Grace's employer is now offering group-term life insurance. The company will provide each employee with $200,000 of group-term life insurance. It costs Grace's employer $700 to provide this amount of insurance to Grace each year. Assuming that Grace is 43 years old, use the table to determine the monthly premium that Grace must include in income as a result of receiving the group-term life benefit. Uniform Premiums for $1,000 of Group-Term Life Insurance Protection:

Question

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To calculate the monthly premium that Grace must include in income as a result of receiving the group-term life benefit, we need to use the Uniform Premiums for $1,000 of Group-Term Life Insurance Protection table. According to the table, the applicable rate for Grace's age (43) is $0.105.

First, we need to calculate the total cost of the insurance provided by Grace's employer:
$200,000 ÷ 1,000 = 200 (to convert to the number of units in the table)
200 × $0.105 = $21.00 (annual premium per unit)
$21.00 × 700 (the cost to provide this amount of insurance to Grace each year) = $14,700 (annual premium)

To convert the annual premium into a monthly premium, we divide by 12:
$14,700 ÷ 12 = $1,225.00 (monthly premium)

Finally, we need to round down to the nearest $0.50 (as per IRS guidelines):
$1,225.00 rounded down to the nearest $0.50 = $1,224.50
$1,224.50 ÷ 100 = $12.245 (premium per $1,000)
$12.245 × 200 = $2,449.00 (total premium for $200,000 of insurance)
$2,449.00 ÷ 12 = $204.08 (rounded monthly premium)
$204.08 rounded down to the nearest $0.50 = $204.00
$204.00 ÷ 100 = $2.04 (premium per $1,000)
$2.04 × 200 = $408.00 (monthly premium for $200,000 of insurance)
$408.00 ÷ 27 (the number of pay periods in a year if paid bi-weekly) = $15.11 (rounded monthly premium per pay period)

Therefore, the monthly premium that Grace must include in income as a result of receiving the group-term life benefit is $15.00 (as we must round down to the nearest dollar).

Grace's Employer Is Now Offering Group-Term Life Insurance