Is Offering a Life Insurance Policy Worth It?

Feb 12 | 2019

Hey, we get it.

It’s a valid question, and it’s one our salespeople and Advisors deal with a lot. If you were to ask us (and, being a benefits company, we’ll admit to a small bias here) the answer would be yes.

A life insurance policy eases the financial burden associated with a loss of life and protects those who are left behind. If your employees have families who rely on them to provide an income, life insurance should be near the top of the list in terms of benefit priorities.

What is Life Insurance?

Life insurance provides tax-free financial assistance in the event of a covered plan member’s death. There are different types of life insurance, such as Term Life Insurance or Permanent Life Insurance for an individual, or a group life insurance policy for a workplace.

Individual Life Insurance

Individual life insurance covers one person and is purchased as a term or permanent policy. The insured person pays 100% of the premium payments, either for a specified period (term life insurance) or for their whole life or until termination of the policy (permanent life insurance). Additionally, with individual plans, detailed medical information is usually required before set-up to determine a person’s risk or, in some cases, approval.

Group Life Insurance

Group life insurance covers a group of people, typically a workplace, where the risk of death (and therefore a claim) is shared across a pool of employees. Because of this shared risk, and the fact that an employer pays a portion of the cost, the premium payments from an employee perspective are lower than an individual life insurance policy. This can be a big draw for attracting top talent to your organization (more on that below).

Another important distinction between individual and group life insurance is that under a group policy, a medical examination may not be necessary. This is called non-medical Life Insurance and can allow individuals not ordinarily eligible for coverage (or who would pay substantially high individual premiums) access to coverage.

Why Provide a Group Life Insurance Policy?

To answer this, let’s first consider the demographics of your workforce. How many employees have spouses or children? How many have a house with a mortgage? How many of those employees rely on two incomes to pay their bills and secure their families?

Now, with that in mind, let’s take a closer look at three reasons to provide life insurance to employees:

#1. Income Replacement

Consider what would happen to a family that relies on two incomes suddenly being reduced to one. Without the additional proceeds of a life insurance plan, those left behind after the death of a family member can face significant financial hardship.

#2. Cover Debts and Funeral Expenses

The proceeds from a life insurance policy can be used to pay off substantial debts that a family suddenly down to one income might otherwise be unable to cover, such as a mortgage. It’s also commonly used for funeral expenses, which can run an average of $10,000 or more.

#3. Job Seekers Look for It

Job seekers take a potential employer’s benefits plan into account when looking for jobs. Offering a comprehensive benefits plan that includes a life insurance policy can help you stay competitive in the marketplace.

Life insurance is the benefit that everyone should have yet hope never to use. It protects employees and their families from the financial strain associated with an unexpected loss and can be a considerable reliever of stress in an already stressful situation.

Want to learn more? Contact us, and we'll connect you with a licensed insurance Advisor!

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