How to Leverage Supplemental Life Insurance in an Employee Benefits Package

Did you know 60% of employees consider benefits when deciding whether to stay with an employer? That’s the majority of your workforce that you could be at risk of losing without an optimized benefits strategy.

But you don’t have to overspend to offer employees the benefits they want. Adding optional supplemental life insurance policies is a great place to start. These give your employees more control over the coverage they receive, so everyone can choose their perfect plan. 

Here’s why supplemental employee life insurance could be the key to improving your benefits package and retaining more workers.

What Is Supplemental Life Insurance?

Supplemental life insurance is coverage an employee can opt into if they want extra life coverage. Organizations that offer group life insurance policies typically only provide basic coverage at a discount. Supplemental life insurance expands on that so your employees can reach the coverage amounts they prefer while still going through your group policy.

For example, your current benefits package may give employees life insurance coverage for up to two years of salary. Employees who want five years of salary coverage could get it by paying a little more for a supplemental plan.

You can also offer supplemental policies that expand on the coverage types available through your group plan. For example, if you only offer permanent life insurance, you could create a supplemental policy for employees who prefer term coverage.

How Does Supplemental Life Insurance Help Employees and Employers?

Employers and employees can each benefit from supplemental life insurance policies in the workplace. Here are the primary benefits each group can expect.

Benefits for Employees

Reduced Financial Stress

The main advantage of supplemental life insurance for employees is securing extra financial protection for their families. With expanded coverage, workers don’t have to worry as much about what would happen to their loved ones financially if something happened to them.

Greater Benefits Personalization

Supplemental employee life insurance policies also open the door to greater benefits personalization for your workforce. This can improve employee satisfaction. When team members have more control over their benefits, it’s easier for them to create a package that fits their needs.

Benefits for Employers

Attract and Retain Employees

Supplemental life insurance can help to keep your employees happy with their benefit packages. This is an important step toward boosting retention — especially when used alongside your other employee growth strategies

Plus, it’s another advantage you can highlight when trying to bring external talent into your organization. It’s a way to show that you care more than the average company, which often only offers basic life insurance coverage.

Cost-Effective Benefits

Your company probably pays a percentage of its employees’ life insurance premiums. However, you likely won’t need to pay anything toward supplemental policies. It’s common for employees to pay 100% of the premium since they have to opt into the coverage.

This makes supplemental life insurance a benefit you can offer with minimal downside. It’s something employees can take advantage of if they want, but it won’t seriously impact your budget. So why wouldn’t you add it to your benefits package?

Types of Supplemental Life Insurance

There are two main ways to offer supplemental life insurance to employees. It can be something you tack onto your group’s existing coverage as a rider or new standalone policies.

Rider-Based Supplemental Life Insurance

Supplemental life insurance riders let employees customize the same basic group policy in whatever ways they want. Some examples include:

• Higher death benefits
• Coverage extended to an employee’s family
• Burial insurance
• Accidental death and dismemberment protection

It may be more cost-effective to offer supplemental coverage through riders. Life insurance companies are often willing to discount optional upgrades like these when you’re already paying for a more robust policy. It can also be easier for employees to manage one policy instead of several.

The downside of rider-based coverage is that it can only expand on an existing plan — it can’t change it entirely. For example, you can add a higher death benefit to a term life policy. But you usually can’t change from term life to permanent life coverage through a rider.

That means some employees may not have their needs fully met by rider-based supplemental life insurance alone.

Standalone Supplemental Coverage

You can also offer full supplemental life insurance policies. These plans complement your group’s base coverage as independent insurance contracts instead of additions to existing ones.

The main advantage of this is giving employees more control over the type of life insurance they have. Standalone policies also let companies offer upgraded coverage like permanent life insurance without having to pay as much for it.

That said, these standalone policies can cost employees more than supplemental riders. The best solution may be offering both types of supplemental coverage so that employees can choose whichever option is a better fit for their goals.

How to Implement Supplemental Life Insurance at Your Company

Here’s a process you can follow if you’d like to bring supplemental life insurance to your business.

1. Ask Employees What They Want

The first decision you need to make is what kinds of supplemental life insurance you’re going to offer. But before doing that, it’s worth checking in with your team to see what types of coverage they would want.

