Should You Offer Life Insurance to Employees?
The landscape of employee benefits is changing. Employers are tasked with finding ways to offer a desirable benefits package while also managing costs. As medical benefits undergo dramatic changes, life insurance offers appealing options.
For many people the thought of life insurance conjures images of mountainous paperwork, physical exams, and exorbitant premiums. An employer sponsored plan is an especially attractive benefit for existing and prospective employees for its ease and low cost.
Even businesses with as few as ten employees can typically offer this benefit by purchasing a group life insurance policy. These plans differ dramatically from individual policies. Most employer-sponsored plans do not even require physicals. Further, an employee can convert their policy to an individual plan fairly easily, should they leave.
How Much?
A general rule of thumb is to provide employees coverage equal to their annual salary. So, an employee who earns $40k annually would then receive $40k of coverage. This is not a rule though, and some employers offer coverage equal to two times their annual salary or more. In these cases though the employee is typically responsible for an increased contribution.
An average life insurance policy can cost as low as five cents for every thousand dollars of coverage. In the example above of the $40k employee, coverage would cost about $2. These rates can vary though, and are based on a number of factors, such as:
- Group size (most insurers won’t offer coverage for a group smaller than ten people)
- Claim history of company
- Average age and gender of employees
- Occupations associated with the group
- Salaries
Additional Coverage Options
Some employers choose to offer additional coverage options, either at their cost or the employee’s. There are options like:
- Accidental death and dismemberment
- Travel protection
- Family and dependent coverage
These options come at a minimal cost, providing excellent value.
Individual vs Group
With the drastic difference in price between individual and group life insurance policies, employers are often curious how this is possible. Primarily, it is possible because it involves a lot less risk for the insurer.
For most employers, there is low risk. With today’s turnover rate, the chance of anybody passing away while employed at said company is pretty low. Administrative costs are kept down as well, when bundled with other insurance options.
Offering life insurance can help you keep and recruit the best and brightest, without breaking your budget. With low cost and high value, it’s also a great way to fill in the gaps created by the changing medical insurance plans.
