Planning for the Unexpected: The Importance of Life Insurance Coverage

By Michael Tomlinson

With 90 percent of workers choosing the same benefits year over year, and since open enrollment is around the corner, it is important for small-business owners to communicate the benefits of life insurance with employees. This will encourage workers to think twice about pushing the benefits “easy button” and safeguard their families from debt they may leave behind in the case of an untimely death.

Considering the diversity of any given workforce, millennial employees especially may not fully comprehend the value of planning ahead for the inevitable or unexpected. In fact, only 36 percent of adults under the age of 30 have life insurance compared to 60 percent of 30- to 49-year-olds.

With this in mind, and with Life Insurance Awareness Month taking place in September, small-business owners should stress the importance of life insurance with millennial employees when they are considering their benefits needs.

What Does Voluntary Life Insurance Cover?

Voluntary life insurance can help an employees’ loved ones with immediate and future financial needs following their death. It can help cover immediate costs such as burial/funeral expenses, uninsured medical costs, and debt as well as more long-term costs such as ongoing family obligations, emergency funds, and retirement expenses.

Life insurance, however, is not limited to mandatory expenditures; it can also be used to help pay for college, fulfill a personal dream, or even fund a scholarship or charitable program in a loved one’s honor.

When Does Someone Need Life Insurance?

While younger employees may not see life insurance as a necessity, there are still many reasons why having life coverage can be beneficial. One way is that it helps ensure security in a worker’s future. This becomes especially true when an employee goes through different life events such as marriage, having children, or purchasing a new home.

Examples of things small-business owners should mention to employees when choosing their benefits:

• First job: Approximately 90 percent of private student loans have cosigners, meaning those grads who do not invest in life insurance may be leaving their parents or other loved ones on the hook for school debt in the event of an untimely death. For employees who are just graduating from college, this is a good time to consider life insurance to protect cosigners from future financial burden.
• Marriage: For employees who have just walked down the aisle, this is the time to review both partners’ policies, compare premiums and benefits, and decide if it makes sense to maintain separate plans or elect “employee and spouse” coverage.
• New baby: New parents may want to consider increasing coverage to provide the best protection to their family. If something happens to an employee, beneficiaries can use the life insurance benefits to help pay for child care and household expenses.
• Purchasing a new home: Employees looking to buy a new home should look at term life insurance as an inexpensive way to ensure their family has the funds needed to pay the monthly mortgage or even pay off a home loan in its entirety if they were to die.

As a benefits decision maker, educating employees on what type of life insurance coverage they need, and when they need it, is important so they can feel more confident they won’t leave their family in financial turmoil.

The Bottom Line of Life Insurance

Employees of all ages and family situations should consider life insurance that will protect the loved ones they leave behind. Reviewing life insurance options, along with other voluntary health benefits, with workers shows that you are invested in your staff’s overall well-being, which will make for a happier and healthier workforce.