The Need For Supplemental Life Insurance Benefits

As an employer, you are keenly aware of the increasing costs associated with company-provided benefits. On an average benefits costs add an additional 37% to payroll. Some benefits are obligatory; others you provide because you recognize a good investment in promoting good will with your employees.

Today's employees generally are offered some form of group term life insurance at little or no cost to them. Most of the time this protection does not meet employee personal and family needs. Here are just a few examples of the limitations which make many plans unsatisfactory:

• Limited Coverage: The coverage is limited in amount and breadth. In the average company, 50% of the employees have no life insurance other than the group term life coverage provided by the employer. However, only 13% of all death benefits in our society are paid by group term life plans.
• Inadequate for Retirement: Group term life insurance coverage typically is in effect only during preretirement years. Ninety percent of all group term life plans terminate or dramatically reduce benefits at retirement or age 70. Yet, 80% of the present active employees will live past the age of 68 (Statistic provided by the Life Insurance Marketing Research Association - LIMRA).
• No Cash Value: Term coverage is a death-only benefit; it does not build cash values for emergencies or retirement.

IN ADDITION...

Families with annual incomes of $30,000 or less generally are not contacted by experienced insurance agents for professional counseling and advice. Statistics show that 90% of the life insurance agents in our country sell to only 20% of the population. Since individuals rarely seek out a life insurance agent, many people who could benefit from coverage never are presented with the opportunity to purchase this means of protection.

Employees with health related problems many times cannot be insured by most carriers. Also, if such employees are offered insurance, the premiums they pay for such coverage is usually rated up which often times prevents them from buying an adequate amount of life insurance (because of personal household budget constraints).

Meeting application requirements -- meeting with an agent, taking a physical, and paying the first two or three months of premium in advance -- also can make it very difficult for the average employee to obtain adequate life insurance coverage.

Because of the above obstacles your employees often cannot purchase the life insurance that they need when the need arises. Yet, they still have to plan for the future and prepare for the unexpected. You, as the Employer, can significantly assist them in this regard at little or no direct cost to you and significantly increase employee morale and good will at the same time.

Providing your employees with quality benefits is a solid investment in productivity, longevity, and loyalty, and better yet, using supplemental, payroll-deducted insurance products provides Employers with a cost-effective method for "rounding out" the employer-subsidized benefits package that it already provides its employees with.

The payroll deduction insurance products which Benico, Ltd. offers to its Employer clients in this regard are products that are specifically designed for mass marketing. Further, Benico's product portfolio includes not only life insurance products (individual or group universal life depending on the account's size), but supplemental disability income, dental, long term care, group homeowners, and group auto as well. For sake of brevity, the following remarks will be confined to payroll-deducted life insurance products.

Payroll-deducted universal life insurance products provide employees with low-cost insurance protection in addition to a tax-deferred investment account that earns competitive market rates. Offering your employees universal life insurance benefits you, the Employer, in a variety of ways, including:

1. Elimination of premium expense to you ... your employees pay for their plans entirely.

2. Eliminates the need for employer-provided post-retirement death benefits ... the coverage selected by your employees goes with them into retirement with no reduction in coverage. Employers which currently fund post-retirement death benefits can, with such a plan, eliminate the high cost of continuing post-retirement coverage, which, with recent FASB rulings concerning recognition of the present value of unfunded post-retirement benefit obligations, is becoming a major cost and accounting issue with such Employers.

3. Provides greater family coverage ... life insurance protection is extended to the spouse and dependents without need for the employee's participation.

4. Requires no ERISA or government reporting. Payroll-deducted insurance programs are also exempt from COBRA requirements, and upon an employee's employment termination the employer has no further obligation other than to cross the person's name off the premium statement (Note: The insurance company, upon learning of the termination, offers the former employee a direct bill arrangement.).

5. Supplements existing company-provided benefits with additional life insurance on an "as needed" basis.

6. Builds good will ... by providing a program which is available only to your employees. It's only as a result of the Employer's "sponsorship" of the program (e.g. sponsorship to the extent of providing a facility for employee meetings and setting up payroll deductions) that your employees have access to the program.

The features of the program include:

• Family protection ... coverage can be obtained by employees for themselves and/or their spouses and dependents.
• Liberalized underwriting: Depending on the size of the account Benico, Ltd. is able to secure liberalized underwriting requirements from its carriers. Typically the insurer will offer up to a certain amount of coverage on a guaranteed issue basis, and then any excess amounts are typically issued subject to the employee's/dependent's providing the carrier with an Evidence of Health statement which contains only 3 or 4 medical questions.
• Advantage of payroll deduction ... which is a very convenient payment mode. No statements to worry about, premiums are deducted from the employee's paycheck.
• Portability ... with the employee being the owner of the policy, should he or she ever decide to leave the company, the coverage may be retained by direct payment. Coverage and premiums remain unchanged.
• Flexibility ... Each employee's plan is designed to meet his or her specific needs and financial situation.
• Voluntary participation ... The employee alone decides whether or not to participate and to what extent.
• Builds cash on a tax deferred basis ... Building wealth accumulation for use to fund children's educational needs, emergencies, or a nest egg for retirement.

Click here for information concerning a recent survey, conducted by the International Society of Certified Employee Benefit Specialists (ISCEBS) which talks about the upswing in popularity of voluntary employee-paid benefit programs.

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