worry: What would happen to an employee’s family if their income suddenly disappeared? Helping close that gap can remove some of that uncertainty.
That’s why for employers, including life insurance as part of supporting employees in the workplace provides several benefits:
Strengthen the total compensation package
Employer-paid or subsidized life insurance adds value on top of an employee’s salary. It’s something workers notice. 45% named life insurance as a top workplace perk in a 2024 Forbes Advisor survey. A stronger benefits package can also improve workforce stability by giving employees more reasons to value their overall relationship with the organization.
Show support for families
Helping protect the people an employee cares about demonstrates that an employer recognizes their lives and responsibilities outside of work. That can build trust beyond the paycheck.
Extend protection beyond employment
Some group life insurance plans let employees keep their coverage after they leave the company. That means the protection can continue even after the employment relationship ends, helping employees and their families through the transition. It's a way for employers to show they care for workers beyond what they can contribute for the day-to-day.
When employer life insurance is included alongside popular employee benefits such as health insurance, disability coverage and employee assistance programs, employers go a long way toward providing the financial wellness and stability employees need to deliver their best work.
Helping employees understand and utilize coverage
Offering life insurance at work is only the first step. For the benefit to support financial wellness, employees need to understand how it works and how much protection they need for their families.
“One of the biggest challenges is employee awareness. Many employees assume the employer-paid benefit is sufficient for their needs or overlook voluntary options during enrollment,” says Datoo.
PwC also found that employees are more likely to value and use benefits when they understand how those benefits address a real financial need. That makes clear communication especially important for life insurance.
Employers can help close that awareness gap in several ways:
Explain the baseline benefit clearly
Employees should know what coverage the employer provides and what voluntary options are available, including the fact that they need to sign up to buy more. Because people often underestimate how much life insurance they need, employers can also point them to tools that help estimate an appropriate amount, such as the Life Happens Life Insurance Needs Calculator.
Make enrollment simple
Employees who want additional voluntary life insurance should be able to quickly find their coverage options, compare costs and enroll. Employers can help by providing clear instructions and making it obvious where employees should go with questions.
Communicate beyond open enrollment
Life insurance needs can change after major life events such as marriage, a new child, or a promotion. Periodic reminders prompt employees to revisit their protection and understand when they may be able to adjust their workplace coverage.
Use targeted, plain-language messaging
Employers should keep insurance jargon to a minimum to help employees understand the program. Communications are easier to act on when they connect life insurance rules and benefits to real life.
Use available expert support
The insurer administering the program may offer educational materials, planning tools or employee education sessions. Employers can use those resources to help explain the program and answer common questions.
Taken together, these steps help employees better understand their options and get more value from the life insurance benefits available to them.
To learn more about how employers can address enrollment, cost and complexity while making benefits easier for employees to understand and use, launch this webinar anytime.
Why employer life insurance delivers value beyond premiums
Employer life insurance can provide value far beyond what an employer pays in premiums. It gives employees a simple and convenient way to provide financial security for their loved ones, making the benefit personally meaningful.
“As workforce demographics become more diverse, employees increasingly expect benefits that support their overall well-being. Life insurance does just that,” says Datoo.
While people hope they never have to use their life insurance, they appreciate when their employer cares enough about supporting employees in the workplace to put that safety net in place.
Frequently asked questions
What are the tax implications of employer life insurance?
Employer-paid group term life insurance premiums are generally tax-deductible for the business. For employees, the cost of coverage up to $50,000 is typically excluded from taxable income. Coverage amounts above $50,000 may result in imputed income that appears on the employee's pay stub, often listed as GTL.
How much life insurance coverage do employers typically provide?
Most employers offer a base amount of group term life insurance equal to one to two times the employee's annual salary, often at no cost to the employee. Many plans also allow employees to purchase additional voluntary coverage for themselves and their dependents at group rates. The right amount depends on an employee's financial obligations, which is why tools like needs calculators can help.
Can employees keep their employer life insurance if they leave the company?
Some group life insurance plans include a portability feature that lets employees continue their coverage after leaving the company by paying the premiums themselves. However, not all plans offer this option, and coverage terms may change. Employers should clarify portability provisions during benefits communication so employees understand their options before a transition.
Learn more about ADP benefits administration services or get in touch with one of our experts.
