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Low-Cost Options Enhance Life Benefits

The year was 1911, the city was Passaic, New Jersey, and the company was the now-defunct Pantasote Leather Company. That’s when and where the first group life insurance policy was issued. 

The most common form of group life insurance is term life, which provides coverage for a specified period, usually one year or more. Term policies provide no further benefits when the term expires, and no buildup of cash value occurs. If this insurance is not renewed at the end of its term, coverage lapses and no payment is made to the beneficiary in the event of death. 

Here are a few options available for enhancing your life insurance benefits: 

Whole Life. Unlike term insurance, permanent life (or whole life) insurance provides protection for as long as the insured lives. Permanent life policies also have a savings component, building cash value that can help families weather financial emergencies, pay for special goals, or provide income for retirement years. 

The annual premium for traditional whole life policies remains constant throughout the life of the policy. In earlier years, the premium is higher than the actual cost of the insurance, but in later years it becomes substantially lower. The excess amount of each premium in the early years is held in reserve as the policy’s cash value. This cash value grows over time from investment earnings and future premium payments, providing funds the insured can borrow as a policy loan. If a policyholder decides to give up the insurance protection, he or she receives the cash value upon surrendering the policy, less any outstanding policy loans or surrender charges. 

Please keep in mind that insurers individually underwrite whole life policies. This means that employees who want more than a minimal amount of whole life coverage (such as $25,000) must complete a standard life insurance application, which is more comprehensive than a group insurance application. If an applicant has poor health, the insurer can decline to cover him or her. Insurers may offer higher amounts on a guaranteed-issue basis, without health questions, if negotiated in advance of enrollment. This offer may extend to employees’ spouses and children.

 Portability. Employees often can retain coverage after retirement by paying premiums directly to the insurer. Many policies also offer survivor benefits, usually continuing monthly payments to the spouse of an employee who dies before retirement; payments may extend for life or to the age at which Social Security retirement payments become available, but cease on remarriage.

 Accelerated Benefits. To help ease the financial burden that often accompanies a serious illness, accelerated benefits allow terminally ill insureds (employees and spouses) with a life expectancy of six months or less to receive an advance payout of a percentage of their group life insurance face amount. Available to covered individuals with a minimum of $10,000 in coverage, insureds may accelerate up to 50 percent of the face amount of their insurance, to a maximum of $250,000. 

Waiver of Premium. Also known as “continued protection,” this option waives premium payments for a disabled employee after a specified waiting period. Of group life policies in force in 2006, 94 percent, or 45 million, provided for waiver of premium in case of disability. 

Will Preparation. To help insureds protect their assets and secure their families’ financial future, this option covers the legal fees associated with preparing or updating a will, when insureds or their spouses use a participating attorney. 

Adding options to your group life program can be a cost-effective way to enhance your benefits package. For more information, please contact us. 

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