Employers Find Group Life Insurance A Key Benefit
Imagine one of your employees passes away unexpectedly. Just think of the emotional and financial transition his or her family would face. You can see why group life insurance is such a valued benefit for the spouses and families of your employees. When reviewing your group life insurance plan, here are a few points you may choose to consider.
Group life insurance plans frequently provide coverage based on a multiple of an employee’s salary or wages. For example, in a matching salary arrangement, an employee who earns $30,000 would have a death benefit of $30,000. If the plan were to provide coverage at two times salary, the benefit would be $60,000. One important feature with this option is that the amount of life insurance increases with an employee’s salary. As a result, if an employee suffers an untimely death, his or her family would receive compensation equal to a year (or two) of gross income—certainly a welcome benefit for a family in grief.
On the other hand, some plans provide coverage in multiples of $10,000 up to a maximum amount that you, the employer, may select for the plan. The amount the employee chooses, however, is level and does not increase with inflation or salary increases.
With either option, the type of coverage usually provided is group term. Term insurance premium rates are relatively inexpensive for the amount of coverage provided. You may also allow employees to purchase additional insurance with after-tax dollars through a payroll deduction mechanism.
If you have a certain number of employees, insurers may offer group life insurance without medical underwriting requirements. In this way, employees who would normally be denied coverage due to pre-existing health conditions may obtain life insurance. However, the smaller the employee group, the lower the amount of the death benefit the insurance carrier may issue without individual underwriting. As the number of your employees grows, you may inquire about increasing the maximum amount of the death benefit or seek a lower group premium. If your plan provides coverage for spouses or children, some insurers may also waive medical underwriting for them.
Finally, there may be some additional options available to your employees if their employment is terminated or they retire. Some insurers allow group term policyholders to convert all or part of their death benefits to guaranteed issue whole life policies at standard premium rates without any underwriting requirements. This opportunity may be beneficial for employees who are medically ineligible for private life insurance policies.
As a business owner, you may find that some of your employees have little or no private insurance coverage, because individual policies tend to have more expensive premiums. Your willingness to implement or redesign a group life insurance plan for your employees may be welcomed, since group coverage is often more affordable and provides employees with improved financial security. At the same time, group life insurance may offer additional benefits to your company in helping to attract prospective candidates, while retaining valued employees.
