Voluntary Life = Better Benefits — at No Cost
Nearly two-thirds (58 percent) of American adults have not bought life insurance because they think it’s too expensive, according to a survey conducted by the Insurance Information Institute in 2008. The III’s survey also found that many respondents hadn’t bought insurance because they just hadn’t gotten around to it or they didn’t know enough about insurance to feel comfortable buying it.
Lack of life insurance — or inadequate amounts of life insurance — can put your employees’ families in financial jeopardy if a breadwinner dies. Employers can help their uninsured or underinsured employees by offering life insurance as a voluntary benefit. Many employers offer voluntary life as an addition to their basic employer-paid group life benefit. However, in these days of rising expenses, some employers choose to offer life insurance on a voluntary basis only.
Since voluntary life is optional and completely employee-paid, the employer has no direct out-of-pocket costs. You simply set up and maintain the program, choosing the products that best match your employees’ needs. If you have 10 or more employees who would be eligible to participate, consider adding voluntary life insurance to your benefits menu.
For employees, a voluntary life insurance program allows them to buy coverage at less-expensive group rates and enjoy the convenience of payroll deduction. In fact, where employers offer life benefits, take-up rates are high — 96 percent of employees offered life insurance benefits take them, according to the U.S. Department of Labor.
Other Advantages Include:
No medical questions. Coverage up to a specified amount is guaranteed, even for employees or dependents with health problems, with additional coverage available on a simplified application basis.
Portable benefits. Voluntary plans allow employees to retain their coverage at the same rates if they leave the company, with billing handled directly between the insurance carrier and the individual.
To help you design a program that responds to the needs of your employees, here’s a rundown of the various coverage options.
Term or Permanent?
There are two categories of life insurance: term and permanent. Term coverage provides pure death benefit coverage and no cash value. Term insurance is what most companies offer in their basic benefits package. It provides financial protection for a specific time (one to 30 years), and provides a death benefit but no cash savings. Rates are guaranteed only for the policy term and usually increase at the end of the term.
Permanent life insurance (also known as cash value or permanent life) provides lifelong protection and includes a savings element. Premiums are generally higher than for term insurance, but they remain fixed throughout the policy’s life.
All permanent insurance has a face amount and a cash value. The face amount is the money that will be paid at death, while cash value is the amount of money currently available to the policyholder. Permanent life offers other benefits — purchasers can withdraw some of the money, obtain a loan using the cash value as collateral or use the cash value to pay premiums, provided there is enough money accumulated.
Varieties of permanent life coverage include whole (or “ordinary”) life insurance, universal life or variable life policies.
Choose the Right Carrier
Not all carriers offer permanent life as a voluntary benefit. If you want your voluntary life insurance offerings to include permanent life, find a carrier that will write it on a voluntary basis.
Also check a carrier’s reputation. With voluntary life insurance programs, the insurer has principal responsibility for program implementation, communication, enrollment and administration. Look for a stable carrier with a reputation for good communications and strong financial ratings to ensure the money your employees invest will be there when they need it.
For more information, please call us.
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