Term
life insurance is becoming a very popular
benefit to offer to employees as part of
a comprehensive benefits package.
Increasingly, employers are realizing
that attracting good talent means
matching what large companies are
offering and term life is usually part
and parcel of such a plan. Let's
look at the benefits of offering this
type of benefit to your employees.
I don't how else to say this but group
term life is cheap. When employers
approach us to
quote term life for their
companies, they usually are surprised by
the final quote. Unlike the
ever-increasing specter of health
insurance, they're actually shocked in a
good way. Term life has decreased
in priced significantly over the past
decade but the group option is even less
expensive due to larger risk pools and a
little term called adverse selection.
As we
discussed in our
term life and risk
article, the
larger the number of people sharing risk
on one policy, the better. This by
definition IS insurance. If a
group of 25 employees are getting group
term life, not only are they entering
the risk pool with all the other
companies out there, they already have a
built-in risk pool of 25 people.
Even better. As for adverse
selection and life insurance, this term
means that a person hopes to gain an
unfair advantage over a life insurance
company based on information he/she has
(and the company does not). For
example, if I am not diagnosed with
anything but I feel that something's
"wrong" with my health, I might apply
for term life insurance. The
paramedical exam may not pick up the issue
and I answer the application correctly
but two years later, I keel over from a
heart attack. This is (a form of)
adverse selection. Small group
term life eliminates this "interest of
the one person" selection by the simple
reason that it's a group of individuals.
The result of these two factors plus the
economies of scale that companies have
in offering a benefit to 25 people
instead of just 1 is lower pricing.
Another great benefit of offering term
life to employees is that it may be
guaranteed issue. This means, your
group may qualify under more lenient
guidelines (since adverse selection is
less of an issue) or regardless of
health status/history. The
option of guarantee issue underwriting
is partially dependent on size of your
company with guaranteed issue being more
likely the larger company is.
Lower
pricing and guaranteed issue are great
benefits but the real reason most
employers offer group term life
insurance is simple...employee's want
it. Aside from the worrying
feeling of not having it for themselves
on a personal basis, employees see it as
a part of a complete benefit package.
The fact that an employee is working
already tells you that there is a need
for life insurance. As we
discussed in our
term life insurance
needs article, the best approach is to
think of life insurance as replacement
of lost income over a period of time.
Employers have found that by offering
what is a very inexpensive benefit
(Group term life), they are able to
attract and retain better employees.
Even though they may (hopefully not)
never have to use this coverage, there is a
"stickiness" factor by offering the
benefit to employees. Health
insurance is the benefit that's really
critical because of the large risks it
protects from but life, dental, and
vision all have a stickiness quality
that keeps good employees 1) happy; and
2) with you.
Offering term life insurance to
employees is also one of those decisions
that eventually you may look back on
and sigh. There's nothing worse than
losing an employee and explaining to the
family members that you did not offer group
life insurance. Hopefully the
family members never ask what the cost
would have been. That's not a
conversation you want to have over
$7/month savings.
Send us your
group census information (ages, zip
code, amount of life insurance) and
we'll get a quote right over to you.
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