What You Need to Know
- Your clients could lose the ability to work, or die.
- Some insurance is better than none.
- Enough coverage beats some coverage.
Since the pandemic, more companies have started to offer health insurance and group life insurance than ever before.
Still, more than 100 million individuals in the United States don’t have sufficient coverage to provide their families with financial security in case of a tragedy, according to the 2022 Insurance Barometer Study by LIMRA and Life Happens.
If businesses want to help their employees — your clients — achieve financial security, they must go beyond the benefits offered through standard group life coverage.
Here’s what you need to know about the way companies offer your clients life insurance now and how that could change in the future.
Life Insurance Today
When employers started offering group life insurance policies, many workers who wouldn’t otherwise have access to life insurance suddenly had coverage, however limited.
Group insurance policies are attractive because their approval by an insurer is virtually guaranteed.
Some of the main features of group life insurance include that client companies usually need to renew group insurance policies year by year or every five years.
The premiums are low, so group life insurance is affordable for most companies.
Coverage is usually fixed rather than based on the individual’s health.
Some basic policies provide minimal coverage for a spouse and children, or employees can purchase supplemental insurance for better coverage.
Unfortunately, there are some downsides to group life insurance.
First, group insurance isn’t portable if an employee changes jobs, because the business owns the policy.
This means that some employees who resign or lose their jobs are in for a rude awakening when their policies suddenly lapse.
Second, group insurance coverage is very limited.
An average basic group life insurance policy only amounts to one or two times an individual’s annual salary.
This is far cry from the recommended level of five to 10 times the individual’s annual income. Which means, should the worst occur, the employee’s family will be left substantially unprotected beyond the first year or so.
It’s true that employees can also buy supplemental life insurance through their employers, though such policies can still have limits.
But for that increased coverage, most employers and insurers require additional forms and proof of insurability, which can take several weeks to process, plus in some cases medical exams.
Today we’re used to purchasing items on Amazon and having them shipped to our house within 24 hours, or paying for groceries and having them delivered to our doorstep within an hour.
So, a weeks-long wait for life insurance can seem a little excessive.
Plus, supplemental life insurance usually has to be renewed on an annual basis and premiums can change from year to year.
The downsides of group life insurance aren’t limited to those for employees.
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