Although life insurance is one of the most common employer-provided benefits, many employees do not appreciate its value. Life insurance can be an invaluable benefit should tragedy strike one of your employees. As an employer, you are well-positioned to educate employees on the importance of this coverage.
What’s in it for you? Educating employees about life insurance can yield higher enrollment, greater appreciation for your benefits package and increased loyalty to the company. Many employees are not financially savvy, but are interested in learning. Financial education from their employer can foster a stronger company-employee relationship.
Why Is Life Insurance Important?
Many employees have never considered life insurance, or think it is an unnecessary expense at this time in their lives. However, having life insurance is important for people of all ages and a few probing questions can help your employees think more clearly about their needs and benefits of coverage, such as:
- Do you provide the primary household income?
- Do you have a mortgage, college loans or other substantial debt that is unpaid?
- How would your family support themselves if you died?
- Could you (or your family) afford tens of thousands of dollars in medical bills and/or funeral costs?
- Who would have the burden of paying any debt or other financial responsibilities that you leave behind?
Getting employees thinking about these issues isn’t fun, but it is important so they have the opportunity to consider their financial responsibilities and to take action to protect their loved ones in the event of a catastrophic accident or illness.
Despite realizing its importance, some employees still will be hesitant to spend the money on a new type of coverage. After all, economic times are still tough and many people are struggling to pay their bills. However, an argument can be made that tough financial times make it more important than ever to provide financial security for loved ones.
Learn and Teach Employees the Basics
Regardless of what coverage you offer, teach employees the basics of life insurance, starting with the main types of coverage and the benefits and drawbacks of each.
Term life insurance is coverage over a specified time period, though it can often be renewed or converted to a permanent policy. Term coverage offers a death benefit, but no cash value. It is a good option for people who can’t afford high premiums but still want coverage, or people who have short-term coverage needs. Offered through your group policy, this can be affordable for employees now, but premiums can greatly increase upon renewal.
Any coverage besides term is a form of permanent life insurance; types include whole, universal and variable. Premiums for permanent coverage start out higher than term, but are usually more consistent throughout the life of the policy. In addition, this coverage offers a death benefit paired with a cash value savings component, so it is of more value later in life.
Emphasize that any coverage is better than no coverage, but that employees should think seriously about the financial needs of their loved ones should they die unexpectedly. Depending on the coverage available to employees, a combination of term and permanent coverage may be a good solution.
Whole life insurance
Whole life insurance is a type of permanent insurance that offers life-long coverage combined with a cash-value savings component. This type of policy has higher premiums than term life. Premiums remain constant throughout the policy and a portion is invested by the company, which becomes the cash value of the policy. Whole life insurance pays a fixed amount upon death.
Universal life insurance
Universal life insurance is another type of permanent insurance policy that combines term insurance with the ability to earn interest on the cash value, paying a market rate of return. Cash value grows tax-deferred, and can be withdrawn or borrowed from the policy. It is more flexible than whole life insurance as it also allows you to change your premium payments and death benefit, within limits.
Variable life insurance
Variable life insurance is similar to universal life insurance in terms of flexibility and an investment aspect. However, instead of simply earning interest on the accumulated cash value, policy owners have more control over how to invest that cash. The ability to invest in professionally managed investment options allows for the potential to accumulate cash value while providing death benefits protection. However, there is greater risk for loss due to this benefit.
Promote Your Coverage Options
When teaching employees about life insurance, be sure to educate them on the specific coverage you offer as well. Provide ample information about the type(s) of coverage offered, the premiums, the benefit, enrollment requirements, restrictions and any other details they need to know.
In addition, be sure to educate employees on the advantages of buying coverage through your company. Not only will your employees appreciate the financial education you’ve provided, but they’ll realize the value of the benefits your company offers. Advantages include:
- Lower rates through your group policy than if buying individual coverage
- No medical exam/review required for group policies (generally); this is in contrast to individual policies, which require medical reviews and may charge much higher premiums or deny coverage based on unfavorable results
- Convenience of purchasing at work instead of having to shop around
If you are ready to add life insurance coverage to your benefit options this year, or you would like information on how you can offer life insurance and other optional benefits to your employees at little or no cost to you, contact Roper Insurance today at 303-721-1145 or by email at [email protected]