A brief guide to selecting life and disability insurance
By Tom Breckenridge
Surveys show life and disability insurance are considered key attributes of any employee benefits package. Employers who consider offering these plans are also happy to hear they are affordable and easy to administer. To help you decide how best to include life and disability plans in your employee benefit packages, here are answers to common questions.
Q: Why should I include life insurance in my employee benefit package?
A: “Life insurance makes sense for any size group,’’ says Jeanne Fuelling, director, Specialty Products, for Medical Mutual, an Ohio-based insurer. “It’s critical in any benefits package, especially for employees with families.”
Fifty-five percent of private-sector employees took advantage of employer-sponsored life insurance last year, the U.S. Bureau of Labor Statistics reported. It’s a popular benefit that’s cost effective, has minimal administrative burden and supports efforts to retain and attract employees.
“It can be tough to get new employees these days, so you don’t want your benefits package to be lacking,’’ says Kevin Mackay, a Cleveland-area benefits consultant for Alpha/OneDigital Health and Benefits.
Q: How does group life insurance work?
A: Employers pay for a basic term life plan that, in the event of an employee’s death, pays a designated beneficiary a set amount, such as three times an employee’s salary. The insurance coverage ends when the employee leaves.
Employer-paid life insurance plans are usually free to employees and have little or no underwriting involved. Employees then have the option to pay for additional insurance coverage and add dependents to the plan.
Q: Why offer disability insurance?
A: Employment disrupted by an illness or accident not related to work is not unusual. A significant portion of the workforce is expected to experience disability at some point in their careers. In fact, one in four 20-year-olds will experience a disability for 90 days or more before they turn 67, the Social Security Administration reports.
Because of this, many employers make short- or long-term disability coverage available, often as an option paid by employees. Disability plans pay an employee 50 to 67 percent of his or her salary in the event of a claim.
These plans give employees assurance that if a serious illness happens, a stream of income will continue for their families.
“Life insurance makes sense for any size group. It’s critical in any benefits package, especially for employees with families.”
— Jeanne Fueling
Q: How much do life and disability benefits cost?
A: Offering employees life insurance and disability products is not as expensive as employers think.
Generally, the cost of employer-paid life insurance is less than 3 percent of the overall cost of medical coverage.
Employees buying life and disability insurance through an employer will generally pay much less than they would shopping on their own thanks to group rates and simplified underwriting.
Q: What does it take to set up and maintain these benefits?
A: It’s not complicated. Compiling a census of eligible employees, signing them up and monitoring plans are done with the assistance of brokers or benefits consultants. They work with the company and the insurance carrier in handling claims.
Carriers, like Medical Mutual, offer health benefits and specialty products like life, disability, vision and dental. Having employee benefits with one insurer makes sense, says Steffan Moody, vice president in the Columbus office of insurance broker Oswald Companies.
“We love the administrative ease and the single point of contact,’’ Moody says. “Everything is streamlined—enrollment, payroll deductions and billing are so much easier when you can bundle these benefits. And there’s economy of scale from a pricing perspective.’’
Q: What else can my employees get with life insurance coverage?
A: Pay attention to extra features. For example, Medical Mutual’s life insurance options include will preparation, identity theft services and grief counseling, Fuelling says.
Employee Assistance Programs, known as EAPs, can be added for little or no cost. EAPs offer confidential services to employees, ranging from financial counseling to elder care.
“It’s an underappreciated benefit,’’ Moody says.