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Now that businesses have cut back on employee benefits due
to the recession, there are insurance gaps to fill. Many companies are
adding voluntary supplemental benefits, such as accident and disability,
hospital and sickness indemnity, cancer indemnity, long-term care, life
insurance, dental insurance and vision coverage to their plans.
Employees typically foot the entire bill, and can opt to have as little
as $10 to $50 automatically deducted monthly from pay checks, based on
the types of coverage they select.
“I’m seeing a lot of interest in supplemental insurance,” says
Kevin Gazda, vice president of employee benefits with Longfellow
Benefits. “In this economy, companies are cutting benefits and raising
deductibles.”
There is no centralized source that collects and aggregates data on the
numerous types of supplemental insurance coverage. Aflac Inc, Columbus,
GA, though, is one of the largest providers of supplemental insurance to
middle market businesses. That company’s second quarter 2009
shareholder report says premium income from U.S sales of supplemental
insurance were up 4 percent over the same quarter in 2008. That’s
based on a survey of 34 insurance companies.
Supplemental term life insurance and dental insurance posted sales gains
of 26 percent and 9 percent, respectively for the year through June,
versus 2008. But long-term care supplemental coverage saw a 28 percent
sales decline. Karen Riedel, Aflac second vice president, says that the
most popular types of voluntary supplemental insurance coverage
purchased by employees are life insurance, disability and dental
insurance.
Term life insurance is typically purchased for extra coverage because,
contrary to life insurance offered by an employer, it is portable.
Similarly, company disability insurance covers only about two-thirds of
an employee’s income. So supplemental disability typically is
purchased to close the gap.
Next in line: Sales of critical illness, accident, and cancer and
hospital indemnity insurance. Riedel says these supplemental lines help
employees pay expenses not covered by standard medical insurance, such a
private nursing, rehabilitation, inpatient and outpatient expenses,
child care and prescription drugs. In addition, the insurance payouts
help cover a family’s basic living expenses.
“A Consumers Union study in 2009 found that illness, injury and
medical expenses are a major contributor to bankruptcy,” Riedel says.
“Basic health insurance does a good job of paying doctors and
hospitals. The critical illness, cancer, accident and supplemental
health help cover living expenses, like car payments and house payments.
Supplemental insurance is a niche market made up of middle income wage
earners who can afford to pay a few bucks out of their pay checks weekly
for additional coverage. Aflac’s average insured is 40 years old and
makes $61,000 annually. Slightly more females purchase the coverage than
males because they usually pay the family’s bills.
Typically, higher-paid salaried employees and executives have money to
cover their deductibles and do not purchase the insurance. The
commission for selling supplemental insurance to a business is more than
50 percent in the first year, depending on the insurance company,
products selected and the company size. The commissions are split
between the broker and an enrollment firm, which is responsible for
meeting with the company employees to explain the benefits.
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