Advisor must build agreement on Voluntary Life planning discussions
by Joi TillmanJoi Tillman is vice president, voluntary benefits at Sun Life Financial U.S., overseeing Sun Life’s extensive voluntary portfolio, and end-to-end enrollment services. Visit sunlife.com
Part I in a two-part series on the voluntary portfolio. Read Part II here.
When it comes to decisions in offering Voluntary group life insurance to your employees, there are two big questions to consider: How much coverage should you offer, and, is the effort worthwhile? These seemingly simple questions can vex industry veterans and employers alike and they have implications for employees, families and HR teams.
The simple truth is that most employees don’t have access to financial advice when it comes to choosing coverage. This can result in underinsurance for people who need coverage beyond the one times annual salary, flat dollar or other amount that their employer may provide.
The need for this coverage is real for all generations in the workforce. Consider emerging Generation Z workers who have shared tuition debt with parents; Millennials who are buying homes and starting families; Gen X’ers who are the new sandwich generation with kids and parents depending on them; and Boomers who may be facing medical expenses or who still help their kids with their finances.
It takes four people plus the insurance/enrollment partner to make a group Voluntary Life plan successful: the broker, the HR benefits administrator, the employee, and the employee’s partner—and these key stakeholders don’t always agree. So where in the planning discussions and enrollment conversations do disconnects occur, and how can we improve those conversations to provide greater access to coverage and help people choose the appropriate coverage they need?
Brokers and Employers don’t always agree
Based on a qualitative study of 36 brokers who sell group benefits and 28 employers who have at least one ancillary benefit, we learned that while brokers generally advocate for more life coverage, many employers remain hesitant to increase coverage or offer voluntary life at all.
Employer and employee perceptions
According to research from LIMRA, employees and employers are often not on the same page when it comes to life insurance. Their “Mind the Gap” study showed that employees rank life insurance as their 4th “very important” benefit, while the coverage doesn’t make it on surveyed employers’ top 5 list. Employers also perceive life insurance as being more important to older versus younger employees, when in fact Millennials express more interest in coverage than Boomers.1
To make matters more challenging, employees and their partners are often not aligned in these decisions. Most of us reading this article have said at some point, “Bring your benefits package home. Share it with your spouse.”
Spouses/partners must take part in benefit conversations. Not doing so can mean they’re among the one-third of U.S. households who wish their partner would purchase more life insurance, according to LIMRA.2
How much is enough?
Within the same survey referenced above, brokers were asked what they consider to be a standard group Voluntary Life plan. They indicate that a standard plan offers one to five times salary or increments of $10,000, up to a $500,000 maximum, with a $100,000 or $150,000 Guaranteed Issue amount. If you are considering a Voluntary Life plan, you may want to use explore this as a plan design option. If you apply this to a $50,000 annual salary (approximate median for U.S. workers), this standard lets employees get two to three times more coverage without answering health questions, let’s them choose the level of coverage they want and allows them to increase coverage every year.
Voluntary Life insurance is a sought-after benefit and employees expect it to be offered through their employers. Is it worthwhile? Yes. The increase in financial security to the employee’s family outweighs the additional administrative tasks required to install and maintain the plan. Certain carrier partners will provide support like voluntary deduction reporting, enrollment status updates and more, in order to reduce the burden associated with certain administrative tasks.
How much coverage should you offer? This will depend on your employees’ earnings and what you know about them. In short, the answer may just be “More.” If you don’t offer Voluntary Life today, you may not be meeting your employees’ needs. And if you offer it today, you may want to look at your plan to allow employees to opt in or increase coverage.
1. Mind the Gap: Do Employers Understand Employees’ Benefit Priorities?, LIMRA, 2018.
2. 2018 Insurance Barometer Study, LIMRA and Life Happens, 2018.