HR, Benefits & business
The decision to offer your employees life insurance is a positive step toward providing a complete range of benefits. Life insurance is a low-cost, high-value benefit - one many small businesses can afford. The question is, do you offer whole or term life insurance?
There are different types of life insurance—the two most popular forms are whole-life and term-life:
•Whole life insurance is lifelong coverage backed by a cash value account. It pays out the death benefits associated with life insurance, but you can also borrow against it, thanks to its cash value and deferred taxation.
•Term life insurance is a short-term policy that offers death benefits only. It's a very affordable plan with low premiums. Terms can range from 10-30 years, and the premiums remain consistent for the course of the term.
Which option is suitable for your team? When deciding, businesses need to consider their employees and their situation. Many variables can sway the decision. Here are some factors to consider:
•Cash flow: The first consideration is your ability to pay the premium for all of your employees each month (or annually). The cost is typically much lower for term policies and can be pretty high for whole life insurance. If your cash flow is tight, term policies tend to be safer. If cash flow isn't an issue, whole life is an option.
•Number of employees: The more employees you have, the more premiums you'll end up paying. Typically, more employees suggest a term policy benefit might be better. That said, whole life insurance can be an excellent offering for small businesses with a few key employees. Once again, the cost comes into play.
•Other benefits: What other benefits are you offering? Do you contribute to a 401k? You might also think about life insurance as a perk for higher-level employees—maybe a term policy that converts to a whole life policy once they reach an executive position?
There is, of course, the consideration of your employees. Life insurance needs vary, which means understanding what's important to them is essential. For example, the ability to pay large medical bills using a whole life plan's cash value may be appealing. Under the proper considerations, life insurance is one of the most meaningful benefits.
Plan design will dictate the type of policy you need. As you consider these factors be sure to talk to an Employee Solutions Group expert before deciding on a life insurance benefit program.