Getting Back To Work

Group Life Insurance

Employee benefit or catalyst to financial ruin?

by Bob Gaydos

Mr. Gaydos is CEO & Founder, Pendella Technologies, a technology company that exists to make the financial protection of individual life and disability insurance available to all people, regardless of age, health status or income level. Visit https://www.pendella.com.

In the 1980s, employer-sponsored group life insurance became more broadly available while individual life insurance disappeared from the employer benefits offering as a result of the AIDS epidemic.

During that time, insurance companies began requiring more invasive medical tests and lab work as part of determining a person’s eligibility for an individual life insurance policy, so employers began only offering group life insurance.

Imagine the additional costs and aggravation medical tests like these created for businesses everywhere. The widespread adoption of group life insurance and the omission of offering individual life insurance created two major problems for Americans:

1.) The misperception that group life insurance is all an employee needs to protect their family

2.) A major protection gap, with 106 million American adults now without the financial protection they need to avoid financial devastation

When employees go through the open-enrollment process, they are able to easily enroll in medical benefits and any group life and voluntary life insurance offered by the employer. What’s missing in that process is the option for individual life insurance to fill the protection gap when employees only enroll in group life and voluntary life insurance benefits.

A Typical Scenario

ABC employer provides both employer-paid and voluntary group term life insurance. These two protections afford the employee $50,000 in group coverage (which is also taxable income to the beneficiary) and up to $300,000 in voluntary group life (which may be subject to eligibility).

A typical family with two incomes, two school-aged children, a household income of $150,000, and a $250,000 mortgage has a recommended need of life insurance coverage in the amount of $1.25 million to cover ongoing costs such as common living expenses, college tuition, and the remaining mortgage. With only a group and voluntary life plan, the typical family is left with a deficit of $900,000. This is a major financial protection gap.

What’s more upsetting is the common misunderstanding by employees that they can take employer-sponsored coverage with them when they leave a job. In most cases, the group life insurance policy is not portable, leaving the employee without any life insurance protection. Securing an individual life insurance policy after leaving an employer or upon retirement can be unaffordable or impossible if an individual’s health condition has changed at any point during their previous employment.

Employer-sponsored group life insurance was never intended to be the sole source of life insurance. And, when offered without an individual life insurance policy, it is a catalyst to financial ruin. We should no longer only offer traditional employer-sponsored benefits to employees — it’s not enough financial protection and with today’s technology companies can easily do more.

Securing an individual life insurance policy after leaving an employer or upon retirement can be unaffordable or impossible if an individual’s health condition has changed at any point during their previous employment...

Employees are looking for more than compensation from employers; they are looking for companies that genuinely care about their well-being, and benefits are the best way employers can demonstrate that. A workplace study conducted by LIMRA revealed that in the next five years the number one insurance benefit employees will be most interested in is life insurance.

Where Can Employers Begin?

Talk with your benefits administration solutions provider. If they do not have an individual life insurance option to offer employees during and beyond open enrollment, ask them to get one. It’s a lot easier than you might think for a benefit administration solution provider to offer individual life insurance options to employees.

There are fully digital individual life and disability insurance platforms that can easily integrate into any benefits administration system, such as Pendella Technologies’ white-labeled solution. The platform can be easily implemented and offers several products from A-rated life insurance carriers. Pendella’s mission is to provide individual life insurance options to everyone.

Solution providers who already offer this option include: csONE, Velocity Benefits, Brite HR, PayDay Employer Solutions, and Explain My Benefits.

Small-to-medium sized companies should consider partnering with a professional employer organization (PEO) that takes care of all the human resources, payroll, and employee benefits for the organization. There are several PEOs that also offer an individual life insurance benefit, including Simploy, AdvanStaff HR, SpiritHR, Partners

PEO, and Employ Source. Every single one of these companies are ahead of the competition by continuously bringing greater value to their clients and evolving to meet the ever-changing benefit needs of their employees.

A More Customized Benefits Menu

Nearly half (47%) of employers strongly prefer to offer a more customized menu of employee benefit options for employees to choose from, according to LIMRA. Individual life insurance is customized financial protection that’s tailored to meet the unique needs of every single employee. Now is the time to adopt existing technology that brings greater benefit options to employees.

The good news is that the process of adopting new technology is far easier than it used to be. In fact, organizations are able to deliver new benefit solutions with only a 90-minute investment of their time and at no additional cost. This case study demonstrates exactly how a PEO was able to bring greater benefits to their small- and medium-sized business clients with just three, 30-minute meetings.

Employers make an unspoken promise to give their employees access to protection that’s going to help them if they become ill, injured, or die. To obtain the right amount of financial protection, employees deserve easy access to life insurance options and the ability to buy a policy online in minutes. The technology is available and designed to make it beyond easy to bring this important financial protection back to employees. Let’s work together to create greater financial security for American families and future generations.