You are a benefits consultant reviewing the group life and disability coverages
ID: 2655064 • Letter: Y
Question
You are a benefits consultant reviewing the group life and disability coverages offered by one of your client firms.
a. The firm is currently considering two group life insurance benefit plans with the following basic characteristics:
Plan A Plan B
Type Term Life Whole Life
Benefit 2 times annual $10,000 per year
salary of service
Premium Contributory Non-contributory
_Comment on the relative attractiveness of the two plans according to their type, benefit, and premium arrangements. (be very specific)
b. The disability plan this firm offers provides short-term benefits equal to 100% of salary for 3 full years and long-term lifetime benefits equal to 75% of salary. The definition of disability for both short- and long-term benefits is termed as "total and continuous inability to perform any and every aspect of the regular occupation." The plan is not integrated with workers' compensation or Social Security benefits at all. Explain to the firm why they have such a high rate of disability claims. (be very spicific)
Explanation / Answer
Before we move forward and start to explain why a specific plan will be beneficial compared to other, we will first understand few concepts which are critical to acknowledge.
What do we mean by Benefits Consultant?
A benefit consultant could be an individual, a group of entity or a organization which has in-depth knowledge on Term-Life, Whole and Permanent Disability Insurance specifically for the employees working in a company. To be precise, a benefit consultant works hand to hand with the employers to get the best fit insurance policies for their employees with all legal bounds and does not favors any specific insurance provider.
What is Term Life and Whole Life Insurance:
In simple understanding, term life insurance is best fit for a specific period of time where one doesn’t want a cover for complete life duration. Someone may go for term life considering, requirement is short term and premium is considerably high. For example, an individual may go for term life when he/she has a mortgage loan and there involves an uncertainty. Here premium may be high as insurance covers various other requirements.
On the other hand Whole life insurance, is when someone opts for insurance cover for the complete life duration or upto 120 years, whichever is earlier. In this type of insurance, benefits are paid only when individual dies or in rare cases if individual lives beyond the specified years of coverage, insurance companies pays off complete premium.
Now, considering all these factors, me being a Benefit Consultant, I will go with the Plan-A. Its very clear that benefits are much higher than plan B. Plan B offers only upto $10,000 of yearly insurance coverage but, whereas Plan-B will more likely cover anywhere between $45,000 to $75,000.
Though, there is a negative part to the plan such as Contributory part where, portion of premium is to be paid by the employees but, the coverage is much higher compared to the Plan-B.
Also, Term Life will be beneficial for a participating company which is planning to offer insurance plan for its employees as company has to look after its employees welfare as long as they are with the companies. Also, as we have explained above, with Term Life, companies can mould the plans, keeping employee needs in mind.
Now, as me being a Benefit Consultant, its becomes a crucial matter to explain to the insurance provider, on some risk factors such as high rate of claims in employer side. And, here is my explanation that because our client company deals in manufacturing of machinery parts which are used by other typical mechanical industries such as railways, road constructions, in industrial tools like transformers, electric fencing etc, mishaps does happen with work force where permanent injuries are one of its effect.
However, our client does all best possible safety precautions per high quality industry standards and as per the government regulatory but, some of times untoward incidents does take place. My client company has all the quality standards approved and is an ISO certified industry.
I hope I was able to explain as much as possible with the scenario in question.
Thank you.
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