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Want to Retain Good Employees?

Life insurance may be the answer.



Recent research from Glassdoor — a website where employees and former employees anonymously review companies and their management — found that 57 percent of people report benefits and perks are among their top considerations before accepting a job, and four in five workers say they would prefer new benefits over a pay raise.

“Employees are the biggest asset a company has, so better benefits help employers attract and retain valuable employees,” says Nora Vaden Holmes, a State Farm insurance agent who runs her own office in Metairie.

While more than 50 specific benefits and perks are listed at Glassdoor — including such perennial favorites as health insurance and 401(k) or retirement plans— some companies are now offering more progressive ideas.

For example, Netflix offers one paid year of maternity and paternity leave to new parents. Airbnb gives its employees an annual stipend of $2,000 to travel and stay in an Airbnb listing anywhere in the world. And Twitter provides three catered meals a day, on-site acupuncture and even improv classes.

According to the Bureau of Labor Statistics’ 2010 National Compensation Survey, 60 percent of firms with fewer than 100 workers offered health benefits. On average, those companies covered 80 percent of employees’ premiums for individual policies and 65 percent for family policies. Just more than half, 52 percent, set up retirement plans and 44 percent offered life insurance.

“The loss of a key employee, simply leaving employment with you, can be devastating, especially if they leave you and go to your biggest competitor,” says Jack Duvernay, vice president of employee benefits with Eagan Insurance Agency. “There are numerous tools out there to entice or ‘put a golden handcuff’ on those employees to stay with their employer.”

While creative benefits can be appealing, a core offering in an enticing benefits package has consistently been life insurance, and September happens to be Life Insurance Awareness Month.

According to LIMRA, a financial industry research organization, as many as 132 million Americans rely on life insurance to protect their financial security. Major reasons given for owning life insurance include covering burial and other final expenses, helping to replace lost income and helping to pay off a mortgage.

“Employees become our work family and you can have peace of mind knowing an employee’s beneficiary or family can have funds available upon the employee’s death,” says Holmes.

According to the 2016 Insurance Barometer Study — a part of the September Awareness Life Happens campaign — one in three households would have immediate trouble paying living expenses if the primary wage earner died. In addition, half the households in America would feel the financial impact from the loss of their primary wage earner in a year or less. In fact, more than 40 percent would feel the impact within six months, including nearly 40 percent of households with an annual income of $100,000 or more.

If you consider adding life insurance as a benefit for your employees, there are many things to consider when choosing the right providers who can best guide you through your choices.

“Always, always, always contact an independent insurance representative,” advises Duvernay. “When I say independent, I mean one that is not captive, or influenced by one provider.” 

He also believes that an independent insurance agent typically works through a brokerage general agent, who has access to most every life insurance provider on the market.

“They are well seasoned in not only making great product recommendations, but also assisting the independent agent in the sales process if necessary,” he says.

But some recommend going with a company with a long history such as State Farm Mutual Automobile Insurance Co., the parent company of several wholly-owned State Farm subsidiaries. Holmes believes that there are many advantages in choosing a company that has proven financial strength such as State Farm.

“It’s good business sense to choose to do business with a company that will be there when you need them,” she says. “Our Fortune 500 ranking was in the Top 50.”

Brad Hammer, an insurance and financial service manager for Fassbender Insurance says there are many options for the consumer.
 




“An employer or employee can buy life insurance as an individual or through a group plan,” he says. “This can be done through local life insurance agents; Internet-based websites, professional associations or affinity groups. But make sure you do your research and make sure your insurance company is rated with a credit rating agency such as A.M. Best Co., Standard and Poor’s, Moody’s or Fitch Group.”

Hammer also strongly suggests having a solid plan.

“Business owners need to look at what risks they might incur over a period of time,” he says. “If a plan is not in place, the costs to correct will be substantial. Know your risk and plan on it.”

Once you have the right providers, the next step is to determine what kind of life insurance you need.

“If available, most companies offer group life insurance policies for their employees in the form of term insurance, and some offer permanent policies as well as whole life, universal life, and variable life,” says Hammer. “The business owner also can protect the business and themselves with key person, business succession, business continuation and buy/sell agreements between the owners.”

According to Duvernay, one of the more common life insurance options is a restrictive endorsement bonus agreement. 

“The employer provides the employee with the amount of the life insurance premiums on a permanent life insurance contract,” he says. “The employee names his or her own beneficiary of that policy. We always like to include a good long-term care or chronic illness rider on these contracts too. This policy is designed to be paid in full within a given number of years, such as 10 years or at age 65. The agreement that is signed by the employer and the employee outlines that the employer will continue to pay the premiums for this policy, as long as the employee remains employed at that place of business.”

The next question is how much insurance is enough to make sure the business and its employees are protected. One thing Duvenay suggests is that a business owner consider who the key revenue drivers are within their company and do everything possible to protect the business from the loss of those sources of business revenue.

“It may be a top salesperson, a construction job estimator, a person who developed and maintains all the most important customer relationships, etc,” he says.  “If that person leaves employment with your firm, then that revenue is lost. If that person dies unexpectedly, you have an immediate loss of revenue to the company, unless you are fortunate enough to have someone of the same skill set that can take up that person’s responsibilities, along with their own. Key employee life insurance is one of the most common forms of life insurance that business owners demand.”

Another thing to consider is that premiums are generally tax deductible. According to Hammer, employers that provide group term life insurance to employees can deduct premiums paid for coverage if the company is not the beneficiary.  He says usually group term life premiums may be limited to the cost for $50,000 of coverage.

“Many employers would rather provide this benefit to their employees instead of paying it in taxes to the federal government,” says Holmes.

Like so many industries, the insurance industry is experiencing some exciting new trends.

“The addition of living benefits riders to new permanent life insurance contracts is probably the most exciting and consumer beneficial trend to come along in years,” says Duvenay. “Many of your major life insurance carriers are making available either long- term care or chronic illness riders to attach to your new permanent life insurance policies.  In the past, insureds have only been able to provide benefits to their beneficiaries in the way of a death benefit, which was honestly, not too exciting to discuss. Today, an insured is in essence still naming a beneficiary in the event of his or her death, but the insured themselves can also benefit from the policy if they ever have a cognitive impairment or have the loss of at least two activities of daily living, by ‘accelerating’ the death benefit early to pay for their own care, which is most often very expensive.” 

Holmes also sees some remarkable trends emerging in her line of work.

“The ‘new’ term insurance — called Return of Premium Term — is exciting,” she says. “This policy is where the insured receives all of their premiums paid back at the end of the term,” says Holmes. “It is a great compliment to whole life or universal life insurance to meet the needs of someone who can’t afford the permanent insurance option. Young couples like the idea of getting their premiums back in a lump sum after 20 to 30 years after their kids are grown and being able to use the funds to pay off their home, pay off college debt or contribute to their retirement nest egg.”
 



What are the benefits of offering group-term life insurance?


• Tax deductible premiums

• Desirable benefit to help attract and keep employees

• Valuable life insurance protection provided at a low group rate

• Employee has the right to name and change beneficiaries

• Death benefits paid income tax free

• One-year level premium rate

• Conversion privileges upon termination of coverage

• Accidental death, dismemberment and loss of sight protection