Group term life insurance is a relatively common advantage offered by many employers today. Policy coverage can even be extended to the spouses and/or dependent children of covered employees. Often, it is an inexpensive option, even for large companies. However, there are some things to know before signing on the dotted line. Here are five tips to help prospective and current term insurance buyers.
Do understand basic coverage terms. Most employers offer at least a short-term health plan that provides coverage for up to one year. This type of policy typically allows small monthly premiums that are adjusted for inflation. Depending on when you enroll in coverage – sometimes as early as 90 days – your premium payments may begin at a lower rate. However, after this time frame, the premiums will increase dramatically. This is why most small business owners choose to implement short term policies and maintain them for the entire year or until their employment ends.
Shop around and compare. When purchasing insurance coverage for the employee or his or her spouse or dependent children, it’s important to compare prices and options among various providers. Small businesses and individuals should look at multiple insurers to find the best rates. For those already insured, it’s advisable to inquire about renewal discounts. Inquire about the possibility of earning additional discounts for having employees who have successfully completed a term life policy and for having employees who have retired from employment with the company.
Don’t overlook group life policies. Most small to medium-sized companies don’t offer employee benefit plans. This is unfortunate because many people view these types of plans as unnecessary and prohibitively expensive. However, this isn’t true. In fact, there are many benefits of group life insurance coverage.
One of the major benefits of group insurance coverage is that it’s often less expensive than individual insurance. For example, some employers match the amount of money an employee contributes for a group term coverage plan. Thus if the company doesn’t offer this coverage, employees would have to pay for it themselves. This cost is usually less than what one would pay for individual insurance.
Another great benefit is the potential for savings. Insurance premiums aren’t just paid for the number of years the policy is in effect. The cost of maintaining these policies can be far higher than paying the same amount out-of-pocket for individual insurance. Group insurance premiums don’t fluctuate; however, they do increase and decrease on a yearly basis. Thus when an employee extends a policy for an additional two years, the premium will increase by two times, rather than once.
It is possible to reduce premiums and expenses for employees even further by paying premiums only while an individual remains employed. Most employers cover their employees’ names and the full extent of the coverage provided under these policies. So after the individual has been terminated, the remaining coverage can be continued by paying premiums only during an annual reevaluation of insurance needs. Again, the amount of money available to the employee will decrease slightly but the savings will be returned to the employer in the form of higher wages.
It is important for employees to understand their coverage and to know what the company’s options are should they become ill or injured. The policyholder is the person who is ultimately responsible for making sure that the costs associated with their coverage are kept within the company’s budget. By keeping premiums and costs low, employers can avoid financial hardship for their employees. Many people are happy with their coverage because it provides a sense of security. If a person is faced with a serious accident or illness, they know that they will be covered and that if something happens they will receive the medical attention they need.