Here’s how insurance brokers can help employees and employers save money with Group Life vs. Individual Life Insurance
It may not surprise those of us in the insurance industry who are constantly attuned to employees’ benefits needs, but a new study from Talker Research revealed that 59% of Americans would rather spend $15 a month on life insurance than maintain their Netflix subscription. (Less than one-quarter chose Netflix… and while we love a good binge session as much as anyone else, we agree with the majority!)
But… Are People Actually Buying Life Insurance?
Responding to a survey and being willing to choose life insurance over Netflix and actually making that move are two different things. According to the survey, millennials, on average, started purchasing life insurance at the age of 28, which means many are still in the process of choosing policies. Only 18% of Gen Z have already purchased life insurance.
While some people might see this as a lack of financial education, a failing economy, or the folly of youth (all might be correct!), these numbers also represent a vast opportunity for brokers to provide the younger workforce with affordable ancillary benefits.
Brokers know that people can save money with voluntary Group Life / AD&D, especially when they bundle it with other important benefits like dental, vision, and accident insurance. But your clients may counter that they already have individual life insurance policies or plan to shop around for an individual plan.
Here are some key talking points to discuss with your clients.
The Differences Between Individual and Group Life Insurance
Individual life insurance policies are written through an insurance broker or agency to provide funds for the loved ones (beneficiaries) if the policyholder dies. Individual life insurance policies come as:
- Term-life
- Whole life
- Universal life
- Variable
- Final Expense
Each type of policy has different associated costs, tax benefits, and death benefit limits. Permanent life insurance options, which include whole life and universal life, allow the policyholder to borrow against the plan. These policies stay in effect as long as you continue making premium payments but are usually more costly than term-life plans.
Insurance brokers know that sifting through the various individual life insurance options to find the right one isn’t always easy. For those who may be confused about their choices, a Group Life / AD&D policy offers many advantages. Even employees with an individual life insurance policy in place can benefit from the added security of a Group Life / AD&D plan.
On the other hand, a Group Life Insurance plan is a simple, straightforward offering that can provide peace of mind and take some of the financial burden off loved ones.
Benefits of Group Life Insurance
Group plans have benefits for many employees. Overall, a Group Life / AD&D plan provides coverage so that employees and their families can avoid dipping into their savings and investments in the event of a death.
Income-Tax Free Benefit
Employees can pay for their Group Life / AD&D benefits with pre-tax dollars if the coverage amount is under $50,000, according to the IRS website. If the employer covers the premiums as a benefit, the first $50,000 in coverage is not taxable. For employees seeking an affordable way to pay for end-of-life care and funeral expenses, a modest Group Life / AD&D benefit carries tax advantages.
Affordable
As a rule, Group Life coverage is going to be less expensive than individual coverage. Since the broker is writing the policy in bulk, the overall premiums will cost less.
Simple to Understand
Typically, Group Life coverage is written as a one-size-fits-most benefit. Group Life / AD&D policies are voluntary, so if doesn’t fit an employee’s needs, they don’t have to opt in. For those employees seeking some level of coverage but don’t want to spend a lot of time thinking about it, Group Life is a great solution. It can also supplement individual term or whole life insurance as a part of estate planning.
Can Be Paid By Employer or Employee (or Shared Cost)
Employers can cover Group Life / AD&D for employees as a recruiting and retention tool. Alternatively, they can offer this benefit as a voluntary, employee-funded or shared-cost benefit. Sixty percent of corporations today offer Group Life / AD&D, so it’s an important tool in your HR arsenal to stay competitive.
Additional Coverage May Be Added
Many Group Life AD&D policies have the option to add more coverage, riders, or even spouses and children. Customizable policies make Group Life / AD&D coverage even more enticing for employees with their minds on benefits that will preserve their legacy.
The Best of Both Worlds: Life Insurance with Executive Carve-outs or Buy-ups
Most companies limit Group Life coverage to $50,000 in benefits to prevent tax ramifications for their employees. Most of these plans are not portable, which means they expire if the employee leaves or retires. However, executive employee (EE) carve-outs allow for whole-life or universal policies for executives, high-performing individuals, and owners. These policies are portable and accumulate cash value as a savings vehicle.
Likewise, life insurance buy-ups are employee-funded options that can expand coverage for top performers and executives.
Brokers: Grow Your Book of Business with Group Life / AD&D
When you have a product people want, and you can provide it at a fair price, you’ve got a formula for success. Right now, Group Life / AD&D represents an in-demand niche that employees want and employers can use to recruit and retain talent. If employers want to fund the benefit, you can privatize new or existing statutory benefits like disability and paid family leave to save money and free up cash for ancillary benefits.
It always pays to bring up the conversation, especially as people begin evaluating their budgets for 2025. Reach out if you are ready to have The DBL Center become your back-office staff and top resource for statutory and ancillary employee benefits as we move into the new year.
FAQs
Is group life insurance cheaper than individual?
Group Life insurance, because it is written in bulk, tends to be less expensive than individual life insurance. Group insurance can also be more affordable for employees if their employer shares the costs. Working with an insurance broker that specializes in employee ancillary benefits can help business owners find the best deals on Group Life / AD&D.
Which is better group insurance or individual insurance?
Both group life AD&D and individual life insurance have advantages and drawbacks. Group Life tends to be more affordable, more straightforward, and is sometimes funded by employers, with coverage under $50,000 available tax-free. However, individual life insurance may be more flexible. Speak to an insurance broker and the employee benefits advisor at your workplace to determine which policy is best for you.
Is group life insurance worth it?
Group Life insurance provides tax-free coverage up to $50,000, which can be funded by the employer or employee. If your company offers this benefit, it can be a good way to pay for end-of-life and funeral expenses with a low monthly cost. You can also use it to supplement an individual life insurance plan to cover your family in the event of your death, making Group Life a worthwhile expense. Employees can also ask their company about buy-ups or executive carve-outs to increase group coverage.
