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The voluntary benefits marketplace has evolved significantly over the years, and the rate of change promises to increase as employers continue to try to attract and retain employees at a reasonable cost. New product and service offerings, along with a growing distribution system of brokers and consultants, will ensure a dynamic and expanding universe of value-added options.
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Home / Product Information / Overview Options / Insurance Products Overview
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The lines between voluntary benefit plans offered on an individual vs. group basis have blurred in an increasingly competitive marketplace. Witness the emergence of “hybrid” products that are filed on a group platform but often contain features representing the best of both product forms. For example, many hybrid plans offer portability, which enables employees to continue coverage if they change jobs.
Voluntary products are typically available at discounted rates as compared to products purchased outside of the worksite. Premiums are payroll deducted by the employer, which makes paying for the coverage easier for employees since the cost can be spread out over the pay periods.
Eastbridge Consulting estimates that about 64% of employers with at least 10 employees offer at least one product, and many offer more than one. In the consultant’s 2006 “U.S. Worksite Study,” voluntary life insurance accounted for the largest share of new voluntary sales (24%), followed by disability (20%), accident and hospital indemnity policies (15% apiece), cancer/critical illness coverage (12%), dental (9%) and long-term care insurance (2%).
“Unlike some products, there may be multiple times in life when people want to buy more life insurance,” says Ron Neyer, senior analyst, distribution research for LIMRA International in Windsor, Conn., who notes that nearly every worksite-marketing carrier offers these plans.
On another product front, it’s easy to see why specialized medical coverage is among the fastest-growing category of voluntary benefits. A Harvard University study pegged average expenses at $11,854 in 2001 among those whose serious illnesses led to personal bankruptcy. Moreover, a 2005 MetLife survey found that Americans significantly underestimate the amount of out-of-pocket expenses associated with a major illness: 22% of respondents said they had no savings and another 21% noted less than $1,000.
Critical-illness insurance is becoming increasingly popular because it’s not only easy to understand but also covers catastrophic claims, says Steve Weisbart, an economist with for the Insurance Information Institute in New York.
Both short- and long-term disability plans also resonate among the public, with mounting concern about protecting income as the number of these employer-sponsored plans continue to shrink. The National Association of Insurance Commissioners notes that people in their 30s are three times more likely to become disabled than die, while the U.S. Census Bureau has found that nearly one in five Americans will become disabled for a year or more before turning 65.
As Baby Boomers approach retirement age, Weisbart believes demand for income-protection vehicles under the voluntary benefits umbrella could grow among younger workers if the roughly 76 million members of this generation struggle to save and exceed their life-expectancy targets – thus, prompting a firestorm of media attention. He says products to be on the lookout for might include long-term care insurance or “longevity” types of coverage that include a deferred annuity to provide income in old age.
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