The simplest formula provides the same dollar amount of coverage for all employees. Another formula sets a flat dollar amount for different positions in the firm. A third formula provides coverage that is equal to some multiple of the employee's earnings. Multiples of one, two or three are common. The most common type of life insurance in an employer's group plan is term insurance.
Term insurance provides a death benefit only and there is no build up of cash value.
Some employers do provide whole life insurance or other insurance that accumulates cash value. The accumulating cash value can become a source of retirement income. Often the employer retains ownership of the cash value until retirement and provides that the employee forfeits his or her rights to it if terminated before retirement. This is not an issue with term policies, since term policies don't have cash values.