Group life insurance is among the most popular offerings in the employee benefit market today. Furthermore, millions of American families rely on it to provide desperately needed protection against the devastating risk of the unexpected death of a family breadwinner. The overwhelming majority of workers typically sign on to the program, when offered.
Group life represents about 41 percent of all life insurance policies in force, according to the American Council of Life Insurers, and provides an estimated $8.2 trillion.
Employees Need the Coverage
The average American family is woefully underinsured. Most families say they want or need enough life insurance to get them through 14 years of living expenses in the event of the death of a family member. One third of adults have no life insurance in place at all, including 2/3rds of American males, ages 18 to 24, according to information from the Life Insurance Marketing Research Institute (LIMRA). And 43 percent say they would experience severe financial problems within six months of the death of a family member.
How Group Life Works
The employer works with their benefits broker or agent to select a carrier and limit of coverage under the plan, as well as define who exactly qualifies as a member of the group eligible for coverage.
Employers pay some or all of the premiums on employees’ behalf. Generally, the premiums necessary to provide up to $50,000 in death benefits to each employee are tax deductible to the employer. Many employers choose to make additional coverage available, however – often on a voluntary basis. Additional premium is deducted from employees’ paychecks and sent to the insurance company via your normal payroll operation. If employees choose to participate via a Section 125 plan, or ‘cafeteria’ voluntary benefits plan, their premiums are generally paid with pre-tax dollars.
Some employers offer the same coverage to everyone. Others elect to offer a multiple of income – usually 1 or 2 times the workers’ annual income but sometimes more. This amount is usually paid for by the employer, but individual workers can choose to buy additional coverage on a voluntary basis.
Approval is generally guaranteed, provided the employer provides the coverage to all eligible employees. This is a valuable feature for many employees, because prior medical issues may make it difficult or impossible for them to qualify for health insurance on their own.
Advantages of Group Life
For the employer, group life insurance is an important part of your company’s overall benefits package. Employees value robust benefits packages, and life insurance provides an essential protection that many of them could not get at all outside of a group plan. Statistically over 7 out of every 10 workers offered group life insurance via their employer take it.
The Bottom Line
The best reason for having group life insurance in place, though, is this: If an employee dies, and his distraught widow calls or comes to the office to ask if he had any life insurance in place, you can look that widow and the family in the eye and say “yes, absolutely. We loved him and valued him and we made sure life insurance was in place to protect the ones that he loved.”
To set up a group life insurance plan for your employees and help protect their families, call your insurance professional today.