Individual life insurance offers added protection — at no cost to the employer

As an employer, you likely provide employees with a group life insurance benefit. So they’ve got coverage, right?

Not so fast. If they leave their job for any reason — a layoff, a new job, retirement, or a terminal illness — a time when they need it most — their policy terminates on their last day of employment, leaving them without coverage.

And 99.9 percent of group life benefits are never paid out to beneficiaries, because people rarely die while employed, says Greg Zito, producer, at Zito Insurance Agency a division of Risk Strategies.

“Employers need to go beyond offering group life insurance benefits and provide another opportunity for their employees, something that extends beyond their term of employment,” says Zito. “Employers who truly care about their people offer individually owned life insurance policies that, when employees leave, they can take with them.”

Smart Business spoke with Zito about the benefits of individual policies and how offering them can help you attract and retain employees.

What is the difference between a group policy and an individual policy?

A group policy is provided by an employer, often as part of a benefits package. It has a limited benefit, although some employers offer the option for employees to increase the coverage.

Seventy-five percent of employees don’t have their own individual life insurance policies, believing it is taken care of through work. But they don’t realize that once they leave employment, they leave that policy behind. And if you leave because of retirement or a terminal illness, at that point it is very expensive, if not impossible, to get a private policy.

Group life insurance policies are like a placebo. People have a policy through work and think they are covered and in great shape, but they are not. Another issue is that the program can be discontinued at any time, leaving people without coverage.

Smart employers offer employees the option of individually owned policies. The benefit comes at no cost to the employer but provides employees with the option of purchasing coverage at varying amounts. These policies are designed to cover the individual — and, if they choose, their spouse and children — with a guaranteed death benefit.

And if they leave employment, the policy goes with them, transferring billing to them directly with no change in cost or benefit.

What are the downsides of individual policies?

There are no downsides to an employer offering a voluntary life insurance program. These policies help attract and retain employees at no cost to the employer. It’s simple, doesn’t take much time and your agent will do all the work. The only responsibility of the employer is to make payroll deductions to cover premiums.

Some employers believe if employees aren’t in the office, they can’t sign up for these policies. However, even if employees never come in to the office, they can enroll remotely. There is no employer that is not a candidate for offering this benefit.

What are other benefits of an individual policy?

One of the products we offer features immediate benefits, a guaranteed tax-free payout upon death, and even an option for living expenses. As soon as an employee enrolls, the policy is in effect, even if that person passes away before making a single premium payment through payroll deduction.

And, in addition to a guaranteed tax-free payout upon death, if the covered person is diagnosed with a grave illness or is confined to a nursing home, they can withdraw 50 percent of the death benefit to help them with living expenses. That’s an amount that doesn’t have to be paid back, and the remaining 50 percent of the policy is paid out upon death.

INSIGHTS Business Insurance is brought to you by Zito Insurance Agency a Division of Risk Strategies.