Group Life Insurance: Contributory V. Non-Contributory

Business owners in today’s competitive job market recognize the importance of attracting and retaining quality employees. Providing group life insurance is an economical way for you to provide a quality benefit that your employees will value and appreciate.

Group Life insurance covers the lives of multiple persons, such as some or all employees of a business, or members of a labor union, or members of an association. The person owning the master group policy in the above examples are the employer, the union and the association, respectively. The insured persons, whether they get the life insurance as an employee benefit, or make a contribution to its cost, or pay for it completely themselves, generally may name their own beneficiaries and are issued certificates that are subject to the underlying Group Life Policy. (Source: law.freeadvice.com)

As an employer, you have two options when it comes to what type of group life insurance you chose to provide to your workforce:

Non-Contributory (Employee Benefit)

As discussed in last week’s blog, many employers are beginning to offer ancillary products as an employee benefit to their staff, even if they aren’t currently offering major medical coverage. Among one of the most popular ancillary benefits offered by employers is group life insurance. If you opt to add group life insurance coverage as an employee benefit, the cost is relatively low per employee and your employees will appreciate the gesture. In this example, non-contributory means the employer pays 100% of the premium.

Contributory (Voluntary)

The benefit to offering voluntary life insurance to your employees is that they normally receive automatic-issue policies (not subject to medical underwriting, as is the case with individual policies). They will also receive a group discount, therefore the rate would be cheaper when part of a group policy versus opting to purchase an individual policy on their own. Even if you as the employer do not contribute to the premium, it is a value-add to the employee, as they most likely are receiving a reduction in premium.

Next week, stay tuned for more information about dental insurance as an ancillary benefit offering to your workforce.
 
Until then,
M.J.

The Importance of Life Insurance & Why It's Never Too Early To Purchase!

One of the most commonly heard rebuttals for opting out of life insurance is “I’m still young, I’ll wait until I’m older…” While it may seem like life insurance is for later in life, there are many situations in which life insurance is almost always a necessity NOW!

As difficult as the concept may be to grasp, accidents happen – all too frequently. People predecease their time every single day and families are left to endure not only the emotional repercussions caused by the death of a loved one, but also the financial burdens it almost always ensues.

If your employer offers you a life insurance policy, it is not something to be solely relied on. While every bit of life insurance helps, if you lose your job – voluntarily or involuntarily – your policy does not go with you. It will only protect you while you are employed. It is also important to note that the amount of life insurance benefit offered through most employers often is not enough to adequately benefit your family in the event of your death.

Let’s evaluate a possibly scenario: John Smith is a 32 year old engineer and is the primary income source for his family, consisting of his stay-at-home wife, Sue, and their two children. John & Sue have a $400,000 mortgage, two auto loans and are trying to put money aside for their children’s college funds. John’s annual salary is upward of $150,000, more than enough to support his family’s comfortable lifestyle. John has an employer sponsored life insurance policy equal to two times his annual salary ($300,000) in the event of his death. Now consider this: John gets into a car accident on his way home from work and he dies. John has little money is savings and has no individual life insurance policy. While $300,000 may be enough to support his family for two years based on their current lifestyle, sooner or later the money is going to be gone. In this situation, individual life insurance would be an extremely beneficial asset to John’s family.

As a rule, many financial planners will recommend that an individual purchase an individual policy worth up to 10 times their annual salary. Had John purchased a $1.5 million 20 year term insurance policy on his life, it would have provided Sue the opportunity to pay off their mortgage, vehicle loans, still save for the children’s college tuition and maintain their current lifestyle for many years to come.

If purchased early, life insurance can be extremely inexpensive. For only dollars a month, an extremely generous life insurance benefit may be purchased on a healthy individual (For example, John’s 20-year term $1.5 million policy would have cost him roughly $56 a month). For a minor out-of-pocket expense each month, you could be saving your family from financial ruin in the event of your untimely death. If you haven’t looked into life insurance, I would highly recommend doing so. Start today!

Michelle