From the September 2010 issue of Benefits Selling Magazine • Subscribe!

Group life plans all look the same - until somebody dies

Walk past any American firehouse and you're likely to see the same scene: easygoing people and silent trucks. Yet, when a fire erupts, those same people and trucks launch into action, achieving the pinnacle of speed, focus and determination.

Group life insurance plans work this way, too. On the surface they look the same. Most provide various options for employer funding levels, opportunities for employees to buy additional coverage, and easy payroll deduction. Because of their similarities, employers and brokers alike rarely look beyond the surface to find out what happens when the alarm bell rings: that is, how does the policy perform when an employee actually dies?

When assessing group life options for a client company, here are a few questions to ask the competing carriers to uncover the performance advantages - or gaps - that will become critical when an employee dies.

Show me the money
If you don't like the answer to this question, look for another carrier's product. The fact is there is broad variance in the industry in how quickly life insurance claims, on average, are processed. Ideally, this process should take days, not weeks.

Why the urgency? When an employee dies, his or her earnings stop immediately. For families, this is a financially devastating turn of events, especially in difficult economic times, when many are virtually living paycheck to paycheck.

Adding to this situation is the immediate pressure the deceased's family is under to make funeral decisions. According to the National Funeral Directors Association, typical funeral costs can top out at $7,300, not counting a cemetery plot or headstone, which can push that number well beyond $10,000. Meanwhile, many funeral homes want payment within 30 days, if not immediately.

The bottom line: if the benefit payment doesn't come quickly enough, the deceased family members may need to pull out their credit cards to pay for the funeral while they wait for the payment. That's not a scenario anyone relishes.

Beneficiaries need choices
Traditionally, death benefit payments have simply been a matter of sending a check to the beneficiary. However, depending on the circumstances, the bereaved might want other things to happen.

For example, he or she might want a check sent directly to the funeral home to cover immediate expenses. The carrier should be in a position to carry out that request, sending the remainder to the beneficiary. Or the beneficiary might want access to the death benefit very quickly, not wanting to wait until the carrier's payment clears the local bank's books. To meet this request, some carriers will send the beneficiary a checkbook from which to write checks directly from the death benefit proceeds, which are held in an interest-bearing account. This way no time is lost.

How easy do you make it?
When an employee dies, the company's HR rep usually assumes the responsibility for launching the group life claim process. Since this individual also might need to deal with co-worker bereavement issues and sudden loss of key talent, he or she needs this claim process to go as smoothly as possible.

When assessing carriers, ask about what resources are available to the company representative who has to deal with the claim. For example, some carriers provide a dedicated group life Web site, so that company representatives can access forms, instructions and FAQs from anywhere. Take a look at these resources with a critical eye to ensure they are understandable to someone unfamiliar with the life claims process.

Who's going to help?
All carriers provide a phone number to their call centers so the company representative or beneficiary can call with questions. However, certain carriers take it a step further and provide the contact information for the claim examiner who is handling the particular case. This way, there is less opportunity for facts being lost in translation among the company, the bereaved and other parties.

This transparency becomes particularly important if a claim gets complicated. For example, some employees will divorce and remarry, never taking the time to change their life insurance beneficiary form. As a result, there can be conflicts between current and former spouses, other family members, etc. It's important the claim examiner remain at the center of these issues, clarifying the policy details and dealing with calls from lawyers and others - to keep the claim process moving with competence and compassion.

Value-added services?
Some carriers offer additional services that add value before or after the moment of truth when an employee death occurs. For example, certain carriers provide employees with assistance in preparing simple wills, something many people put off due to the expense of hiring a lawyer. Even the most basic will, executed now, can prevent major issues from arising when a family goes to settle an estate.

Ask also if the carrier has any special services that help beneficiaries handle their funeral arrangements more effectively. Family members must make difficult decisions during a very emotional time, and are reticent to question prices of various funeral services. See if the carrier provides access to resources that can provide discreet and impartial advice in this area. It could save the bereaved family a substantial amount of money without detracting from the dignity or quality of the funeral.

It pays to ask
Value-added services aside, the most important feature of a group life policy is how it performs when it really counts - both for the beneficiary and the company representative initiating the claim. It pays to make sure the carrier will deliver for your client when the "alarm bell" sounds - with speed, efficiency, determination and compassion.

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