Why group life insurance needs to change

The US life insurance market is facing a major crisis. Only around half Americans have life insurance. Even among those who have life insurance, 30 million do not have enough money to protect their families when they die. This is because many of these people rely on inadequate group life insurance provided by their employers.

Bob Gaydos

Life insurance companies must change dramatically if employers want to offer life insurance benefits to employees. These changes can only come when insurers and businesses agree and embrace the latest in insurance technology.

Here’s what you need to know about the complexities of group life insurance today and how to make the most of it.

Problems with the current model

Group life insurance is a way in which many employers provide benefits to employees as a group, rather than providing benefits tailored to individual needs and preferences. The low cost of group life insurance, and its availability to any employee with good health or financial stability, makes it a popular option for companies. The group policy is for employers and employees are awarded through certification. The coverage is not portable, meaning people cannot keep life insurance when they change jobs.

In addition, group coverage comes at a very low rate. Group life insurance typically pays out twice as much as an individual’s annual income, which is nowhere near enough to provide financial protection for families in the event of death.

Unfortunately, the lack of education about other options – in particular, buying life insurance – prevents many people from seeking the right treatment. This may be due to the misconceptions people have about the cost of life insurance. More than half Americans — millennials in particular — are over the moon about the cost of life insurance. As a result, many people mistakenly believe that they cannot afford life insurance.

Group life insurance also presents challenges for businesses. Since group wages are often low, employers may offer employees the option to purchase additional insurance. Because this is still at work, it is not portable and the employer must manage payroll deductions to pay for the insurance. In addition, extended life insurance often requires additional paperwork, lengthy application and endorsements, and more. All in all, the current model is not good for employees or employers.

A good change

This is what insurance should look like to employees. Employers must continue to provide basic employer-sponsored social benefits. However, employers must provide employees with access to whole life insurance. These policies are specific to the employee, based on their needs, and preferences.

The payment of such policies is based on the health of the person, so any employee who is in good health can count on a low cost and a valid legal system. And employees have full control over the process, so they decide the length and frequency of coverage.

Unfortunately, insurance companies have their own challenges, especially when it comes to getting approval from the insurance company. Some insurers still require medical tests and complex documentation to process their insurance. Processing may take weeks or months.

Second, employers should educate workers about the importance of increased support and the limits of collective bargaining. One reason is that many employers do not realize that their insurance will not cover them until they lose their coverage.

With more partnerships and better training for employees, employers benefit because they don’t have to worry about any additional administrative burdens or payroll deductions. Insurers will benefit as more workers realize their need for personal life insurance and their ability to afford it. And in the end, workers will benefit because they will have more support to ensure the financial stability of their families.

Bob Gaydos is the CEO and founder of Pendella. They can be contacted at [email protected].

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