Though it may seem like COVID-19 has taken a backseat in today’s headlines, the Life Insurance Marketing and Research Association (LIMRA) has seen the pandemic as a continued influencer of life insurance ownership. With such a life-altering event for many generations, realizing how precarious life can be may have made our population more aware of the need to protect their loved ones.

Competition for attracting and retaining great employees is intense, which makes providing the benefits your workforce wants essential. With employees increasingly relying on workplace life insurance to protect their families, a strong life insurance policy is an attractive benefit. But a policy is only as good as the financial strength of the company that issues it. As we conclude Life Insurance Awareness Month, it’s important to ensure that your business is providing the right coverage and benefits for your employees.

Here are three key benefits your company should consider for you and your employees:

1. Employer-paid, Individual Term Life Insurance

For an employer, life insurance can do so much more than replace income. In fact, 42% of Americans say their household would face financial hardship within six months should a wage earner die unexpectedly. Providing a life insurance policy can be an extra incentive for key personnel, a part of a well-crafted benefits plan and a valuable benefit for employees.

As an employer, consider an individual, simplified-issue term life insurance policy benefit for key employees without the hassle and uncertainty of medical underwriting. It’s an excellent way to provide a fringe benefit. Your plan may allow an employee to name their own personal beneficiary. For highly compensated individuals whose coverage is capped under an employer's group life insurance plan, this is an ideal solution to provide an employer-paid, guaranteed 10-year level term policy.

This fringe benefit is ideal for industries such as manufacturing, distribution, legal, building/construction, medical services, public entities and financial services.

2. Understanding Group vs. Individual Life Insurance Options

As open enrollment season approaches, it’s common that employees are offered a variety of choices to elect life insurance coverage for themselves and their families. Evaluating options can be confusing, and many employees take the path of least resistance by checking the box for optional insurance. This choice can lead to higher premiums and limited policy features than what’s available in the individual life insurance market.

For the company, there are two important parts to getting you and your employees through the enrollment period. First, getting comfortable with how much coverage is adequate and what types of policies are available requires a conversation with someone knowledgeable about life insurance. Your provider should be your partner in the process since there’s a need to be underwritten for a personally owned policy.

Second, about two in five adults who participated in the 2023 Insurance Barometer Study’s survey said they’re only somewhat or not at all knowledgeable about life insurance. Therefore, it’s critical that a strategic communications process starts before the open enrollment period, so the employee understands the costs and product options available to them. There may be situations where, due to health considerations, an optional employer-sponsored plan is the only available option. Your company should prepare communications for employees, as well as working sessions where they can ask questions. This typically requires an outside representative through the provider who can answer specific questions.

3. Providing Key Person Coverage

The loss of a key employee can cripple a business, especially a small to medium-sized one. When a key employee with specialized knowledge or key account relationships dies unexpectedly, a business can suffer setbacks to morale and revenue. An inexpensive and elegant solution is the purchase of a key person policy. This coverage is generally a term insurance policy for a term length that corresponds to the needs of the business.

The business is the owner, beneficiary and payor of the policy. Proceeds can be used to offset the short-term losses suffered by the untimely death of the key employee and provide a buffer if the replacement commands a higher salary.

Life Insurance Awareness Month provides an opportunity for employers and employees to become more informed about this important protection. Even for those who understand the value of life insurance, a gap is still recognizable between how many need coverage and how many have it. The experts at CBIZ can help employers better understand their options for employees. Connect with a member of our team and gain access to more resources here.

This article includes input from Anne Long, President of CBIZ Individual Insurance Solutions. Through Anne’s collaborative relationships with key partners, she helps establish business development, product development, risk, finance, technology and operations in individual insurance product lines.

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