Employee Group Benefits

Many people entering into business on their own are coming from a corporate environment in which they were provided by their employers with generous "fringe" benefits. Typically these include group life insurance, some accidental death and dismemberment coverage, dependent life insurance, out-of-province medical emergency coverage, short and long term disability income replacement insurance, extended medical coverage, and a dental insurance package. Suddenly on your own, these are difficult benefits to do without.

When starting or buying a business, the first priority has to be survival of yourself since, if you don't survive, neither will the business. If you need these benefits, you had better get them. But look before you leap.

Whether sponsored by an employer, a chamber of commerce, a union, or a professional organization, all group benefit packages are underwritten by an insurance company, or a group of insurance companies. They are in it to make money, at least break even, definitely not to lose money. For this reason, you really have to take coverages you may not want or need (which make money for the insurance company) in order to get coverages you do want or need (which may lose money for the insurer). A benefits package is exactly that, a package. It’s a little like a cable or satellite TV package.

Unless it's available to you through your spouse's group package, you will want to have extended health care. This is what pays for prescription drugs and for a whole bunch of medical and para-medical services you might need and which, if you had to pay for them yourself in an emergency, would leave you financially flattened. So everybody needs that.

Dental is even worse for insurance companies in that everybody makes claims and everybody complains about the premiums. The insurance company will love you if you decide not to take it! But families with young children right up to older couples who are apt to have dental problems are wise to have it. Your employees will thank you for it. However, for the early days you might be well to self-insure this benefit in order to keep fixed costs down. Or for yourself handle it through a private health benefit trust.

Disability insurance is sort of marginal for the insurance company: mostly they make money at it but less so than with life insurance and AD&D. That's because individuals are five times more likely to be disabled than to die during their working lifetimes.

Short term disability, sometimes called weekly indemnity, provides coverage on the basis of a percentage of weekly earnings for up to 17 weeks or so, depending upon the plan. Usually Workers' Compensation will provide a credit if you provide this coverage. It is vastly superior to WC since it covers the employees on and off the job. It is more expensive but better value. However, if you are just setting up the business, you might leave this one alone for a time as well, just to keep fixed costs to a minimum.

Long term disability insurance is quite complex. You are referred to the author's article on Disability Income Replacement Insurance for the necessary background which cannot be covered here: please call to request a copy. Many group disability plans are so inadequate that the employer would be better to buy individual coverage for the employees and recoup part or all of the cost by salary deductions.
Dependent Life is a frill. Yes, people do have their spouses and children die: the author lost his own son to meningitis. But it is a rare occurrence in our part of the world. Usually parents are not dependent upon their children. However, a few hundred or thousand dollars to help pay the cost of a funeral is helpful, especially to employees who do not earn large incomes.

Accidental death and dismemberment provides a false sense of security. People who are not very old rarely think they will die other than by an accident, and this is false thinking. To wit: the author’s son’s death at age 14 from an illness. Claims are rare on the accidental death part. However, the dismemberment portion of the insurance can be useful if one of the children should lose an eye or a leg in a serious sporting injury. Again, claims are rare, but you have to take the coverage if you want to get the part you really want.

The life insurance is important. This is the only part of the coverage that is portable, at least to some extent. Group life is rarely cheaper than individual term life insurance when compared head to head but, as an employer, you will want to know that your employees' families are provided for should one of them die. Often, if you have employees who are mostly younger than you, you can get the cost down on a grouped basis, so it could be less expensive for you, if not for your employees. Group life insurance is usually convertible, at least in part, to permanent privately-owned life insurance should an employee leave the group.

Out-of-province travel emergency coverage is vital, especially if you or your employees travel out of the province on business. Your business could be at the wrong end of a lawsuit if a medical emergency happens while your employee is travelling on business. This type of insurance is quite unregulated and is a minefield of legalisms as to terms and conditions. Read the words carefully and request a copy of our article on the subject.

In planning a group package, you will find that, usually, the life insurance, the AD&D and the disability insurance are based on a multiple or percentage of base earnings. To keep your costs down, you will want to show your earnings as low as possible. For your own essential coverages, such as family support and bank security, you will want to have your own private coverage anyway.