Group Insurance




Vision & Dental

Strategic Partners

Supplemental Benefits

By Theresa Semple

Many people fail to understand the importance and value of life insurance until it’s too late. The majority of those who do enroll for life insurance typically do so through their employer. Sadly, when unemployed, most people lose their life insurance benefit. Offering a life insurance to your employees can offer a multitude of benefits for them and encourage loyalty to your company.

Employer-Provided Life Insurance

When a company pays for a life insurance policy on behalf of its employees, this is known as employer-provided life insurance. This coverage typically provides a lump sum payment to the designated beneficiary or beneficiaries upon an employee’s death.

It’s typically less expensive for employees to get life insurance through their employer due to the lower rates offered by insuring a group. As an employer, you can consider offering group-term life insurance benefits to all full-time employees. The benefit for the employees is they often pay less for life insurance and can often avoid getting a medical exam ahead of time, as if traditionally required when seeking out private life insurance coverage.

According to the Life Insurance Marketing and Research Association (LIMRA), approximately two-thirds of employed Americans in 2021 relied on workplace life insurance (theirs or another family member’s) to meet their life insurance needs. This has turned out to be especially true for millennials.

The Bureau of Labor Statistics reported in 2020 that about 60 percent of private-sector employers offer group life insurance, and 98 percent of employees take it. An article by Forbes regarding life insurance reports the percentage of Americans with life insurance is about 52 percent including individual and workplace policies. About one in four American adults surveyed by Forbes Advisor is covered solely by an employer-based life insurance policy.

The Impact of COVID 19

When the COVID 19 pandemic hit, it made people more aware than ever that they needed life insurance. The 2021 Insurance Barometer Study by LIMRA, found that 27 percent of adults lost their life insurance coverage in 2020 due to an unplanned loss of employment. Women were more likely than men to report losing their coverage. This was the result of layoffs when companies shuttered during the pandemic, employees were laid off, and parents, mostly mothers, had to stay home with children as schools closed.

On the flip side, the same study showed that the pandemic increased the likelihood that people would purchase life insurance. Nearly one in three or 31 percent of people asked reported that they were more likely to buy life insurance because of the pandemic. The study also found consumers started placing a higher financial prioritization on life insurance as a result of the pandemic.

Life insurance ownership has increased for both Generation Z, people ages 18 to 26, and for Millennials, those ages 27 to 42, according to LIMRA. Between 2022 and 2023, the percentage of Generation Z life insurance policy holders increased from 34 percent to 40 percent. The percentage of millennials with life insurance also increased in that same timeframe from 45 percent to 48 percent. This demonstrates how even younger generations of workers are making life insurance a financial priority. Even more employees in those generations report life insurance as important, but many believe that it’s simply too expensive for them to afford.

Benefits of Life Insurance

One of the most important benefits of an employee having life insurance is that it offers a sense of financial security.

“Among insureds with financial dependents, 68 percent feel secure, compared with 47 percent of non-insureds,” according to the 2022 Insurance Barometer Study. “Consumers with overlapping sources of coverage have the highest likelihood of feeling secure.”

There is a sense of security with knowing that if something should happen to your employee, their family and final expenses will be covered. Some life insurance policies grow cash value over time or even allow your employees to take out a policy loan if they should need it.

Another benefit is that as life events and needs change, employees can typically increase their coverage. For example, an employer may offer the option of paying an additional premium to increase their basic protection.

As an employer, you can typically provide your employees savings on life insurance because group rates are less expensive than individual rates. In addition, if you as the employer cover the premium cost, they can save that money they would have spent or redirect it to their other financial needs.

Most employee’s life insurance plans are also guaranteed. What that means for your employees is that they can have life insurance coverage regardless of whether they have a serious medical condition or not. Many times, they aren’t even required to have a physical conducted for them to be approved for coverage.

“When asked, 68 percent of all workers believe a life insurance benefit is important to them or their families,” according to the Facts About Life 2021 Workplace Benefits report by LIRMA. “Life insurance products with features that allow employees to keep their coverage (portability, continuation during a temporary loss of work) and provide access to family members are most important to employees.”

Finally, getting life insurance is often a matter of convenience. They don’t have to conduct a bunch of research or call around to insurance carriers. If you offer your employees the benefit of life insurance, then getting started with their coverage is simple because all they have to do is opt-in.

These added benefits are a great carrot when it comes to hiring and retaining quality employees.

Cash Value Life Insurance

Another option for life insurance coverage is a cash-value life insurance policy. This option provides your employees with life insurance protections in addition to building savings within the policy. Such cash value can be useful for employees because it gives them the opportunity to take a loan from their policy when they need it or it can be surrendered in one lump sum for the cash value on a given dates.

Group Term Life Insurance

A group-term life insurance policy is a contract between your business and the insurance company that covers a specific period of time. The group term life policy is meant to provide death benefits on the life of your employees during the specified time period for a set price.

There are different types of group-term life insurance policies. For example, carve-out plans allow you to remove highly compensated employees from the group term coverage and provide them with individual life insurance policies as an added benefit. Some group term life insurance plans allow the employer to pay all of the policy premiums while others allow the employee to make part of the cost contribution. These are known as noncontributory and contributory policies.

Group Whole life

In addition to cash value and group term life insurance policies, there is also the option of group whole life. Under these policies, the employee pays a fixed premium for the duration of their lifetime or over a lesser period of time. There are many variations of group whole life insurance. This type of life insurance allows your employees to have employer-paid life insurance for a given term but they can pay for additional coverage for permanent group life insurance as well.

Things to Consider

As an employer, you need to consider the draw that adding a life insurance benefit offers to your company. How will it attract better employees and help you retain them?

You’ll also want whatever plan you choose to fit within your budget. That can mean looking at different types of group life insurance options as well as the term that is covered.

All life insurance benefits should be extended to all full-time employees and must be nondiscriminatory. You’ll also want to ensure that your business is getting the most tax benefit by offering life insurance. Your insurance agent and tax professional can assist you with the latter.

The bottom line is that most Americans find it easier to get life insurance through their employer because it comes at little to no cost to them.

To learn about affordable group life insurance options for your small or medium business, visit Semple Solutions now at https://semplesolutionsllc.com/group-life-insurance or call us at (732) 238-6734. Our professionals are here to answer your questions and help you find the best benefits for your employees and your business budget.

Skip to content