The Value Proposition of Voluntary Benefits in Small Business

The employee benefit commonly referred to as Voluntary Benefits has unfortunately been misconstrued over the last decade due to over-simplified advertising and marketing, poor face to face communication and and emphasis on sales rather than solution providing.

In the early days, this benefit was often labeled “supplemental insurance”. While some of the benefits under the umbrella are supplemental by definition, many are not. I do not know of an employee who considers disability insurance to be supplemental. There is absolutely nothing supplemental about life insurance.

There are also those who make the leap from “voluntary” to “supplemental” to “optional” - and in their mind, optional means “unnecessary”. Usually, this leap is made by an employer who is disconnected financially from an employee group that operates under a distinctively different income level. Thankfully, my job is to explain, as gently as possible, where the fallacy exists.

If Voluntary Benefits are not “supplemental”, then what are they? Voluntary Benefits are a suit of products designed to allow an employee on an individual basis to reduce their risk based on their own needs.

Voluntary Benefits address four key areas of an employee’s risk:
1. Paycheck
2. Out of pocket medical expenses (deductible, co-insurance, etc.)
3. Catastrophic occurrence and critical illness
4. Life

First, the paycheck is an employee’s biggest asset. However, it is also their biggest area of risk if left unprotected. The average American cannot go a month or more without a paycheck. Voluntary Benefits include an option for short term disability insurance to replace lost income due to accidents and illness.

Second, out of pocket medical expenses and an employee’s risk associated with such expenses have increased steadily in the last decade as deductibles increase in favor of lower premiums. Also, a significant percentage of out of pocket expenses come from things that simply are not covered by health insurance. Travel expenses, lost time at work, and the fact that the bills are still due all contribute to this category of risk. Supplemental Health, Accident or Cancer insurance can go along way toward protecting an employee who is one incident away from financial strain.

Third, the catastrophic event. On the plus side, more people survive the first heart attack or stroke. On the down side, the financial burden that comes with such an illness is often enough to ruin even the best retirement planning. A solid Critical Illness plan can function as a living form of life insurance and provide cash at a time when it is needed most.

Finally, Life. In reality is should read “Death”, but for obvious reasons we’re all more comfortable with the term “Life”. Every working American with a family, a mortgage, a plan should ask the question: What happens if I’m not here tomorrow? Surveys show that employees prefer to purchase life insurance through the workplace than on their own. Some of this is due to an inherent distaste for the process of learning and searching on an individual basis. It can be intimidating and you rarely know that you’re making the right decision. A less spoken reason is that an employee is more comfortable having the premium taken directly out of their paycheck and knowing they have the protection. Worksite life insurance is protection. Individual life insurance results in another bill in the mail every month. It is literally that simple.

The Value Proposition of Voluntary Benefits:

Chances are any company with more than one employee has employees with different income levels, personal backgrounds and varying life stages. Voluntary Benefits provide employees the opportunity to address their individual needs while substantially enhancing the employer’s goals of providing value in their employee benefits plan. The value realized is in the eye of the employee, but the opportunity offered is beyond valuation.