A study conducted by LIMRA and Life Happens found that 41 million Americans say they do not have life insurance coverage at all. When it comes to providing benefits for your employees, life insurance ensures they give their families much-needed financial security. All too often, however, life insurance is a misunderstood and confusing topic. We are here to help.
Here is what you need to know about group life insurance plans.
What is life insurance?
Life insurance is a contract between a person and an insurance company. A premium is paid, and after a person’s death, a lump sum, or death benefit, is paid to the beneficiaries the person designates. The beneficiaries can use the money for any purpose they like.
What is group life insurance?
Group life insurance is when an entire life insurance contract covers a whole group of people. The policy owner is the employer or organization, and the policy covers all the employees at the organization.
Are there different types of group life insurance?
Yes, there are two different types of group life insurance: employer-paid or voluntary. These are usually seen as term life insurance, which provides your employees coverage for the term of their employment.
Employer-paid life insurance
Employer-paid life insurance is when the policy is paid by the employer. This offers your employees a convenient way to receive life insurance coverage. This type of coverage, at times, offers them coverage portability or the ability for your employees to continue their life insurance policy when they no longer work for you.
Voluntary life insurance
Voluntary life insurance is an optional benefit offered to employees. This type of life insurance is paid for by the employee directly to the workplace’s insurance company via a monthly premium taken out of their paycheck. Like employer-paid life insurance, voluntary life insurance can also offer coverage portability.
Why is life insurance important?
As an employer, you may wonder why life insurance is important to provide to your employees, and there are several reasons:
- It provides for lost income: Providing a group life insurance policy helps ensure that your employees’ loved ones will have some financial replacement for the lost paycheck in the case of their death. This allows the family time to get a footing in their new reality.
- It reduces stress: Losing a loved one is already a difficult and emotional experience without the added financial burden of losing a partner or parent. Life insurance will help protect the family from the difficulty that awaits. For example, finding help for childcare after the loss of a parent is a huge stress for the surviving parent. Knowing they have financial support to afford it can ease the pressure.
- It helps cover bills and debts: Life insurance will help cover bills or debts your employees leave behind, so they are not passed to your employees’ loved ones.
It doesn’t have to be confusing
Life insurance can be, admittedly, confusing. But it is a smart move for employers who want to add family-focused benefits into their employee benefits plan. Talk to a trusted advisor who will help you decide on the best group life insurance plan for your employees.
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