According to the Bureau of Labor Statistics, approximately 60 percent of private-sector employers offer group life insurance, and 98 percent of employees take advantage of this offering.
Are you considering adding life insurance to your list of group plan benefits? Are you questioning whether or not it’s a good offering?
If so, you’re in the right place. Below, you’ll discover ten benefits of purchasing life insurance for employees.
1. Lower-Than-Average Premiums
The relatively low life insurance cost is one of the top reasons employers purchase these policies for their employees.
Group life insurance policies are typically quite affordable because they come with minimal risk for the insurance company.
Insurance providers base premiums on the overall risk presented by the business or organization. In most cases, the chances of an employer not paying their life insurance premiums are low.
Life insurance policies can also be more affordable for employers because they’re often bundled with health insurance and other offerings. Sales and administrative costs are lower, and those savings transfer to your company.
2. Savings for Employees
It’s not only employers that save when purchasing life insurance. Employees also experience savings.
In some cases, employers pay the entire life insurance premium for their employers. However, even when the employee pays a portion of the cost, they get a better deal than if they had purchased individual insurance on their own.
Employees will likely appreciate getting life insurance (something they might not have been able to afford otherwise) at a discounted rate. The peace of mind alone — knowing that their families will have some money coming their way after they die — is worth the cost for most people.
3. Improved Employee Retention Rates
Improving your company’s benefits offerings — including life insurance benefits — is an excellent way to enhance employee retention rates.
People generally want to work for an employer that takes care of them.
Investing in better benefits shows your employees that you want them to be healthy and secure. When you let them know that’s the case, they’re more inclined to stick with you and remain loyal long-term.
As a business owner, you know how important employee loyalty is.
It costs your company less to retain existing employees than constantly search for and hire new ones. Loyal employees also tend to be more engaged and dedicated to their jobs.
Looking for reasons why employee benefits are important? Read more here
4. Improved Recruiting
In addition to improving employee retention, buying life insurance for your employees can also help you attract better ones if you need to expand your staff.
Remember, people want to work for employers that care about and invest in them. If you’re known for investing in your employees and offering superior benefits, you’ll easily attract top-tier talent to your organization.
Loyal employees who are happy with their benefits will also act as ambassadors for your company. For example, they’ll speak highly of the business and encourage others to apply for open positions.
5. Enhanced Employee Financial Wellness
Life insurance offers financial protection for employees of all ages and life stages.
When they have access to a life insurance policy (whether it’s one you pay for entirely or one they help to pay for), they can feel confident that their family is protected in case something happens to them. Their loved ones will have financial help covering funeral costs, avoiding debt, etc.
This peace of mind can help employees feel more financially stable and confident about their (and their families) futures.
6. Improved Employee Morale
Which group of employees is likely to experience better morale and increased job satisfaction?
- The employees who don’t have access to any benefits beyond the bare minimum, OR
- The employees whose bosses invest in them and offer additional benefits that provide peace of mind and better financial wellness
In most cases, the second group will be happier with their job and employer. They’ll also be more likely to stay engaged and motivated at work — and more likely to stay with that employer long-term.
7. Increased Productivity
Happy, engaged, and motivated employers tend to be productive employees. Because they know that their employer cares about them, they care about their employer.
How do they show that they care? By putting their best foot forward each day, doing quality work, and achieving or exceeding their goals.
If you want your employees to get more done, invest in them. Give them something they might not be able to get (i.e., additional benefits) from another employer.
8. Tax Benefits
Employers can also experience certain tax benefits when they buy life insurance for their employees.
Employee life insurance premiums are typically deductible because they’re considered ordinary business expenses. The cost of employer-provided life insurance can also be excluded from the employee’s gross income for up to $50,000 of coverage.
It’s important to note that life insurance plans must comply with specific nondiscrimination rules.
For example, it must benefit at least 70 percent of the business’s employees. Furthermore, at least 85 percent of employees who participate in the plan cannot be highly-compensated employees (also known as Key Employees).
The IRS considers Key Employees to be those whose gross salary exceeds $215,000, employees who own more than 5 percent of the company, and employees who own at least one percent of their company with an annual salary of over $150,000.
You could face tax penalties if your plan doesn’t abide by these rules.
Need more budget to offer benefits to your employees? Don’t worry! Discover how you can offer your employees benefits with a small budget here.
9. Multiple Plan Types
As a business owner, you have several life insurance options to choose from for your employees.
The number of choices can be daunting at first. However, it also gives you plenty of opportunities to select a plan that benefits most of your staff and will boost their job satisfaction.
Insurance consultants can also help you sort through your options and select the best one based on your company type, your needs, and your employees’ needs.
10. Additional Supplemental Coverage Options
Many business owners choose to offer their employees a minimal amount of life insurance coverage — such as one or two times the employee’s salary. However, they also give their employees the option to purchase additional coverage at a lower cost than if they bought it independently.
This approach gives you the best of both worlds. You can save money on the coverage you offer your employees, and they save money if they want to increase their coverage for additional peace of mind. Everyone wins!
Tips for Buying Life Insurance
Have you decided that buying life insurance for your employees is a good idea? If so, you might now be wondering how you choose the right plan that benefits the greatest number of people.
It helps if you start by understanding the basics, including the two primary types of life insurance:
- Term Life Insurance: Covers the employee for a specific length of time (usually the length of their employment). In this case, employers typically provide coverage equal to an employee’s yearly salary.
- Whole/Permanent Life Insurance: Covers the employee for their entire life. The value increases over time, and the policyholder can cash out before they die, making it an investment option.
Employers typically pay most or all of the premium for term life insurance. Employees usually pay the premium for whole life insurance since it would cover them even after they stop working for a particular company.
When choosing a life insurance offering for your employees, you must choose between term and whole insurance. You should also consider the following factors:
- Do you want to allow employees the option of purchasing additional coverage or raising their coverage level?
- How do you want to transition the coverage if an employee leaves your company?
- How much of the premium do you want to pay?
- For term life insurance, what length of coverage do you want to offer (one year, two years, the duration of employment, etc.)?
- Do you want employees to be covered automatically, or do you want them to opt-in?
- Do you want to cover all employees or only some?
Consider working with an insurance consultant if you’re intimidated by all these factors. They will help you sort through different options and choose the best plan for your business and employees.
Are you looking to learn more about choosing the right insurance? Watch this video that will answer your questions!
Add Life Insurance to Your Employee Benefits Today
Buying life insurance for your employees is an excellent way to improve recruitment, increase retention, and boost morale at your company. However, it can be tricky to choose a cost-effective policy that also offers a significant amount of coverage.
That’s where our team at Commercial Benefit Services comes in.
We have over 30 years of experience in the insurance industry and have worked with businesses of all types and sizes to choose the most suitable life insurance offerings. We can also help you select other types of insurance plans, such as health insurance, Medicare, short-term disability, and long-term disability.
Contact us today to schedule a free consultation or learn more about our services.