Consent and Company‑Owned Life Insurance: What Employers and Employees Need to Know

When Consent Is Needed

Company‑owned life insurance is a benefit that the employer pays for on behalf of an employee. Consent is required only when the policy's death benefit is paid to a beneficiary other than the employer or the employee's estate. If the policy is a standard group term policy with the employer as the sole beneficiary, no separate consent is necessary beyond the initial enrollment.

Types of Policies and Consent Requirements

Group term life insurance: The employer pays premiums; the employer receives the death benefit. No consent needed from the employee for the benefit to be paid to the employer. Group accidental death and dismemberment: Same as term life; no employee consent required.

Employee‑owned policies: The employee pays premiums, but the employer administers the policy. If the employee names a beneficiary, the employee must provide written consent for the policy to be funded and to designate that beneficiary. Employers must obtain the employee's signature on a consent form before the policy is issued.

Legal Safeguards and Regulatory Context

Under the Employee Retirement Income Security Act (ERISA) and various state laws, employers must provide clear disclosure of the policy terms and the employee's rights. The Employee's Consent Rule requires a written acknowledgment of the policy's cost, coverage, and beneficiary designations. Failure to obtain consent can trigger penalties, including potential liability for wrongful claims or misdirected benefits.

Practical Steps for Employers

• Include a consent clause in the employee handbook or benefits enrollment packet.
• Require a signed consent form before issuing a policy that names a beneficiary other than the employer.
• Maintain records of all consent forms and policy documents in a secure, accessible location.
• Provide annual reminders and updates to employees about their coverage and beneficiary options.

What Employees Should Do

Review the consent form carefully. Verify that the beneficiary designation matches your wishes and that you understand the premium responsibilities if you choose an employee‑owned plan. Keep a copy of the signed form for your records.