Making Employees Aware of the Necessity of Life Insurance

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Life insurance is amongst the most common benefits offered to the employee from the employer. However, a lot of employees don’t realize the importance of life insurance. One way, to begin with, is considering life insurance as a positive and lasting gift to your family members v/s associating it negatively with illness and death.

If you are an employer, then you are in a good position to make your employees aware of why life cover is an important part of their lives.

Importance of Life Insurance

A lot of employees have not given much thought to life insurance and consider it to be an unnecessary expense in their lives. But having life insurance is very essential for individuals of all ages. Here are some of the probing questions that can help your employees in putting more thought towards their requirements and the coverage benefits like-

  • Do you have a college loan, mortgage, or any other type of debt, which is unpaid?
  • Are you or your family members capable of affording expensive medical bills or funeral expenses?
  • Are you the sole breadwinner of your family?
  • Would your family be able to support themselves after you pass away?
  • In case of your sudden demise, who will take the burden of any debts or other financial responsibilities, which you leave behind?

We understand that your employees would not enjoy thinking about these things; however, it is essential for them to put their financial responsibilities in priority and take necessary action to secure their loved ones in the case of an illness or a catastrophic accident.

Even after you make your employees realize the importance of life insurance, some of them may still remain hesitant for spending their hard-earned money on a new kind of coverage. And, it is understandable because the economic conditions are tough and a lot of them might be even struggling to clear their bills.

However, you can make an argument that tough financial times are the reason that makes it all the more important to give financial security to your loved ones. 

Educating the Employees with the Basics

No matter what insurance coverage you offer, make your employees aware of the basics of life insurance, including the main types and the life insurance benefits and drawbacks. Here are some types of life insurance. 

Term Life Insurance

It is a cover that is offered for a specific period of time, although usually it can be converted or renewed into a permanent policy. Term plans offer a death benefit but do not involve a cash value. They can be a good option for those with short-term coverage requirements.

When offered via group policy, a term insurance plan can be economical for employees now; however, the premiums may increase at the time of renewal. 

Permanent Life Insurance

Any kind of coverage other than term insurance is a form of permanent life cover. The types may include universal, variable, and whole life insurance plans.

The premiums on permanent coverage are always higher than term insurance. However, they usually remain more stable throughout the policy term. Moreover, this coverage also offers a death benefit along with a component of cash value savings. Therefore, it is more valuable later in life.

You should emphasize that having any life cover is better than no life cover at all. Your employees should seriously think about the financial requirements of their dependents should they pass away unexpectedly.

Based on the amount of coverage available to the employees, making a combination of permanent and term insurance cover can be a good option. 

Universal Life Insurance

This is another kind of permanent life insurance, which includes term life insurance along with the ability to earn interest over the cash value, making payment of the market return rate. The cash value can be borrowed or withdrawn from the policy. As opposed to whole life insurance, it is more flexible because it also lets you change the payments of your premium and death benefit, staying within the policy limits.   

  • Whole Life Insurance: Whole life insurance is a kind of permanent insurance that provides a life-long cover along with the component of cash value savings. This kind of policy comes at higher premiums as compared to term insurance.  The amount of premiums remains the same throughout the policy term and a part of it is invested by the company. This invested part is the cash value of the insurance plan. This type of life cover pays out a fixed amount at the time of the policyholder’s death.
  • Variable Life Insurance: It is somewhat similar to universal life cover when it comes to the investment and flexibility aspect. But under variable life cover, the policyholders have more control over the ways of investing their money instead of earning interest simply on the cash value accumulated. The option of investing in professionally managed investment instruments, make it possible for the policyholder to accumulate cash value along with death benefits. However, the risk of losses due to these benefits is greater. 

Promoting your Options of Coverage

While teaching your employees regarding life insurance, make sure you also make them aware of the specific coverage you offer. Give them proper details of the kinds of coverage offered, the life insurance benefits, the premiums, restrictions (if any), eligibility requirements, and other information that they should know.

Moreover, you should educate your employees about the advantages of purchasing coverage from your company. This way, the employees will appreciate the financial awareness given to them and understand the value of benefits that your company provides them. These benefits may include-

  • The convenience of buying at work rather than wasting time shopping around.
  • No need for medical tests or review needed for group policies (usually). The individual plans, on the contrary, need medical tests and may charge higher premiums or reject the coverage depending on the result of the tests.
  • Lower rates on group plans as compared to individual plans.

It is essential that you educate your employees about the importance of life insurance and the benefits of buying it from your group plans. This may add value to the financial planning of your employees, and improve their participation and loyalty towards the company.

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