Why Purchasing Life Insurance Is a Good Move for your Business
While many people think of life insurance as an individual purchase, there are also numerous benefits for employers to equip their business with the same protections. Mike Fidler, a Financial Consultant at JA Benefits, explained purchasing group-term life insurance is a cost-effective, simple option that many of his clients choose.
“I find most employers have big hearts, and they want to do things for their employees and staff, because they appreciate what they do,” Mike said. “To be able to provide different options of life insurance to protect the employees’ families is a really good benefit. The cost factor for group life insurance is pretty inconsequential in the big picture for them, so they can provide outstanding benefits for employees, spouses and even family.”
Many people don’t take the time to sit down with an insurance planning opportunity, so providing some form of life insurance as an option to employees is a significant perk.
Additionally, there are other life insurance possibilities employers should consider to protect their business’s interest.
Key Person Life Insurance
Beyond purchasing a group-term life insurance policy, employers can also purchase key person life insurance, which helps insure the continuation of the business if a key player in the organization passes away.
“For instance, if you have a person who has all the secrets to your technology department, and you lose that person due to a death, then there’s a big financial consequence to the company,” Mike explained. “So, many times employers will purchase key person life insurance that would remunerate the business if that person passes.
The Hartford’s “Business Owner’s Playbook” explains key person life insurance as “life (and sometimes disability) insurance on specific key employees, typically the founders, owners, or important executives – the people who are crucial to the company’s survivability. Unlike personal life and disability insurance, the business buys a key person policy, pays the premiums and is the beneficiary.
If the covered employee dies, the business gets the insurance payoff.” Determining who the key players are is a significant decision for businesses and will protect a company’s most important assets in the event of an untimely death.
Business Owner Insurance
The owners of the business should also purchase life insurance policies to assist the company’s smooth transition, if one or more of the owners passes away, as well as ensure their beneficiaries are taken care of.
Purchasing life insurance that covers the owners in case of a death will make sure the company is made whole and the heirs of the deceased owner will receive the benefit of the life insurance that also buys out their stock.
Many times, companies use life insurance as an executive benefit. Life insurance can be used to “carve-out” those particular people who the company would like to reward, beyond the other programs they currently provide.
Why Purchasing Life Insurance Should be a Top Priority for Employees
Purchasing life insurance is a sound financial decision that every employee should make, especially those who have dependents, but it’s important to determine what plan is right for you. Mike Fidler, a Financial Consultant at JA Benefits, said the best place to start this process is knowing what life insurance policy an employee has through their employer.
“Often times the employer benefit packages are well planned and sometimes those are portable, which means you can take them with you after leaving the company,” Mike explained. “But I also have learned that many times, once that person retires or separates service, the life insurance is typically terminated. They may want a personal program to wrap around what they have at work.” Most personal term policis have a level benefit for 10 to 30 years. They are convertible to a permanent plan, as well.
The best way to accomplish this is to personally own one form or another of life insurance – whether it’s additional term or a more permanent approach.
Term Insurance
Term insurance is an option that an employer can provide. Many of JA’s clients have some form of group-term life insurance. It typically has a low initial cost, is easy to purchase, and is typically issued on a guaranteed acceptance basis.
Voluntary term insurance provides coverage and if typically portable when you leave employment. These policies have no value other than the guaranteed death benefit, meaning there isn’t a savings component to them that is found in a permanent insurance product.
All of the premiums on term insurance cover the cost of underwriting and maintaining the coverage. As a result, these tend to be lower than permanent life insurance premiums but have a “maturity” date in the future. To further offset this cost, sometimes the employer will pick up some or all of that premium for the employee.
Permanent Insurance
The other life insurance option for employees is called permanent choice, which comes in a few different forms. There’s universal life, which is an element of term insurance, and then there’s whole life insurance that is usually a fixed premium cost.
All of these policies have different benefits that are added to them, which are referred to as “riders” or living benefits.
Permanent insurance differs from term insurance in its longevity. These kinds of policies are designed to preserve that benefit through a person’s lifetime.
“If you want your policy or plan to last longer than you do, then it’s usually going to be a permanent approach,” Mike explained. “The premium is at least, initially, a little bit more than most term policies. However, it’s designed to pay for those things that happen throughout your lifetime, during your young and working years, while creating potentially excellent benefits for the future.”
As an employee, how do you determine which option is best?
“There’s a process involved in determining how much life insurance someone needs, and everybody is different,” Mike said. “I treat everyone’s situation as unique. There’s really no blanket solution. I think you really have to sit down and look at the big picture to make sure you’re doing the right thing for everyone.”
JA is at Your Service
At JA, we leave no stone unturned in planning for both the employer’s business and their employees. We have experts like Mike who has more than 30 years of experience in the insurance business and the know how to properly secure your company’s future.
For Employers, Mike noted:
“Once we have all the information, we can provide the most comprehensive program to take care of the company and the company’s employees,” Mike said. “Hopefully those employees are going to work there for a long time and at some point in time retire, because of the individual approach, we can take them from the first day they walk in the door all the way through their employment to retirement and beyond.”
Mike’s passion and conviction for what he does makes him a valuable asset for your business and demonstrates the JA difference.
“I think life insurance is often an overlooked part of the financial plan process. If structured properly, life insurance is really a beautiful tool. It can help you protect and create an estate,” Mike said. “The cost factor is pennies on the dollar, as it can hedge all of your other financial objectives. It can always be there for you, your family or your business when you need it. There’s so many new living benefits that have been put on permanent life insurance that makes it a low-cost alternative to a lot of other planning processes. I feel strongly about what it does and how it protects everything that you hold so near and dear.”
For Employees, Mike noted:
“When you focus around finances, a discussion about life insurance always comes up. I’m able to help employees transition and create that legacy for their spouses, their children, and their grandchildren who outlive them,” Mike said. “That’s what we bring to the table. Experience and knowledge of how to create these programs that work.”
“I have an opportunity to help you look ahead to the future, because I work with people that are in their 80s and 90s, so I see what happens,” Mike explained. “I think life insurance is often an overlooked part of the financial plan process. If structured properly, life insurance is really a beautiful tool. It can help you protect and create an estate. It can always be there for you, your family or your business when you need it. I feel strongly about what it does and how it protects everything that you hold near and dear.”