The concept of bundling term and permanent life insurance is not a new one - it's been around for 20 or 30 years on the individual side, says Rob Shestack, managing director and national employer benefits sales leader at Marsh U.S. Consumer. However, the need has never been greater for such a voluntary benefit offering at work, as the days of "kitchen table" individual life insurance sales are all but forgotten.
Shestack points out that less than a decade ago there were only a few voluntary worksite carriers pairing perm and term, but today they recognize that bundling provides an easier and faster strategy that benefits both the broker and the client.
Damon Bates, vice president of consumer & product marketing with MassMutual Life Company, agrees, and says "more worksite activity with perm and term is to come in the future."
When purchasing life insurance, employees "think they have everything taken care of for their future through [group life benefits] their employers provide, such as four times their salary," says Bates.
But, he adds, employer-sponsored benefits should not serve as a foundation for a long-term plan - for two reasons. "No. 1, you can't get enough protection or pure death benefit through these plans," he says, "and No. 2, they're not portable, so employees may lose this coverage."
Voluntary life products are a must-provide for brokers who want to meet client needs, says John Milam, EVP at Willis, in Knoxville, Tenn. "Because if they don't, someone else will."
Still, employees are satisfied with term life for now. Most people will not die while covered under term, so it offers significantly lower premiums than permanent, which will pay out eventually. Because "people are more concerned about being hit with a major medical expense while they're alive," says Howard Silverstein, president of Choice Employee Benefits Group in Williamsville, N.Y., they would rather set money aside to contribute to other coverage such as critical illness and disability, or put it in a health savings account.
Multiple target markets
Shestack and Bates agree that bundling perm and term is the best way brokers can help employees cover their short- and long-term needs. Because, depending on where an employee is financially during his or her life, their needs will fluctuate.
Purchasers in their 30s and 40s may have a mortgage, be in the midst of getting married, or have kids that are considering college plans - all large financial expenses that term life insurance can cover at a cheap rate at this age. But, as plan holders age, their need to cover immediate expenses can diminish at the same time that a term policy becomes more expensive as they enter a new age bracket. This is where a perm life policy gains momentum; employees can use this product toward their final expenses or estate planning needs in their 50s and 60s.
"By the time consumers reach this age," says MassMutual's Bates, "there's less term insurance being sold and more post-retirement planning to help maximize pension benefits and lay framework for legacy planning for their grandchildren."
