How to Provide Better Coverage for Employees

As companies struggle to attract and retain people, there are ways to make life insurance more effective for—and attractive to—your employees. 

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HR managers haven’t had it easy since the onset of the Great Resignation. Employee turnover has become an increasingly dire problem for businesses. In the last year, more than half of all professionals have expressed a desire to change jobs, even to apply to completely new industries. So, HR managers have good reason to seek better ways to motivate employees to stay. Unfortunately, that’s easier said than done. 

One area of employee benefits that has been largely overlooked is life insurance, even though half of employees see life insurance benefits as more important now than before the pandemic. In fact, 80% of workers are highly interested in workplace life insurance benefits, which means companies that offer such benefits have a higher chance of retaining employees. 

That said, the current methods employers use to provide life insurance are less than ideal. The coverage amounts for group life insurance are usually inadequate to protect employees’ families in the event of a worker’s death. Group life insurance, as it’s currently designed, isn’t enough to allow companies to hang on to valuable employees.   

Fortunately, there are ways to make life insurance more effective for—and attractive to—your employees. 

Why Group Life Insurance Is Inadequate

As significant as life insurance is when a family really needs it, few employees give it much thought when they’re considering their benefits packages. They don’t realize the coverage is usually insufficient to provide financial stability for their families in the event of a tragedy. 

Some two-thirds of employees in the U.S. rely on life insurance in the form of employer-provided group policies. Although group insurance plans look good on paper, they tend to offer much less coverage than expected, sometimes as little as $25,000. Considering how many workers may have unpaid student debts, mortgages and dependents to care for, such low amounts are clearly not enough. Knowing this, many employers allow workers to purchase supplemental policies to increase coverage, but these aren’t guaranteed issue and may only reach up to $300,000 or less, which is still insufficient for many families. 

Additionally, group insurance plans through an employer generally aren’t portable, because the employer owns the policy, even though an employee may be paying a portion of the cost. Employees may not even realize that they’re paying into a policy that will essentially be null and void if they change jobs. 

Finally, because most companies rely on a single carrier to provide group life insurance to employees, workers may have limited options for coverage. Employees often find they have little to no control over life insurance benefits as offered through the workplace, even if such policies are easy to get and inexpensive. 

HR managers would do well to look closely at employee satisfaction regarding benefits packages. About 43% of people who resign from their positions claim that they did so at least in part because of inadequate workplace benefits. What most HR teams don’t realize is that they can easily offer employees much better options. 

See also: Adopting a New Mindset on Benefits

Ensuring Proper Coverage

HR managers can start to improve coverage by educating employees regarding life insurance benefits. For example, at least a third of employees don’t realize just how inadequate coverage offered through a group policy can be. A quarter of families will start to experience financial hardship just a month after the death of a primary wage earner, and nearly half will experience financial hardship within six months. And that’s primarily due to the low coverage amounts in group policies. 

Individual life insurance plans can be surprisingly inexpensive, contrary to popular belief. Around half of Americans overestimate the cost of an individual life insurance policy, often by at least three times. In fact, individual life insurance is typically available at almost the same cost as group plans and will likely provide much better coverage. For the same money, employees can receive coverage amounting to around $500,000. Knowing all this will encourage employees to seek supplementary life insurance or individual life insurance plans. 

Another area that many employees lack knowledge about is how easily and quickly they can obtain an individual life insurance policy. Many such policies in the past required medical exams, extensive paperwork and a long processing time, up to four weeks. But with accelerated underwriting and instant decision policies, workers can now get life insurance policies completely online within a matter of minutes, with no medical exam required. 

Besides educating employees, HR managers should work closely with company decision makers and insurers to create more life insurance options for employees. Ideally, companies should form relationships with multiple carriers, so employees can shop around for more personalized life insurance benefits. 

Final Thoughts

The way that you provide life insurance benefits matters. If nothing else, it’s a great way of showing employees that you genuinely care about them. Workers who feel like their employers care about them are nearly 70% less likely to pursue other employment opportunities. 

If you’re just checking a box by providing basic group coverage without helping your employees acquire adequate life insurance, your group plans can actually backfire and produce dissatisfaction. By contrast, if you can help employees find individual life insurance plans that offer adequate coverage, then employees will know you care about their well-being. You’ll likely experience less employee turnover and higher productivity as a result.

Bob Gaydos

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Bob Gaydos

Bob Gaydos is the founder and CEO of Pendella, which automates underwriting through AI and big data.

Over the last 10 years, Gaydos has founded, invested in, advised and operated innovative companies in the benefit and insurance industry, such as: Maxwell Health, an online benefits administration platform acquired by Sun Life in 2018; Connected Benefits, an online insurance agency acquired by GoHealth in 2016; Limelight Health, a group underwriting platform acquired by Fineos in 2020; GoCo, an online platform for HR, benefits and payroll; and Ideon (formerly Vericred), an innovative data services platform powering digital quote-to-card experiences in health insurance and benefits.


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