Does Your Employee Benefits Programs Provide Meaningful Protection?

Posted on Wednesday, April 03, 2019

Working families are more reliant than ever on employer-provided benefits to see them through a financial crisis. Are your workplace benefits sufficient to provide your workers with meaningful protection in case of a medical or other disaster befalling a breadwinner?

The answer for too many companies is "no." Although workers are far less likely than past generations to buy private life insurance, say, from an agent on their own, employer benefits have not filled the gap. The result is a generation of American working families left vulnerable to economic hardship from the disability or death of a breadwinner or other family member. 

According to a recent insurance industry survey of workers with middle incomes (defined as between $50,000 and $100,000 per year), only half believe they can financially withstand the disability or death of a family breadwinner.

The problem is hitting the middle class hardest. Families with incomes well above $100,000 per year are often able to create their own security, and receive a good deal of advice from financial and insurance professionals. Working class families -- those with incomes below about $50,000 -- often are able to access various parts of the social safety net in times of crisis.

But families in the "middle-market" are largely left out. They simply are less likely by far to own private disability insurance or life insurance to help see them through a crisis -- and they aren't being targeted by financial professionals enough to make a dent in the problem. These people are highly reliant on workplace benefits to be there for them in case of a death or disability.

Over 80 percent of middle-market respondents to the Guardian survey report that all their medical, life and disability insurance benefits come from their employers.
Meanwhile, 6 in 10 middle-income families own no life insurance of their own on the lives of their breadwinner(s) whatsoever.
Only 7 percent of middle-income families own any kind of disability insurance outside of employer plans.

Life Insurance is Often Inadequate

Many employers cap life insurance death benefits at $50,000. That's the upper limit under which employers can deduct life insurance premiums on employees in most cases. But that's not much more than a burial plan for most families. Consider a family breadwinner earning $50,000 per year who dies unexpectedly. He or she is gone forever, of course. Yet the $50,000 in life insurance may not last the family even a year. Meanwhile, the mortgage must be paid, and children must be clothed, fed and educated for many years to come.

What Employers Can Do

Fortunately, it is a fairly simple process to make much more meaningful life insurance benefits of up to $500,000 and more in some cases available to workers at little or no cost to the employer by offering life insurance as a voluntary (opt-in) benefit. You just deduct the premiums from the workers' pay, and forward them to the insurance company and your workers are covered. Underwriting is frequently streamlined and even employees with health challenges can qualify in many cases, if they join a large pool of insureds.

Posted in Tax Topics For Individuals

Disclaimer: The information contained in Dulin, Ward & DeWald’s blog is provided for general educational purposes only and should not be construed as financial or legal advice on any subject matter. Before taking any action based on this information, we strongly encourage you to consult competent legal, accounting or other professional advice about your specific situation. Questions on blog posts may be submitted to your DWD representative.

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