Employer-paid, one-size-fits-all benefit plans are quickly diminishing. Companies are looking for ways to cut costs, yet attract and retain employees. For the small business owner, voluntary benefits - where employees select and pay for the benefits that suit their needs - take the pressure and costs off of the employer's shoulders, while offering a variety of employee options that a company might not otherwise be able to afford.
How Does It Work?
Voluntary benefits are paid for by employees through pre-tax payroll deductions. Employees can pick and choose which benefits relate to them and buy up as much as they need. Voluntary benefits can often bridge a gap created from higher deductibles and co-pays, part-time status, or probationary periods (the time it takes for regular, employer-paid insurance benefits to kick in).
Employees benefit from more affordable group rates and a guaranteed issue policy. There is typically no individual underwriting and therefore no medical questions on the application.). Should the employee choose to purchase the additional benefit on their own, they are not guaranteed.
With multi-generational workplaces, not everyone is looking for the same coverage. For example, a young Gen Y person may want to buy up on accident insurance due to their high risk hobby of skydiving or rock climbing. Whereas a middle-aged worker may be interested in long term care insurance or life insurance to take care of their family should something happen to them. Depending on the situation, short-term disability insurance could also help replace some of one's income during a maternity leave.
Types of Voluntary Insurance
Once considered "extra," voluntary benefits today are getting more consideration as cost effective options that make sense. Depending on the plan, an employer can offer some or all of the following in their voluntary benefits menu:
- Permanent life insurance (whole and universal)
- Term life
- Disability income protection
- Critical illness benefit (i.e. cancer treatment)
- Group legal plan
- Accidental death and dismemberment (AD&D)
- Combination of life, auto and home insurances
- Hospital care
- Dental plan
- Home mortgage program
- Long term disability
- MasterCard program
- Retirement plan
- Short term disability
- Long term care
Chances are that you, like most, are not an insurance aficionado. Yet, setting up a voluntary benefits plan and forgetting about it is not wise. Here are some pointers from HR and insurance industry experts:
- Enlist the help of a reputable benefits specialist who can advise you and manage your benefits.
- Ask your rep how much commission is paid on each product employees purchase (if they can't provide an answer, find a new rep).
- Educate your employees on how voluntary benefits could help them; no sales pitch here, just information that they could use.
- Be the buffer between your voluntary insurance carrier(s) and your employees. Do not let them market directly to your employees.
- Offer voluntary insurance as part of your overall benefits package and communicate costs and details to both employees and prospective hires. This allows them to make informed decisions.