In the fight to win the talent shortage war, companies are pulling out all the stops. Those with means are beefing up their benefit packages to include voluntary options, like life insurance. Employer-sponsored life insurance can be a very nice benefit if it is kept in perspective and does not cost employees an arm and a leg.
Whether you are an employer or an employee, there is plenty to know about employer-sponsored life insurance and how it works. Employers wishing to add it to their benefits packages can do so while taking advantage of group rates. Employees wishing to sign up can get quite a bit of value for their money.
It Is Term Life Insurance
The first thing to know is that employer-sponsored life insurance is a term product. What does that mean? For that definition, we turn to BenefitMall, a general agency for insurance brokers. With representing more than 100 carriers and thousands of brokers, employer-sponsored life insurance is something BenefitMall recommends.
They explain term life insurance as insurance that only remains in force for a set amount of time. In the case of an employer-sponsored plan, it remains in force as long as an employee continues working for the company and maintains their enrollment. If the employee is terminated or does not re-enroll during the next open enrollment period, coverage automatically ceases.
It Is Group Insurance
One of the advantages of obtaining life insurance through one’s employer is lower cost. That lower cost is achieved by spreading liabilities out across a large group of policyholders. In simple terms, employers get better rates on group insurance policies because they are bringing more subscribers to the table.
This is good in the sense that it keeps rates in check. But there is a downside: coverage limits. Most employer-sponsored life insurance plans only pay 1-2 times an employer’s annual salary. Someone looking for a $1 million policy will not get it through an employer-sponsored plan.
Employers Determine How It is Paid For
As a voluntary benefits, life insurance can be paid for in a number of different ways. BenefitMall says that some employers absorb the entire cost themselves. It is cheap enough that they do not worry about it. Other employers put the total cost on their employees’ shoulders. It is still cheaper than buying life insurance on the individual market, so getting employees to sign up isn’t impossible.
A third option is to treat life insurance just like health insurance and the company 401(k). Employees pay a portion while the employer picks up the rest. Both contribute to the cost without having to spend excessively on it.
A Nice Supplement
Life insurance, by its nature, is intended to cover burial costs and replace at least some income when a person dies. That being the case, can you ever really have too much life insurance? Some would say no. They would say that employer-sponsored life insurance is a nice supplement to an individual policy.
An employee with their own term or whole life policy could get additional coverage at little to no cost by signing on to an employer-sponsored plan. If they can double their coverage without doubling monthly payments, why not do it?
Even if an employee is concerned that group life insurance offered through their workplace isn’t enough to meet their needs, something is better than nothing. In the absence of an individual term or whole life policy, group coverage is still a good deal. It is worth investing in if an employer offers it. As for employers, life insurance is a minimal-cost voluntary benefit that can boost its package.