6 Key Benefits of Life Insurance
Over the years, I’ve met with various employees, all at different phases of their career and in a variety of different industries, to discuss their employee benefit offerings. Quite often, the younger the employee, regardless of the industry they’re in, the less knowledgeable they are on benefits. Their largest concern tends to be the payroll deduction associated with the benefits they’re choosing. Their goal is to keep the deduction as low as possible and not elect anything perceived as “unnecessary”. There’s often a lack of understanding on why some benefits, such as life insurance, may be worth a second look.
Life insurance is often perceived as a coverage that’s only needed if you have children or at least married. Employees think that because they don’t have dependents there isn’t a need for this coverage or the deduction that often comes with it. I was once asked by a young man in his mid-20s, “Why would I want someone to financially benefit from me dying? They should be sad. Not happy.”
Although I can somewhat understand his (young) thought process, I would argue that single employees need life insurance too, and the best place to start is with employer-sponsored plans. Here are six reasons why single employees at your organization may want to reconsider this coverage.
- There’s guarantee issue. Most employer-sponsored plans that offer voluntary life have term life policies. These plans tend to offer guarantee issue which means the employee is guaranteed a certain level of coverage without having to go through underwriting approval. If coverage is waived, any amount elected later down the road will need to be approved by underwriting. The time to elect coverage is when you’re initially offered this benefit. There’s no need to be overinsured, but when you’re young and healthy, you’re also likely going to have no problem getting approved for amounts over the guarantee issue if you want even more coverage.
- Coverage is often portable and offered at group rates. What if the job the employee has isn’t their dream job, rather their here and now job? I get it – many don’t see the value in electing life insurance if they don’t see themselves staying with that company for very long. Most of these life plans, however, are portable and not only is the coverage typically guaranteed when initially offered, the price is typically cheaper than what one will see in the individual market. If they leave employment and go elsewhere, they can compare the cost and coverage and make an educated decision at that time on what plan would be best. The employee then has options.
- Single status may not be your permanent status. Life goes by fast. You graduate college, find a job and then you blink your eyes and BAM! It’s ten years later. Many waive voluntary life, because when they were first offered it, they were single – not really realizing or caring they may not be single forever. No time like the present to start planning ahead!
- You don’t have to have a “ring on it” to be in a relationship. I often encounter individuals that check the “single” box on their application but are in a long-term relationship where there’s shared financial responsibility. If two people are splitting rent or a mortgage and one passes, what happens to the other person if they relied on that financial support? To simply assume that because someone isn’t married and, therefore, doesn’t need coverage is really not keeping the person’s best interest in mind.
- Others depend on you or will in the future. You may not have dependents, but do you have parents that you help support or can see yourself helping as they get older? Maybe you have a brother or sister that for some reason may need financial support. Everyone has a different situation when it comes to how others rely on them or how they may rely on them down the road for financial support. This may or may not matter to the single individual at the time. If it does, life insurance can really help offset some of that financial-related stress.
- Who wants to be a financial burden? It’s expensive to die. I’ve read that you need to anticipate anywhere from $7,000 to $10,000 for a funeral. Single or not, someone has to pay for this. In addition, many young, single adults carry debt. At one time or another, they may have needed co-signers to help them purchase a car or to obtain school loans. In the event they were to pass, they’re now leaving their co-signers (likely mom or dad) to deal with those loans. Mom and dad not only lost their child, but between the cost of the funeral and any outstanding loans, they now have to suffer the financial ramifications of their child’s passing.
There will be times when a single individual can and should pass on the voluntary life insurance offered to them by their employer. Yet, I think there are more times when there are strong reasons why they should reconsider this benefit. As long as the employee understands why taking this coverage could be beneficial – they can then make a decision that is best for them. For more information on life insurance and how to educate your employees on this benefit, contact us today.
- Life Insurance Calculator
- Seinfeld and Your Employee Benefits
- The Value of a Long-Term Employee Benefits Strategy
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