Benefits from life insurance policies can be applied to anything – from funerals, to college costs, to mortgages, to credit card bills. It’s an important financial planning tool. The catch? You need to be covered by a life insurance policy. While most Americans believe in the importance of life insurance, 30 percent of U.S. households have no life insurance at all. Of the U.S. households who have life insurance, 50 percent say they need more. 1 As the benefits industry approaches Life Insurance Awareness Month in September, Unum (NYSE: UNM) is helping employees understand the options available to help them create a mix of coverage that is right for them. Just over half of life insurance owners get it through their benefits package at work. 2 This employer-provided coverage offers a solid foundation of financial protection, but it may leave dependents vulnerable beyond immediate needs. “Group life insurance provides excellent benefits for final expenses and some lost income,” said Colleen Brescia, manager of group life products at Unum. “Employees should look at additional options for coverage at work, however, to help them achieve the longer term financial protection they and their families may need.” That’s where supplemental group or individual voluntary products come into play. “There is not a one-size-fits-all solution for life coverage,” says Debbie Cecil, director of voluntary life products. “Each employee will have different needs. The right combination of life insurance coverage is vital in making sure your loved ones are financially secure should the unthinkable happen.” The right formula for coverage will be based on needs like college costs, retirement security and long-term care options. Brescia and Cecil say that the first step to making the right choices for financial protection is to understand the different types of life insurance available. Here’s a breakdown:
- Group term life and supplemental lifeMany employers provide a basic group term life insurance as a strong foundation for employees during the working years. Employers may also make available supplemental coverage for their employees to purchase so employees can get additional coverage to help meet their individual insurance needs. Group Term life rates are extremely reasonable and if an employee leaves employment, they may be able to take the coverage with them. . These plans frequently include additional services like financial planning and grief counseling for surviving beneficiaries, work-life balance employee assistance programs, and Accidental Death and Dismemberment.
- Term life insuranceFor young, single workers who don’t have many financial obligations and for young families who need a lot of income protection during their working years, term life coverage is usually adequate and affordable. The policy lasts for a defined period of time, called the term. A term life policy does not accumulate cash value. Rates typically go up as the policyholder ages, but are generally lower than whole or universal life policies.
- Whole lifeWhile employees still need the basic protection of a group term life while they continue to work, whole life insurance considers employees’ needs as they transition from work to retirement. In addition to level premiums and guaranteed cash value, the policy has a paid-up-at-age-70 option and access to a long term care benefit for policyholders and their spouses.The cash value of Unum’s new whole life coverage is guaranteed to equal the values shown in the policy, offering consumers easy estate planning and straight-forward finance management.
- Universal lifeUniversal life premiums are flexible and can be adjusted to fit an individual’s changing financial lifestyle. So premium contributions can be adjusted to balance against an employees’ financial status or needs, which typically reduce at retirement.