There are a few basic truths underlying the popularity of voluntary benefits; affordability is one of them, along with understandability and processing ease. For an employee, voluntary plans are easy to apply for, to qualify for, and to pay for. For an employer, there is little work beyond allowing enrollment and handling the payroll deduction process.
However, for various reasons, HR benefits managers may have the mistaken belief that voluntary benefit plans are expensive—possibly dating back to pricier products that have been sold in the past. This happened to us recently. One of our brokers passed along a message from an HR benefits manager who asserted their employees making $12 to $15 an hour “should not be offered voluntary benefits because they cannot afford them.” This was the reason given for not allowing some eligible employees to attend our group meetings. Meanwhile, the employer had no life or disability plan for these employees.
We helped our broker by providing a simple analysis of the affordability of our product package. The employer made assumptions about the costs, thinking we'd hit people up for too much money. So, we shared a few examples to make a point about affordability (these are actual prices for the members—most insurance companies will have similar, not identical, prices).
Voluntary term life—cost per month of a $50,000 benefit:
Age 25: $2.45
Age 35: $3.40
Age 45: $5.25
Age 55: $23.15
Voluntary rates for $300-a-week benefit (typical for someone making $12 to $13 an hour): all ages $24/month.
The total cost (even at age 55) is less than $50 a month. The cost for these workers is about $6 to $11 a week.
Meanwhile, think of the money these people may be spending on non-essential items. A latte a day may be the coffee habit of choice for some. But at $4 a piece, that latte habit can cost over $100 a month. Even a couple of Mountain Dews a day could be $50 a month. The benefits manager wouldn't tell people to cut out Mountain Dew or their favorite coffee—yet those items should be considered extras, while personal and family financial security should be considered essential.
Our example shows how even entry-level employees can afford financial security, taking care of their basic needs for life and disability insurance protection. Yes, we or the employer may also offer other voluntary options that can be seen as less essential. We position those for employees who have taken care of basics and are looking for extended protection at an affordable cost.
The $12- to $15-an-hour worker probably needs life and disability products even more than people making three times as much. They are unlikely to have enough savings to get through tough times without going into debt or eradicating their retirement fund. They trust their employer's choice of voluntary options and enjoy the ease of qualifying on a guaranteed basis.
We were very happy, in the end, that our broker was able to convince the HR manager that our program is affordable, and the enrollment was a success.
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