Life Insurance Can Provide A Legacy of Financial Security During Uncertain Economic Times
by Ted Madge

Life insurance can be a strong source of financial security for many Californians who have experienced unprecedented losses in home values and significant losses in their investment and retirement accounts. Stock values and interest rates on savings accounts rise and fall, but life insurance benefits do not fluctuate. Life insurance can help provide the security and stability that survivors need upon the death of a loved one while helping them realize their goals and dreams.
As open enrollment season shifts into high gear, now is the time to talk to clients about incorporating life insurance into their employee benefit packages. Nearly everyone needs some level of coverage. In fact, insurance experts say that most people need 10 to 20 times their net income and often more, according to the Life and Health Insurance Foundation for Education (LIFE). And yet LIMRA International recently revealed that one third of American adults carry no life insurance coverage at all. Employers that include group term life insurance in their benefit plans provide a simple and affordable way for employees to address gaps in financial security and help ensure that those left behind can continue living the lives they desire.

Partnering With Employers To Make Coverage Available

How can you establish a need for life insurance coverage that will result in employer buy-in? Demonstrate the need for life insurance, not with a long list of statistics, but with the benefits the coverage can provide. In this case, it’s the protection of a family’s financial future in the event of an employee’s untimely death. Ask your clients whether their employees’ survivors would have enough assets to maintain the lifestyles or fund education and other important goals. Point out that adding life insurance to their benefit portfolios doesn’t have to be expensive.
Employers have several options for making life insurance a part of their benefit packages. They can do the following:
• Fund the entire premium for their employees,
• Provide a basic life insurance benefit (such as one time earnings or $10,000) and offer employees the option to purchase additional coverage on a voluntary or employee-paid basis, or
• Offer benefit exclusively on an employee-paid basis, limiting their costs to administrative expenses.

Many employers provide a basic life insurance benefit and give employees the opportunity to buy additional coverage. There are several advantages to buying life insurance in the workplace even when employees share the cost with employers or shoulder the entire cost. Group coverage can be easier to obtain than an individual policy purchased outside the workplace because it’s usually offered on a guaranteed issue basis with no health questions asked of timely applicants. In addition, premiums, which are usually paid through payroll deduction, can be 10% to 20% less than individual life insurance due to efficiencies in enrollment and billing procedures, according to LIFE.

Options For Employers

When adding coverage, employers can choose a multiple of earnings plan or a unit plan. With a multiple-of-earnings plan, employees purchase coverage in increments based on their salary -- typically up to five times their annual earnings. With a unit plan, they purchase coverage in units of a specified dollar amount (often $10,000).

Employers can also choose whether to make accidental death and dismemberment (AD&D) and dependent life coverage available for purchase with basic life insurance. Depending on the plan design, AD&D coverage can double or triple the death benefit if an insured dies accidentally. It can also pay a benefit in the event an insured loses a limb or eyesight as the result of an accident. Dependent coverage allows an insured to purchase life insurance coverage for a spouse or children at group rates, which can be more affordable than individual coverage premiums.
Not every group term life insurance contract is the same. Some include standard features, such as AD&D coverage, an accelerated death benefit, and disability waiver-of-premium while others require additional premium for these provisions. It’s important for clients to understand that and base their selections on actual coverage needs rather than price alone.

Add-Ons Increase the Value of Coverage

Additional features can be incorporated into life insurance policies. For example, an accelerated death benefit can enable a terminally ill person to collect a significant percentage of a policy’s death benefit while still alive. A disability waiver-of-premium waives life insurance premiums when an insured suffers a long-term disability, generally lasting six months or longer. Portability is another feature that can be included with some group coverage. It allows insureds to continue their coverage if they terminate employment with the sponsoring business.

Even when crafting an employee benefit plan in today’s challenging economy, every employer should consider the legacy of financial security that life insurance offers. Helping your employer clients understand the value of the coverage can be an important step in making it a part of their benefit packages. And that can result in value for you as well.
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Ted Madge is sales manager for Assurant Employee Benefits’ San Francisco sales office. Assurant Employee Benefits specializes in quality employee benefit and services, including long-term and short-term disability, life and accidental death and dismemberment insurance, dental coverage and disability reinsurance management services. Assurant Employee Benefits is the brand name for insurance products underwritten and issued by Union Security Insurance Company and for prepaid dental products provided by affiliated prepaid dental companies. Plans contain limitations, exclusions and restrictions. For more information, call 800-436-2435.