Financial Impact Of Premature Death

Many Americans have a difficult time determining how much life insurance is necessary for their family to be adequately covered.

MetLife completed a survey of surviving spouses several years ago which provides insight into what amounts of life insurance were adequate.

It was found that the premature death of a spouse caused a “major” or “devastating” financial impact according to most surviving families, and that this was attributable to a lack of adequate life insurance coverage:

• More than half of the surviving spouses who received life insurance proceeds described the amount of coverage as “inadequate.”
  

• On average, it took surviving families four to five years to recover financially from the premature death.
  

• The vast majority of surviving families had to make significant adjustments to cope with the financial impact of the death.
  

Tips From an Independent Benefits Consultant

• You have the right to hire and fire your benefits consultant or broker.

One of my customers owns a construction business with several hundred employees. During my initial visit with the owner I discovered they had been told one owner would need to lose weight in order to obtain disability coverage. I pointed out a group LTD plan could be implemented on all 20 salaried personnel for less than the cost of individual disability on the two owners and it come Guaranteed Issue. After being hired I was successful in placing LTD coverage and further reducing a 45% health plan rate increase to 20% with the incumbent carrier. Your customers do not tolerate bad advice from your firm so why not hire someone who focuses on your issues and offers sound counsel?

• Eliminate inefficient insurance costs

Insurance should be secured for catastrophic risks. Many employers continue to fund dental coverage when the annual maximums are limited to $1,000 or $1,500. This is not catastrophic protection and the cost can easily fund a risk that is catastrophic like disability for instance.

• Try Fixing service problems with vendors before Firing Them by dealing with the right vendor personnel.
  

Too many consultants and brokers begin a new relationship by replacing incumbents without any effort to resolve the underlying cause of a service related issue with the incumbent. In a vendor relationship as in a marriage communication is always less painful than a divorce. A competent consultant can often resolve issues with an incumbent thus eliminating a costly and time consuming vendor search and implementation. Several years ago a very large hospital system was facing a mid rate guarantee increase from their group life and disability insurer. After meeting with the employer and their carriers underwriters we were able to eliminate the rate increase altogether for Life and mitigate the needed increase for LTD plan. If we had not sat down face to face with the client and their vendors underwriters an agreement would never have been reached. If you have not met your underwriter face to face how can you have a relationship?

• Align funding, plan design and objectives

Several years ago I met with a customer with several thousand employees had a participating group life insurance plan and a self-funded Long Term Disability plan with an extremely limited benefit offering. The customer hated the cash flow fluctuations inherent with the minimum premium funding arrangement for Life and the FAS 112 exposure associated with the LTD plan.I recommended they needed to take advantage of the fixed cost of a fully insured life insurance plan and shift to a fully insured LTD plan. By changing the funding arrangement the employer was able to save over $100,000 annually while enhancing Life and Long Term Disability Benefits and generating a predictable monthly cost while eliminating future FAS 112 exposure.

• Boost your pharmacy generic utilization rate

Statistics show that only 33% of physicians discuss generic drug options with their patients and patients only bring the subject up 2% of the time to their doctors. It is possible for an employer to secure a PBM which will utilize a simple process and plan design to assure insureds are encouraged systematically to utilize the low cost in therapeutic class generic alternatives. This change alone can take many employers from an 8-10% pharmacy trend to flat or even negative territory.

• Demand relationships not transactions from consultants and brokers

The service models of many intermediaries at many broker and consulting firms is oriented towards their interests versus their clients. This is particularly true at many publicly traded firms where revenue growth and the pressure for billable hours focuses intermediaries on securing new business primarily while seeing that the service staff maintains just enough dialogue with existing clients to retain their revenue. Our clients deal exclusively with a principal who understands their objectives and translates them into plan design and actionable expectations for vendors so that a relationship rooted in performance over time. Our goal is a relationship not a transaction.