Voluntary Benefits

As the U.S. health coverage environment evolves, working Americans increasingly are turning to voluntary employee benefits to supplement core coverage. Voluntary benefits can offer added financial security to employees, with no direct costs incurred by employers.

Insurers including Kanawha Insurance Company, a Humana company, are responding to this need. Through comprehensive voluntary benefit products and services, employees are gaining access to enhanced coverages that otherwise might not be available to them.

Disability

Voluntary disability insurance provides benefits over and above basic health insurance, offering eligible employees income protection insurance in the form of benefits that partially replace income lost as a result of a disabling non-occupational accident or illness. When such an event takes away the ability to bring home a paycheck, voluntary disability insurance coverage can help fill the gap as payments may be used for any purpose including ongoing bills such as rent, mortgages, educational expenses, food, and car payments.

Plan variables may include:

  • Combination benefits covering accidents, sickness or both
  • Coverages including off-the-job coverage, 24-hour coverage or both
  • Elimination periods, which are the number of continuous days (beginning with the first day of total disability) before any monthly benefit amount is payable
  • Benefit periods for which monthly income benefits are payable after the elimination period ends (such periods often include choices of 90 days, six months, one year, two years or three years)
  • Portability, depending upon whether the plans are offered on an individual or group chassis and the length of time an employee is employed before employment is terminated (either voluntary or involuntary)
  • Optional riders covering categories such as emergency accidents, outpatient sickness, hospital indemnity and COBRA

Life

Voluntary life insurance plans allow employers to provide, at no cost to them, life insurance to eligible employees at rates that reflect group economies of scale. Some products offer “life and lifestyle” insurance in one policy, which can be accessed when health, life and death circumstances require. Considered life insurance, such products allow employees to receive a benefit while living.

Two primary types of life insurance are term life and whole (or permanent) life.

Term life insurance, an original or “pure” insurance form, offers protection for a specified period of time and builds no cash value. If the insured dies during the specified term, policy benefits are paid to beneficiary/ies. Products offer varying durations and benefit amounts and often include embedded benefits for terminal illness and AD&D. Coverage durations can be annual renewable or “level” for periods such as 10, 15, 20 and 30 years, during which the premiums remain unchanged. Coverage may be portable and riders for items such as critical illness/total disability, quality of life, increasing death benefits, AD&D and families are often available.

Whole life insurance can play a role in meeting current as well as future financial needs. Consisting of a permanent life insurance policy that protects the policyholder through his/her life, whole life insurance offers a completion of premiums at a predetermined age. Features of whole life plans include premiums that remain level throughout the life of the policy, guaranteed renewable protection that cannot be reduced and accumulated cash values that can be withdrawn (upon the policy’s surrender), borrowed against as a loan, annuitized or used to purchase extended or reduced paid-up insurance. Some whole life plans may also include dividends paid annually and guaranteed cash values.

Health

As health care costs continue to rise, the value of supplemental insurance coverage increases. Voluntary health insurance serves as supplemental insurance to an individual’s existing health insurance plan, helping employees meet their financial obligations when they are hospitalized or incur expenses when receiving outpatient or inpatient treatment. Cash benefits can be used to help offset the loss of income, experimental treatments, transportation to doctors and treatment facilities, or for normal living expenses.

Accident

Offering protection beyond basic health coverage, voluntary accident insurance provides supplemental on- or off-the-job coverage and may cover deductibles and other services standard health care coverage may not provide. Some voluntary accident insurance products can be both a reimbursement and an indemnity insurance policy – expense reimbursements paid are for actual charges or up to the maximum amount stipulated per selection.

Embedded benefits of accident insurance may include:

  • Accident medical expense
  • Ambulance benefit
  • Hospital confinement
  • AD&D
  • Optional benefits/riders such as accident total disability, hospital intensive care, bone fracture and dislocation, and coverage for spouse and children

Specified Disease/Cancer

When an individual is first diagnosed with cancer, heart attack or stroke, his or her life is interrupted in many ways: physically, emotionally and economically. Employers demonstrate their concern for their employees who face such challenges by offering voluntary specified disease (including cancer) insurance. Such plans help an individual’s ability to maintain adequate earnings for everyday living expenses.

Benefits for voluntary specified disease insurance including cancer expense policies may be paid either through a lump sum or an annually restorable policy.

Premiums for lump sum policies do not increase with age and are typically payable until the policy is paid up at a specified age (or predetermined number of years), or until a claim is incurred. Often, specified disease lump-sum policies offer a return of premium rider, which allows premiums to be refunded if the policy remains continuously in force and no claim is paid during the term of the policy.

Lump sum cash payments typically allow benefits to be used for any purpose, including:

  • To help offset the loss of income
  • Deductibles, copayments and scheduled benefit limitations
  • Treatments considered experimental
  • Transportation expenses to and from doctors and treatment facilities
  • Normal living expenses (mortgages, car payments, utility bills, child care, groceries, credit card bills, etc.)

Annually restorable policies help offset expenses incurred for treatment of covered diseases. Payments typically are more focused toward inpatient or outpatient services as well as supplies and treatments such as hospital room and board; drugs and medicines; laboratory services; and medical or surgical services.

Features of such plans may include:

  • Annually restorable benefits
  • Travel and wellness benefits
  • Payment in addition to other coverage
  • No deductibles
  • Portable coverage
  • Issue ages (often ranging from late teens to early 70s)
  • Family coverage
  • Guaranteed renewable for life

Administrative Services (Section 125)

Benefiting both employers and employees with potential tax savings, Section 125 of the Internal Revenue Code allows employees to designate pretax dollars toward insurance premiums, medical care and dependent care expenses. These funds are not subject to Social Security, Federal and most state taxes, thus lowering an employee’s tax liability. In turn, lower payrolls can potentially reduce employers’ payroll tax costs and, in turn, reduce Federal and/or state unemployment tax contributions and workers’ compensation premiums.