>How could it possibly be cheaper? The insurance premiums will have to be enough to cover the costs of the payouts plus overhead and some additional margin of profit for the insurance company.

This isn't completely true. Most insurance companies make additional income on investing the float[1]. Warren Buffet started his economic empire through his insurance company and his ability to prudently invest the float it generated.

For the majority of companies I would assume it is still cheaper to buy insurance than it is to self-fund since they do not have the actuarial or investment expertise that many insurance companies have built up over the years. And I doubt Google is going to be doing something like that in-house, though it is possible. It's also equally possible that they are just taking out life insurance policies on their employees and then sugar-coating it as a "death benefit".

[1]https://en.wikipedia.org/wiki/Insurance#Insurers.27_business...

Investment on the float is something you can do on your own without insurance. There have to be better ways to access that level of investment expertise without paying an insurance company for it.

Is the actuarial expertise necessary here? That's needed to set premiums for individuals who take out policies so you know how much they should pay given their situation. But when you're self-insuring like that and not requiring anyone to pay premiums, what does it matter? At most, you need a general idea of the overall costs based on the aggregate demographics of your workforce, which is a much less complicated proposition when you have as many employees as Google. Depending on how you want to do it, you may not even need that, since Google has a lot of cash and can probably just make a guess.