The "dos and don'ts" of insurance purchasing

I recently came across a chart we created about 25 years ago when the company I worked for first entered the voluntary benefit market (a brass ring goes to anyone who remembers Capitol Bankers Life). We had a mixture of producers at the time: individual "business insurance" producers, brokerage general agencies, and employee benefit brokers. The chart was intended to convince everyone that the expanding "payroll deduction" market was a great opportunity for all.

It amazes me that the chart we came up with then still holds true today -- perhaps even more than ever. There are two sections, one covering the employee perspective, one the employer. Here are the charts.

Employee Dos and Don'ts

Why employees don't buy individual life insurance

1. Hard to qualify -- complicated underwriting
2. Don't like doctors, exams, etc.
3. Spouse will remarry -- doesn't need insurance
4. Too expensive
5. All family members are in good health
6. Will inherit money
7. Family is grown
8. Have enough employer-paid group life
9. No spendable income
10. Using 401(k) for retirement

Why employees do buy voluntary life insurance

1. Easy to qualify
2. No medicals necessary
3. Can insure your spouse
4. Group buying power makes voluntary affordable
5. Are you sure? What about accidents? What if health changes?
6. Life insurance guarantees a liquid asset in the estate.
7. Protection for your retirement, debt repayment, etc.
8. Usually not (need is 4+ times pay), also not portable
9. Small systematic payment via payroll deduction -- affordable
10. Protected in event of early death

Employer Dos and Don'ts

1. Products not competitive with individual life
2. Employees have enough insurance
3. Too much administration
4. Group term a better deal
5. Union members wouldn't buy
6. Will affect our 401(k) participation
7. Need affordable long term care
8. Nobody's asked for it
9. We don't have time to communicate it
10. No one else is doing it

1. Voluntary products often outperform individual
2. Studies indicate this is not true - most are underinsured
3. Modern insurer administration is easy for employers
4. Only for the limited coverage an employer can provide
5. Union members seek out voluntary benefits
6. Not adversely - actually voluntary is a great completion product
7. By keeping life insurance costs low employees can afford LTC
8. Statistics prove employees appreciate the offer
9. Perfect, we offer a full communication package
10. Yes, they are! -- voluntary life is the most commonly offered voluntary product

You're probably wondering how much editing I did on the chart. First, if I wrote it today I would cover the full range of voluntary benefits, and not just life insurance, which was the dominant voluntary product 25 years ago. As to the rest, I'll admit to adding some words to clarify, and in one or two cases to update the verbiage, but the fundamental message is the same today as ever -- there are a great many reasons favoring voluntary benefit plans. Check out all the "Dos" listed above.

Marty Traynor is vice president of voluntary benefits at Mutual of Omaha. He can be reached at marty.traynor@mutualofomaha.com.