You can do this with a simple poll created through a free tool like Google Forms. You’ll want to ask things like:

• What they feel is missing from the company’s current life insurance policy
• How much they’d pay for expanded coverage
• Whether they have any other concerns about their life insurance that supplemental coverage may be able to address

Compiling these responses will show you what the demand for supplemental policies looks like in your organization. That’s an important thing to know before choosing what you’ll offer.

2. Choose a Provider

Next, start thinking about which life insurance provider you want to use. You may just expand the relationship with your current company. But you’ll sometimes need to look elsewhere — especially if your existing provider doesn’t offer the forms of supplemental coverage your employees want.

It may even be worth swapping your base plan to a new provider as part of this process. Rates can change as you seek to expand coverage and the decision you made in the past may no longer be the best fit for your company in the present.

3. Decide Which Types of Supplemental Life Insurance to Offer

Now you’re ready to finalize the types of supplemental coverage your company will offer. Generally, the more options you give employees, the better. You want people to be able to create their ideal coverages. Offering more choices makes that possible for a higher percentage of your team.

You may want to think through this with a representative from the life insurance company you’re using. They can help you understand how rates will change based on the decisions you make. 

Although your company may not be responsible for these costs, you still want to make sure your employees get a deal that’s at least as good as what they could get from an independent policy. It may be helpful to speak with an employee benefits consultant as part of this process.

4.  Set Coverage Minimums and Maximums

Once you’ve finalized the types of supplemental coverage you’ll offer, you can start setting coverage limitations. This generally means choosing minimum and maximum policy values.

You generally want to offer employees as wide of a range as possible so they can choose what works for them. Keep in mind that most workplace life insurance policies offer base coverage ranging from $50,000 to $100,000. Any additional coverage would go beyond this amount.

But your life insurance provider will have something to say about this, too. They usually have internal minimums and maximums that company policies must follow. Plus, rates could change based on the range you choose.

5. Educate Employees

At this point, you’ve finalized your supplemental life insurance offering. Now you’re ready to start sharing these new benefits with employees. It’s important to be thorough so that people understand their new benefits and know how to access them.

The easiest way to share the information could be through a company-wide email. But you could also host workshops or meetings for people who have questions or want to learn more.

6. Monitor and Adapt

Now all that’s left to do is monitor your company’s supplemental life insurance usage rates. You’ll also want to review data on policy types and coverage amounts to see how your team uses their new benefit in practice.

The data you track can help you refine your approach to supplemental life insurance policies moving forward. For example, if accidental death protection has a low usage rate, it may be something you can cancel in the next contract. 

Or maybe lots of people pay for the maximum amount of supplemental coverage. That could be a sign that you should seek to expand your upper coverage limits the next opportunity you get.

Support Your Employees With Great Benefits

Expanding your company’s benefit package can lead to happy, loyal employees. But it’s not the only way to achieve those goals. There are many ways for companies to prioritize employee wellness — from helping them pay for gym memberships to offering mental wellness support.

If you’re searching for a simple way to enhance company-wide wellness, sign up for Wellhub. Our corporate wellness platform is a single solution for employee wellness in fitness, mindfulness, therapy, nutrition, sleep, and beyond.

You can talk to a wellbeing specialist today to learn more about how we can help you improve your team’s wellness!

You May Also Like

• The HR Leader’s Guide to Navigating Employee Insurance Benefits
• Boosting Employee Engagement with a Centralized Employee Benefits Portal
• Want to Improve Your Company’s Bottom Line? Start by Boosting Employee Wellbeing

References

• Church Pension Group (Retrieved June 4, 2024). Supplemental group life insurance.  https://www.cpg.org/active-lay-employees/insurance/life/supplemental-life/
• Forbes Advisor (Retrieved June 4, 2024). Employee Benefits In 2024: The Ultimate Guide.  https://www.forbes.com/advisor/business/employee-benefits/#:~:text=A%20study%20by%20the%20Society
• Guardian (Retrieved June 4, 2024). Is the life insurance you have through work enough? https://www.guardianlife.com/life-insurance-through-work