According to the U.S. Department of Labor, employers in 2008 have been spending 30.2% of total compensation dollars on employee benefits, up from 27.4% in 2000.
In view of the cost squeeze employers face, much of this attention focuses on medical and retirement group benefits. This overshadows one other important group benefit–group life insurance.
Ignoring or not emphasizing the value of group life insurance could mean employers and benefits brokers are overlooking a good opportunity to improve employees’ view of the total value of their benefits package.
Reasons that employers often look beyond group life vary, but a central idea for many is that life insurance is not a pivotal benefit and not likely to be viewed by employees as very important.
For some employees, enrolling in group life programs can be a distraction when they must put so much effort into deciding among various health care and retirement saving options, with their matches, vesting, deductibles, co-pays and premium levels.
What’s missing from all of this is the understanding that, while choosing the “wrong” health plan might cost an employee several hundred dollars during a plan year, failing to choose an appropriate level of life coverage could cost an employee’s family hundreds of thousands of dollars and place survivors in a position to lose the wealth and real estate the family has worked so hard to secure.
For group benefits brokers, there’s some good news. On the whole, Americans continue to view life insurance as a key part of their financial security, according to a recent ING survey of over 2,000 adults ages 18+. Furthermore, they want assistance from employers and–in the case of individual life policies–from agents in sizing their life insurance requirements and buying the competitively-priced life products they need.
Conducted in late 2007 and early 2008 by Ipsos Public Affairs, the survey demonstrates the central role life insurance should play in a comprehensive financial plan.
For group benefits brokers, the findings mean that, to help meet the changing or hidden needs of employee groups, brokers can help employers ask the right questions (some are shown in the chart).
As for answers, the ING survey offers some insight. For example, 67% of the adults surveyed said their death or the death of a spouse would have an extremely or very negative effect on their family’s financial future. In fact, many said that such events as falling home prices, a stock market crash, Social Security becoming insolvent, an economic recession, a pay cut and higher interest rates on loans and mortgages would have less of a negative impact on their family’s financial future than premature death.
In view of that, an active benefits broker can position group life as essential ‘protection’ for employees’ savings, rather than solely money for a funeral. In other words, employees should view their employer group life as a protective benefit for their family by putting a plan in place based on their needs and life stage.
It’s worth noting that despite life insurance’s relatively low profile, 85% of the adults surveyed agree that people “in their situations” should have life insurance.
Their reasons for doing so vary among generations: Generation X (ages 33-42) and Y (ages 18-32) were more likely than their older counterparts to envision life insurance handling a broad variety of potential needs. For example, they were more likely to view life insurance as a resource to fund funeral costs and household expenses. Surprisingly, they also were more likely to view life insurance from a legacy standpoint, seeing it as a means to leave behind money “enough so that no one in their family ever needs to work again.”
Thus, as the demographics of the U.S. continue to change, so must brokers and employers change their way of thinking about life insurance options for employee groups.
Nearly every large group employer now has online tools and calculators to encourage employees to calculate their life insurance needs to secure a meaningful amount of coverage. But, these tools must be accompanied by sophisticated educational approaches.
Broker help may take the form of assistance with shaping educational programs, holding workshops and seminars, providing even better automated enrollment tools, and delivering highly responsive insurance options that meet the needs of a changing workforce.
With the right effort and momentum, benefits brokers can assist clients in helping Americans close the gap between their wish for financial security and their ability to achieve it. They also can help improve employees’ perceptions of the value of their benefits–and continue to build a successful broker business in the process.