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Why Plan Sponsors Should Consider Adding Life Insurance In 2019

When you work with start-ups as often as I have for so many years, you really see this, “I’m invincible” mindset that nothing is going to happen to them. And while I would be lying if I said I hadn’t embodied that mentality when I was younger, the value of having life insurance added to your plan in your 20’s far outweighs any downsides to having it in your back pocket.

Even with companies in the startup space, you do get instances where death claims arise from a medical or mental health conditions, or an unexpected accident. And while you think it won’t happen, unfortunately I’ve seen a number of these examples happen with young companies, with no coverage in place to help protect their families in the immediate aftermath.

This outlook is still embedded in the anatomy of the startup culture and it spills over when they set up benefits coverage. Many plan sponsors are ultra-focused on paramedical, massage, HSA’s, or dental and vision – but they aren’t thinking about the less glamourous items in an employer-sponsored plan that offer just as critical coverage when their team needs it the most.

Why startups need to look at adding life insurance

Life insurance is a component of a comprehensive employee benefits package. If you have the minimum amount of around $10K or $20K in a life insurance policy, it’s simply not going to cut it, especially because you can’t add it on after the fact.

Which is why I always recommend companies to look at a minimum of $50K life insurance. Even if the average age of your team is 27, you never know what’s going to happen. It would only amount to an extra three or four dollars a month per employee – so it’s virtually nothing, but can provide a wealth of value.

If you’re spending so much on dental and massage, why can’t you foot the costs for each employee and give them the peace of mind that comes with life insurance? It’s something I see that gets talked about a lot, but there isn’t a whole lot of buy-in from the startup community yet.

Why should someone in their twenties care about life insurance?

Life insurance provides peace of mind for an employee who is concerned about how his or her family will make out financially in the event of their death. Life insurance provides a certain financial cushion for the employee’s survivors if the employee’s death is not their fault.

One of the primary benefits to getting a life insurance policy at such a young age is the significantly less expensive premium that comes with it. And while it might not feel like it provides a lot of value up front, having a policy locked in the background can give you incredible peace of mind knowing that your loved ones will be protected should anything happen.

Here are four benefits of life insurance for young adults.

  1. Funeral and burial expenses: The unfortunate truth is that a basic policy might not even be enough to cover funeral expenses and burial costs. Even a modest funeral can cost thousands of dollars. Life insurance can provide your dependents or your estate with the proper figures it needs to settle these expenses so they don’t have to pay out of pocket for it.
  2. Income replacement: There are significant financial risks to those you leave behind if you don’t have the protection of a life insurance policy.
  3. Debt repayment: More and more young people are carrying mortgages and getting into real estate early. Or they might have outstanding student loan debts that need to be paid off. While you might not have a substantial estate to leave to your dependents, you certainly don’t want to leave them with a financial burden.
  4. Estate planning: Life insurance can also be used to meet longer-term estate planning needs, such as covering capital gains taxes due at death or providing a guaranteed pool of money for a beneficiary.

Reframing modern benefits plans with peace of mind coverage

Benefits plans are a lot more forward thinking and holistic than ever before. As we continue to redefine what a plan should look like when sponsors take into account the evolving needs of the modern worker, life insurance should be at the right in the middle of the conversation, up there with medical and dental.

Younger workers are more focused on building a strong financial foundation and looking downstream for investments in their health, their professional development and their financial future. While life insurance might not even warrant a thought because you’re young and healthy, startups can start the conversation by educating their employees about the benefits of life insurance. It costs so little and can provide your workers with peace of mind should something happen.

Taking care of your employees doesn’t just apply for where they are in their lives right now, it means taking care of them and their families should the worst-case scenario happens.