Individual life insurance for employees

What do you want to know

  • Your clients could lose the ability to work or die.
  • Some insurance is better than nothing.
  • Sufficient coverage is worth some coverage.

Since the pandemic, more companies have started offering group health and life insurance than ever before.

Yet more than 100 million people in the United States lack sufficient coverage to provide their families with financial security in the event of tragedy, according to the 2022 Insurance Barometer study by LIMRA and Life Happens. .

One of the biggest barriers to financial security is the low coverage offered by basic group life insurance policies.

If companies want to help their employees — your customers — achieve financial security, they must go beyond the benefits offered by standard group life insurance.

Here’s what you need to know about how companies currently offer life insurance to your customers and how that might change in the future.

life insurance today

When employers began offering group life insurance policies, many workers who would otherwise not have access to life insurance suddenly had even limited coverage.

Group insurance is attractive because its approval by an insurer is almost guaranteed.

Some of the key features of group life insurance include the fact that corporate clients typically need to renew group insurance policies year to year or every five years.

Premiums are low, so group life insurance is affordable for most businesses.

Coverage is generally fixed rather than based on the individual’s health condition.

Some basic policies offer minimum coverage for a spouse and children, or employees can purchase supplemental insurance for better coverage.

Unfortunately, group life insurance has some drawbacks.

First, group insurance is not transferable if an employee changes jobs because the company owns the policy.

This means that some employees who quit or lose their jobs face a rude awakening when their policies suddenly lapse.

Second, group insurance coverage is very limited.

An average basic group life insurance policy is only one or two times an individual’s annual salary.

This is far from the recommended level of 5 to 10 times the individual’s annual income. Which means that if the worst should happen, the employee’s family will be left unprotected beyond the first year or so.

It is true that employees can also purchase supplemental life insurance through their employer, although these policies may still have limits.

But for this increased coverage, most employers and insurers require additional forms and evidence of insurability, which can take several weeks to process, as well as, in some cases, medical examinations.

Today, we are used to buying items from Amazon and having them shipped to us within 24 hours, or paying for groceries and having them delivered to our doorstep within the hour.

Thus, a wait of several weeks for life insurance may seem a bit excessive.

In addition, supplemental life insurance generally must be renewed each year and premiums may change from year to year.

The disadvantages of group life insurance are not limited to those of employees.

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