If I recall, some of you are tax guys and / or benefit reps, so can you help me understand imputed income, in non IRS lingo

My understanding is that any life insurance over $50k is subject to imputed income. I also am aware of the Uniform Rates Chart. My sample question is this:

Assume you have $200,000 in employer paid life insurance. You first subtract out $50,000 and get $150,000. You then divide this by 1,000 and get $150. You multiply this by the applicable rate in the above mentioned Uniform Rates Chart. Assume the rate is $0.15 and you get $22.50/month or $270 annually. What exactly does this $22.50 or $270 represent? Is it added to your regular salary and then taxed at the applicable tax rate?

Basically, I'm trying to understand why someone would not really want a large amount of employer paid life insurance just to avoid paying taxes on it. In the example above, the amount seems to small to even worry about, but I guess if someone were really old and / or had a much larger amount of insurance it could add up.