Insurance Plans
ABSTRACT
Insurance plans are optional benefits that an organization may offer to its employees. Although they are considered optional, it is standard in most industries to offer insurance programs within a benefits package. Employers may choose to include these benefits in a package and may choose to pay for the benefits or have the employee pay for the benefits. The life insurance plans available are term life, universal life and whole life. Accidental death and dismemberment may also be offered, and there are two types of disability plans that may be offered, short term and long term. It is important to consider what each of these plans include and what the advantages are of each plan in order to offer the employee the best and most affordable plan for the company and for the employee.
Introduction
Insurance plans are optional benefits that an organization may offer to its employees. Although they are considered optional, it is standard in most industries to offer insurance programs within a benefits package. Employers may choose to include these benefits in a package and may choose to pay for the benefits or have the employee pay for the benefits. The life insurance plans available are term life, universal life and whole life. Accidental death and dismemberment may also be offered, and there are two types of disability plans that may be offered, short term and long term. It is important to consider what each of these plans include and what the advantages are of each plan in order to offer the employee the best and most affordable plan for the company and for the employee.
Term life insurance is an insurance policy that continues in effect for a specified term. This may be an amount of years or until a specified age. Upon the death of the policy holder, the policy will pay the amount on the face of the policy. If the policy holder lives longer than the term stated in the policy, upon death, the policy will not pay anything to the beneficiary. Term life insurance is a basic policy that is relatively inexpensive and it is not difficult to understand its components.
Term life may either be level or decreasing. A level term life plan is an insurance plan that keeps the same amount of benefit regardless of when the policy holder dies. Term life plan types include a yearly term a five-year term, ten-year term, fifteen-year term, twenty-year term, five-year term, thirty-year term and a term that is based on a specific age. The most popular of the term types is the twenty-year term. The only limitation on level term plans is age at time of purchase, if an individual is over eighty years old, an insurance company will likely not sell the policy.
A level term life plan may be renewable which means that the policy will remain effective either for a specified term or terms of until a specified age. Premium for a level term policy is determined by the policy holders age as well as health at the time of purchase of the plan. Another type of term life policy is the annual renewable term plan. This plan is for a term of one year and then must be renewed. Term life plans do not provide a refund for the paid premium should the policy holder end the plan after a term has ended. .
Universal Life
A universal life insurance plan is a permanent insurance plan that offers protection throughout the life time of the policy holder. This plan is considered a permanent plan. The policy holder pays a premium that is an average price to insure the policy holder until age 100. The premiums in a universal life plan are flexible. The universal plan is much more complicated than the term life plan. Besides including death benefits, typical plans include a cash accumulation account. Often times, a cash accumulation includes a stock index participation. Universal plans also have flexible premiums unlike the term life plans. Policy holders pay premiums determines the amount of premium.
Whole Life
Whole life insurance plans are permanent just like universal life plans. Whole life plans do not have flexible premiums but instead have premiums that are fixed. This plan also has a cash accumulation account, however, unlike the universal plan, this account typically accumulates over a period of time and is not based on a market index. The account on the whole life plan will always earn money while this is not a guarantee on the universal plan.,
Accidental Death and Dismemberment
Accidental death and dismemberment insurance is an insurance benefit that pays a benefit to the policy holder if he or she is dismembered or a benefit to the policy holder’s beneficiary is the policy holder’s death is the result of an accident. Dismemberment includes not only loss of a limb but also loss of sight, speech or hearing as a result of an accident. In order for benefits to be paid as a result of the accident, death or dismemberment must occur within a reasonable time following the accident and the injury or death must be the direct result of the accident. There are several types of events that are not included accidents which would be covered under of policy for accidental death and dismemberment. These include death or dismemberment as the result of surgery, mental illness, physical illness, hernia, overdose on drugs or bacterial infection.
Some employees may choose accidental death and dismemberment in lieu of term, universal or whole life. However, this is not typical as accidental death and dismemberment insurance is much less useful than other life plans and its coverage includes many limitations and restrictions.
Short term Disability
A short term disability insurance plan provides a policy holder with benefits that are a certain percentage of the policy holder’s pay when the policy holder becomes temporarily disabled. A temporary disability is a disability that may result in absence from work for a short period of time as the result of illness or injury. The typically term of disability for the short term plan is between three and six months. The amount of benefit that is offered on average is sixty percent of the policy holders base salary. Most policies set an upper limit on the amount a policy holder may receive in monthly benefits. Policies also provide a limited on the amount of time that benefits may be received by a policy holder. This is typically two years. The employee or the employer may pay for this plan
Long term Disability
Long term disability is an insurance plan offers income to an individual policy holder for an extended period of time. Typically, a long term disability plan issues its benefits to policy holders once the short term disability plan has reached its end. The average benefit offered in long term disability plans is fifty-five percent of the employee’s salary. The policy holder will receive benefits under this plan until he or she returns to work.
Similar to the short term disability plan, the employer may opt to pay this benefit or have the employee pay for it out of his or her salary. The issue for employees as to the benefits when an employer pays for the plan is that if the policy premium is paid out of pre-tax money of the employee’s salary, when benefits are received by the employee, the employee must pay taxes on the benefits. The period of time that a long term disability will pay is typically until the disabled employee returns to work or reaches the age of sixty-five.
Conclusion
As dicussed above, there are a variety of Insurance plans that an employer may make available to employees as part of a benefits package. The life insurance plans may be term life, universal life or whole life. The choice for the employer would depend on employee’s age as well as understanding of the plans. The accidental death and dismemberment plan option is particularly not useful as a replacement for life insurance because it has many restrictions and limitations. The disability plans may be either short term or long term. Each of these disability insurance plans typically offer the same benefits except for a different period of time. It is important to consider what each of these plans include and what the advantages are of each plan in order to offer the employee the best and most affordable plan for the company and for the employee. The choice of insurance plans to include in an employee benefits program should be considered an important matter as the benefits package can be a decision maker for a well-qualified employee to work for your organization.
References
Accidental death and dismemberment insurance. (2015). Retrieved from Insurance.com: http://www.insurance.com/life-insurance/coverage/accidental-death-and-dismemberment-insurance.aspx
Huntley, C. (2016). Universal Life Insurance: Insider's Guide to Benefits, Pros & Cons. Retrieved from Huntley Wealt Insurance Services: http://www.insuranceblogbychris.com/universal-life-insurance-pros-and-cons/
The basics of long-term disability insurance. (2016, June 3). Retrieved from Insure.com: http://www.insure.com/disability-insurance/long-term-disability.html
The basics of short]term disability insurance. (2014, November 12). Retrieved from Insure.com: http://www.insure.com/disability-insurance/short-term-disability.html
What are the different types of term life insurance policies? (2016). Retrieved from Insurance Information Institute: http://www.iii.org/article/what-are-different-types-term-life-insurance-policies
What's the Difference Between Whole Life and Universal Life Insurance? (2016). Retrieved from Protective: http://www.protective.com/learning-center/life-insurance/what-is-the-difference-between-whole-life-and-universal-life-insurance/
