Brokers who aren’t selling supplemental life insurance at the worksite to middle-income employees are missing out on an exceptional marketing opportunity.

Today, employees understand the importance of having adequate life coverage, and purchasing it where they work is an attractive option. But because more than 75% of American households don’t have a personal life insurance agent or broker, many potential purchasers don’t know where to begin, according to LIMRA International, Windsor, Conn.

In fact, LIMRA has found that consumers think buying life insurance is a complex financial decision. Half of them are unsure how much coverage to buy and 43% worry about making the wrong decision.

By selling supplemental life in the workplace, brokers and agents can respond to these concerns while increasing their income stream. For employers, it’s a way to expand their benefit offerings without additional cost. For employees, it’s a chance to ask questions during enrollment and purchase appropriate coverage at affordable rates through convenient payroll deduction.

Currently, 93% of employers offer some basic term life insurance, with the average coverage equivalent to one year’s salary, according to LIMRA data. Although this is a good foundation, employees usually need additional coverage to help meet changing financial needs during different life stages. Also, some plans don’t allow employees to take their employer-paid coverage with them if they leave the company, and coverage may end at retirement.

Now, many middle-income Americans are recognizing that they may be underinsured. One LIMRA survey showed that among those who already own some life insurance, 40% believe they don’t have enough. According to the survey, households saying they need more insurance own only enough life insurance to replace their income for 3.6 years. Yet most insurance advisors suggest that employees with dependents should have about seven times their annual income in life insurance.

For many employees, the best solution for maximum protection at all life stages is a combination of supplemental group term and individual whole or universal life insurance. Layered on top of the employer-provided plan, the additional coverage gives employees cost-effective lifetime protection.

The challenge for employees is deciding which type of coverage is right for their needs. Many younger, middle-income employees with little disposable income choose supplemental term insurance because it is relatively cheap and provides a high death benefit. Purchasing this type of insurance early in an employee’s career makes sense because the working years are when higher coverage amounts may be needed to ensure children are educated, the mortgage paid, and ongoing living expenses covered in the event of premature death.

Premiums for supplemental term life insurance, however, rise sharply at retirement, and there may be better alternatives for employees looking for long-term protection, such as individual whole or universal life insurance. While premiums are generally higher initially, this coverage can build cash value by earning a guaranteed minimum interest rate, spreading the cost over the life of the policy. Whole life insurance also can serve as a savings vehicle for employees, helping to maintain a family’s standard of living and covering future financial plans.

For employees, buying whole life during the working years is a smart investment decision that offers several advantages. Employees should be encouraged to buy young, since whole-life premiums are age-based and remain the same throughout the life of the policy. Because employees own the policy, they can take it with them if they leave the company for any reason. Some plans even make spouse and children’s coverage available for employees who do not buy employee coverage.

In addition, employees can borrow from their policy after sufficient cash value has accumulated. Also, the cash value of most interest-sensitive whole life policies can be used to buy a smaller “paid-up” policy, usually at retirement, on which no further premiums are due.

Employees are very positive about buying insurance where they work, and they trust their employers to recommend a reputable carrier. To ensure a successful worksite marketing experience, brokers or agents may want to consider these differentiators when selecting an insurer:

==Does the carrier’s plan offer features such as portability, an accelerated benefit, optional accidental death and dismemberment benefits, financial counseling, or waiver of premium in the event of disability?

==Does the carrier support the product with comprehensive enrollment and communication processes?

==Does the carrier have trained, knowledgeable enrollment counselors who can answer employees’ questions?

==Does the carrier offer Web-based enrollment systems and Internet billing services?

Offering supplemental life insurance at the worksite also gives producers the opportunity at reenrollment to introduce other products, such as critical illness insurance, that middle-income employees need and want.

Joanne McInnis is director of group life product development at UnumProvident Corp., Chattanooga, Tenn. She can be reached at jmcinnis@unumprovident.com.

Underinsured

The Group Life Gap

Typical workers with dependents need death benefits equal to at least 5 times their annual earnings. But death benefits at the majority of group life plans are equal to just 1 year of a participant’s earnings.

2005

2003

Coverage amounts

Less than 1 times earnings

1%

1%

1 times earnings

58%

56%

Over 1 times earnings

41%

43%

Source: Bureau of Labor Statistics, 2003 and 2005 National Compensation Survey data