It continues to be a challenging business environment. Economic growth remains sluggish and many employers are cautious about hiring new workers or expanding employee benefits. At the same time, however, companies want to attract, motivate and retain productive employees. Offering voluntary employee benefits can accomplish these goals while addressing employers’ cost concerns and simultaneously improve employees’ financial wellness. They also provide an opportunity for you to differentiate your advisory service offerings and add value to your employer-client relationships.
Types of voluntary benefits
Voluntary or employee-paid benefits have three key features. First, employers decide what voluntary benefits to offer, select carriers, and work with those carriers to design and implement benefit plans. Second, voluntary benefits are offered to employees at the worksite. Finally, employees typically pay 100% of the cost for the benefits they select, usually by payroll deductions.
There are three major categories of voluntary benefits. Financial protection products address key financial risks to which most employees are exposed. These can include life insurance; short- and long-term disability insurance; long-term care insurance; and accidental death and dismemberment insurance. Medical protection products complement health insurance offerings with coverage for specific medical issues: dental insurance; cancer insurance; critical illness insurance; and vision insurance. Convenience products are typically purchased outside the workplace but some employers may provide them at the workplace for convenience and potentially with an employer-negotiated discount. Products can include auto insurance, home insurance and pet insurance, for example.
Advantages for employees
Employees seek a level of “financial wellness” that allows them to meet their short- and long-term financial needs, both planned and unplanned. These unplanned needs can include the risk of premature death, disability and prolonged illness. Insurance offers protection against these risks’ financial impact but many households lack adequate insurance protection. For instance, LIMRA reports that ownership of life insurance is at a 50-year low. Only 59% of U.S. adults owned life insurance in 2010, down from 70% in 1960. Approximately two-thirds of private sector workers lack long-term disability coverage, according to the Council for Disability Awareness. That’s a significant exposure because the American Payroll Association reports that 70% of individuals live paycheck-to-paycheck and cannot afford a disruption in their incomes.
Voluntary benefits programs make it easier for employees to cover these gaps by providing them with an attractive value proposition. Prudential Financial’s “Sixth Annual Study of Benefits: Today and Beyond” in 2011 found that employees with access to voluntary benefits cited several advantages with those programs. They were more convenient because of payroll deductions (cited by 51%); they cost less than outside the workplace (49%); and they provided access to a wider range of useful benefits than might otherwise be available (47%). Also, more than half (52%) of employees said that voluntary benefit offerings increase the value of their employers’ benefit packages.
Advantages to employers
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