Middle-class families - those with incomes of between roughly $50,000 and $100,000 per year - are becoming increasingly reliant on workplace benefits in case of a disability or critical illness.
Simple health insurance is insufficient to carry the load. The loss of a breadwinner's or caregiver's financial contribution through death or disability is often devastating.
A recent survey by benefits provider Guardian indicates that families are struggling when it comes to achieving their financial goals. Of those workers surveyed, only half believe they would be able to manage if the household lost an income due to death or illness.
Workplace benefits are critical
According to Guardian's researchers, over 80% of respondents report they get their health insurance, disability insurance, and retirement plan all through their employer.
Meanwhile, six in 10 have no life insurance in place outside of the workplace. This means that many families are relying entirely on workplace benefits to see them through the death of a family breadwinner.
And in the event of disability ending a breadwinner's income, the situation is even scarier. Only 7% of the middle class owns any kind of disability insurance protection, outside of what they can access via their employer.
Are life insurance benefits adequate?
For young families, the primary role of life insurance is to replace the income of a deceased breadwinner. But many employers cap life insurance benefits at $50,000 - the maximum figure that allows employers to deduct premiums as a workplace benefit under IRC 7702.
The actual need for many of these families is several hundred thousand to a million dollars, and occasionally more. That's what it takes to replace the income of a worker who earns $50,000 to $100,000 per year until the children are out of college and a surviving spouse is taken care of.
Voluntary benefits help fill the gap
One solution is to offer voluntary benefits to workers. These include a menu of benefits, such as:
These benefits can be offered at little or no cost to the employer.
Premium costs are simply deducted from workers’ wages and forwarded to the insurance company via payroll deduction. In this way, workers can purchase the coverage they need to provide protection for their families.
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In February 2020, The Friedman Group joined AssuredPartners, the 10th largest insurance brokerage in the U.S. This partnership provides us access to additional capital and a national footprint that enables us to continue to negotiate the most favorable coverage terms and conditions for our clients, and allows us to provide an even broader spectrum of risk management support services.