In these unusual times, employers are looking for an edge to recruit and keep good people, and perhaps the most important tool to do so is to provide employee benefits — most commonly medical coverage. Often these plans come with a “side” of group life insurance that provides protection for employees, but only while they remain employed.
“Unfortunately, this can provide a false sense of security for both the employer and employee,” says Greg Zito, Life Insurance & Employee Benefits Specialist, Zito Insurance Agency, a division of Risk Strategies Company. “The majority of employees are not aware that they lose this protection the day they terminate employment, regardless of the reason, whether that is retirement, disability or even, in the worst-case scenario, terminal illness.”
Smart Business spoke with Zito about supplemental benefits and how employers can use them to help attract and retain employees.
What are the terms of employer-provided group life insurance?
Surprisingly, most employers, and even HR specialists, are not aware that the moment employment is terminated, so is the group life insurance benefit. And while some plans offer a conversion privilege, the cost of coverage increases exponentially and for most people is not affordable. I have never met an HR specialist who has completed a conversion, despite multiple inquiries, because of the overwhelming cost.
Employees don’t understand this and, upon retiring, are often surprised to learn that not only have they lost their coverage but that the cost to replace it — if they can get it at all due to their age and pre-existing conditions — is exorbitant. Seventy-five percent of Americans do not own personal life insurance, as they fall under the ‘placebo’ of group life protection, and 99.9 percent of all group life plans never pay a benefit because employees rarely die while they are still employed.
Why should employers consider offering supplemental life insurance?
As an employer, do you want to provide something that just sounds good on paper, or provide employees with a supplemental opportunity that guarantees permanent protection?
Supplemental life programs offer personally owned policies that employees pay for via payroll deductions, so there is no cost to the employer. Spouses and children can be covered as well, and because these plans are offered guaranteed issue with no exam or questions, employees cannot be declined.
And when employment is terminated, for whatever reason, coverage can continue with no change in cost or benefits — both guaranteed level for life — and either paid directly by the employee or deducted from a checking account.
What plan options are available?
A variety of plans are available, including a plan that has the option of lifetime paid-up protection after 20 years of premiums, or a tax-free return of paid premiums in cash. Tax-free benefits are payable the moment an application is signed, regardless of the plan chosen, for any means of death, with no exclusions or waiting periods. Benefits double for accidental death, and premiums are waived if the policyholder is out of work due to a disability. Plans feature ‘living’ benefits, as well, such as tax-deferred cash values and nursing home benefits.
Enrollment can be done in person locally, or remotely for employers with employees in multiple locations or in multiple states. Home health care agencies are an excellent example where employees do not report to an office. This is also timely with the recent trend of employees working remotely. The program is offered for manufacturers, social service agencies, home health care providers, universities — any institution where an employer sees the benefit of offering something beyond group life and supplementing with coverage employees can take with them when they leave.
With no cost to the employer, no servicing or administration for the HR team and employees grateful for a lifetime benefit, supplemental life insurance is a win all around. ●
INSIGHTS Insurance is brought to you by Zito Insurance Agency