In order to retain hard-working, top-notch employees, it is important to offer a variety of benefits to help sweeten the pot and entice them to stay at your business. That is why offering group life insurance to your small business is a good idea. It’s not only a good supplement to existing individual life insurance, but it is also cost-effective and inexpensive when compared to an employer paying for medical or a retirement plan.
Group life insurance isn’t generally offered to companies with less than 10 or 15 employees, and when it is offered, it is offered as a part of a “menu” plan. This just means that there are different employee benefits, such as group health, group life, or group long-term or short-term disability that employees may be able to add on to their current group health insurance plan.
An independent insurance broker is typically used with businesses consisting of less than 1000 employees. This broker may recommend group health insurance coverage that provides a list of prices from several different companies. On the average, most employers will purchase all their group insurance products – health, life and disability – through that one broker. Once purchased, the employer will then pay a set amount per $1,000 worth of group life insurance.
For example, if an employer pays 25 cents for every $1,000 of a $50,000 death benefit, it will cost the employer $10.25/month for that employee ($.25 x 50 = $10.25).
On average, small policies are offered on a guaranteed issue basis, which means no medical exam is required from any of the employees that are insured. It is important that employees understand that group life insurance isn’t meant to take the place of individual life insurance policies, because group plans generally only cover anywhere from $10,000 to one year’s salary. One year’s salary isn’t enough to support an employee’s dependents in the event of their death.
The price of a group insurance package is determined by the number of employees, their gender, average age and type of business that you operate. The more hazardous or “dangerous” the job, the more a company will pay per $1,000 worth of group life coverage. Also, the group’s rate is not affected if an employee suffers a severe medical condition, but continues to work. After the policy has been issued, an employee will remain covered in the event they need to take a leave of absence. However, if the employee is on disability or takes a leave of absence before the group life insurance policy is issued, they will not be covered under the plan until they return to work.
Better rates are generally given to larger employers because of the amount they collect in premium, versus that of smaller employers who don’t collect as much. Tiered life insurance policies also typically remain with larger employees, due to the fact that they are better able to afford them. Regardless of the size of your company, it is important to reevaluate your group insurance plan regularly.
A group life insurance plan should be reevaluated and reassessed when your company grows significantly, hires executives with larger salaries, increases in number of employees, the demographics of the employee population changes, or when it improves previously offered benefits. By checking back with your broker as your business grows, you may be eligible for a lower life insurance rate.
When looking for a new or different insurance plan, there are a few different options that an employer can look towards. The first and most basic life insurance plan typically covers one year’s worth of salary. The next step up would be to expand your benefits with a plan, such as a group universal life insurance plan, which can offer two to three times an employee’s salary, as well as offering a portability feature which allows the employee to remain covered after they leave or retire. A group universal life insurance helps build cash towards future premiums, but is generally offered by companies with over 1000 employees, because the cash value account must be individually managed. Also, the employees are permitted to pay in as much, or as little, as they want.
The classification of the employee is also a determining factor when thinking about separate group life insurance plans. For example, an employer may choose to do a flat death benefit payout for certain workers, where as those who hold higher positions (i.e. managers, supervisors, etc.) receive benefits equal to one to three times their salaries.
Spouses and children may be covered in certain extended group life insurance plans, where the company may offer a set payout to a spouse, then a certain set payout to each of the dependent children. When an employer begins offering expanded benefits, the expenses may be passed directly to the employee. An employer can offer so much of a certain benefit, but if an employee would like to add more to it, they may have to start paying for it. Also, blood and urine samples will be taken, tests for whether or not the employee is a smoker or not will be run, and a medical exam will need to be done to ensure the recipient will be covered.
Also, when it comes to offering voluntary group life insurance plans, it is a good idea to research insurers who offer the features that you would like to provide. These may include portability policies, accelerated death benefits, or even a waiver of premium benefits.