Term life insurance is becoming a very popular benefit to offer to employees as part of a comprehensive benefits package. Increasingly, employers are realizing that attracting good talent means matching what large companies are offering and term life is usually part and parcel of such a plan. Let’s look at the benefits of offering this type of benefit to your employees.
I don’t how else to say this but group term life is cheap. When employers approach us to quote term life for their companies, they usually are surprised by the final quote. Unlike the ever-increasing specter of health insurance, they’re actually shocked in a good way. Term life has decreased in priced significantly over the past decade but the group option is even less expensive due to larger risk pools and a little term called adverse selection.
As we discussed in our term life and risk article, the larger the number of people sharing risk on one policy, the better. This by definition IS insurance. If a group of 25 employees are getting group term life, not only are they entering the risk pool with all the other companies out there, they already have a built-in risk pool of 25 people. Even better. As for adverse selection and life insurance, this term means that a person hopes to gain an unfair advantage over a life insurance company based on information he/she has (and the company does not). For example, if I am not diagnosed with anything but I feel that something’s “wrong” with my health, I might apply for term life insurance. The paramedical exam may not pick up the issue and I answer the application correctly but two years later, I keel over from a heart attack. This is (a form of) adverse selection. Small group term life eliminates this “interest of the one person” selection by the simple reason that it’s a group of individuals. The result of these two factors plus the economies of scale that companies have in offering a benefit to 25 people instead of just 1 is lower pricing.
Another great benefit of offering term life to employees is that it may be guaranteed issue. This means, your group may qualify under more lenient guidelines (since adverse selection is less of an issue) or regardless of health status/history. The option of guarantee issue underwriting is partially dependent on size of your company with guaranteed issue being more likely the larger company is.
Lower pricing and guaranteed issue are great benefits but the real reason most employers offer group term life insurance is simple…employee’s want it. Aside from the worrying feeling of not having it for themselves on a personal basis, employees see it as a part of a complete benefit package. The fact that an employee is working already tells you that there is a need for life insurance. As we discussed in our term life insurance needs article, the best approach is to think of life insurance as replacement of lost income over a period of time. Employers have found that by offering what is a very inexpensive benefit (Group term life), they are able to attract and retain better employees. Even though they may (hopefully not) never have to use this coverage, there is a “stickiness” factor by offering the benefit to employees. Health insurance is the benefit that’s really critical because of the large risks it protects from but life, dental, and vision all have a stickiness quality that keeps good employees 1) happy; and 2) with you.
Offering term life insurance to employees is also one of those decisions that eventually you may look back on and sigh. There’s nothing worse than losing an employee and explaining to the family members that you did not offer group life insurance. Hopefully the family members never ask what the cost would have been. That’s not a conversation you want to have over $7/month savings. Send us your group census information (ages, zip code, amount of life insurance) and we’ll get a quote right over to you.
