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Voluntary Life Insurance: A Benefits Solution Among Challenges

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Every September, agents and brokers across the country turn their attention to Life Insurance Awareness Month (LIAM). With this comes all the statistics about the abundance of underinsured Americans today and articles reporting the break down and what it means in the current economy.

However, while LIAM should serve as an annual reminder to agents and brokers about the great opportunity to close life insurance coverage gaps, it seems the situation still has not improved.

While statistics announced during LIAM 2009 revealed that Americans recognize the importance of owning life insurance, the number of policyholders who have scaled back or dropped insurance completely is a clear illustration that Americans are unclear on solutions. Among Americans who altered their life insurance coverage last year, one-third lost coverage completely as a result of a job change or loss, according to The Life and Health Insurance Foundation for Education. Meanwhile, 11 percent decreased coverage and 14 percent cut life insurance coverage completely.

Identifying a problem or challenge is an important first step that helps uncover an opportunity. However, it’s time to shift the conversation from the problem to focus on viable solutions. Simply telling consumers to close the gap is not enough. Agents and brokers need to understand the options and pass their knowledge along to clients, acting as consultants and making tangible recommendations based on their clients’ individual needs.

This must go beyond the important act of explaining the difference between life insurance policies, to taking into consideration the solutions that are best for different life stages. A single woman fresh out of college has different needs than a newly married couple or one expecting children. And with 83 percent of employers citing “controlling cost of benefits” as a key challenge, according to LIMRA, age, life situation, and employment status don’t eliminate the threat of losing coverage.

A voluntary solution

In a market with such a diverse array of products, clients are looking for simple, straightforward solutions that lead to financial security and provide their workers with peace of mind. According to LIMRA, almost 75 percent of middle-market Americans feels they need life insurance as a financial security product. With more and more employers shifting benefits costs to employees, it’s no surprise that Americans feel the pressure to take their financial security into their own hands – and life insurance plays an important role in that.

Voluntary life insurance is one solution that’s overlooked. Though it can be used as a standalone policy, the purpose of voluntary life is to supplement existing life policies to help attain financial security – and keep it. Fifty-six percent of married parents feel that their current life insurance coverage is inadequate, which spells an enormous opportunity for agents and brokers who can offer voluntary life insurance policies to round out that coverage.

Voluntary life insurance options are simple, flexible, and pay policyholders cash benefits. Many providers offer whole and term life insurance policies, which are two of the most widely understood and straightforward policies on the market. As Americans are doing what they can to safeguard against future financial risk, voluntary life insurance addresses a number of concerns — some stemming from the economic crisis and others that have long existed.

  • Coverage in retirement. More and more Americans have delayed their retirement to rejoin the workforce as a result of the financial crisis. Voluntary life insurance offers whole and 10-year term life policy options that extend to age 70. This covers retirement-aged Americans longer than before and allows them to breathe a little easier when it comes to financial stability.
  • Unemployment. Another serious concern stemming from the economic uncertainty of the past couple of years is the ability to maintain life insurance coverage in the face of layoffs. Individual voluntary life insurance policies are portable, so whether a policyholder is laid off or decides to leave their company, they don’t need to rush into another job just for the life insurance coverage.
  • Access to cash. In any economy, cash access is important. Many voluntary life insurance policies begin to accumulate cash value as early as three years into the policy. This money can be borrowed against for a variety of different reasons, from starting a business to helping fund a child’s education.
  • Changing needs. Riders are also available to help meet policyholders’ changing needs. Many Americans reassess their life insurance needs during such major life events as getting married and having children. Juvenile life insurance is a good example, allowing for future insurability maintained at a competitive rate. Given the epidemic of adult and childhood obesity in the United States and instances of Type II diabetes, it’s more important than ever to make sure children are insurable as adults.

As life insurance statistics are released and reported on throughout the month of September, agents and brokers should be mindful not only of the problems being measured, but also of the solutions available to their clients. As always, education is a key element of providing clients with the coverage they need — and in order to make a change, the conversation needs to go beyond defining the basics of life insurance to include a holistic view of life insurance solutions.

Ronald J. Sanders has nearly 30 years’ experience in a variety of roles at Aflac, most recently as senior vice president, deputy director of sales, and vice president, Southwest territory director. He can be reached at 800-99AFLAC.