Employees Lack Life, Disability Coverage They Think They’ll Need

Voluntary benefits can help fill the gap

By Jeff Brown, Colonial Life & Accident Insurance Co. Nov 1, 2010

Many U.S. employees don’t have the life and disability insurance coverage they believe will be important to them in the future, according to a study commissioned by Colonial Life & Accident Insurance Co.

Findings from the survey, conducted in June 2010, reveal a large gap between what protection workers think they will need five years from now and what they have. Eighty-two percent of U.S. employees enrolled in workplace benefits programs said life insurance will be important, very important or extremely important to them five years in the future. However, only 61 percent of full-time workers have life insurance through their own or their spouse’s employer.

For disability insurance, the disparity was even stronger: 77 percent of those enrolled in benefits programs say this coverage will be important, very important or extremely important to them five years from now, but only 42 percent of those employed full time have disability insurance through the workplace.

The majority of employees rate the following benefits as important to them in the future:

• Critical illness insurance (76 percent).

• Accident insurance (76 percent).

• Cancer insurance (61 percent).

These types of coverage typically are provided by employers as voluntary benefits at negotiated group rates, with employee-paid premiums deducted through payroll deferral programs.


Top Employee Concerns

Other key survey findings include:

• Employees are most concerned about the rising cost associated with their benefits. Employees rank the cost of coverage (68 percent) and increased deductibles and co-pays (67 percent) as their top two benefit concerns in the next five years.

• Employees worry their employers won’t offer certain benefits in the future. Among employees enrolled in benefits programs, 34 percent worry their employers will stop offering health-related and other benefits. Among employees who still plan to be working and enrolled in benefits programs five years hence, 48 percent worry that their employers will stop offering certain benefits.

• Employers see salary and benefits as equally important in the next five years.When asked whether salary or benefits will be most important five years from now, employees give them equal weight. The majority of employees (71 percent) feel salary and benefits will be equally important in the future.

Employees don’t make the connection between benefits and their financial security. Nearly all HR managers (95 percent) agree that employees will rely somewhat or very much on their workplace benefits to protect their financial futures, but only half of employees surveyed say benefits will help strengthen their future financial security at least moderately. Surprisingly, nearly a fourth of them (23 percent) say workplace benefits will have no effect on their financial security.

There are several possible explanations for this disconnect. Employees might be taking their benefits for granted and not realizing the importance of their insurance coverage until the need arises. Or they might not fully grasp the potential cost and financial impact an unexpected hospital visit or disability could have on their financial situation.

Employees are optimistic about the future role of benefits at the workplace.The majority of employees enrolled in benefits programs (57 percent) say the role of their employer or their spouse’s employer in providing benefits in the next five years won’t change. But 37 percent of employers expect that employers will play a smaller role as benefits providers in the future.

What the Results Mean

Employees clearly see the need for many types of insurance protection, especially as they get older. However, employees must see the total compensation picture in order to appreciate fully what their employer offers. Benefits statements are one tool that can help employers in this regard. Personal, one-to-one communications with professional benefits counselors can also boost employees’ understanding and appreciation of their benefits.

With the shift of greater responsibility to employees for the benefits decisions, benefits communication is certain to be even more important in the future. Employers should make effective communications a priority to help ensure the maximum return on their benefits investment.

Selection Criteria

When choosing a voluntary benefits partner, employers should consider the following:

A broad portfolio of insurance plans to help employees fill any coverage gaps.

A financially stable company.

Payroll deduction of premiums.

The ability to communicate existing benefits, highlight any changes and communicate new voluntary benefits.

Multi-facility enrollment capabilities (if applicable).

Prompt claims-paying record.

Excellent service reputation.

Though much uncertainty exists around the future of employee benefits, employers should consider the needs and concerns of their employees. Voluntary benefits offer a strong solution that meets employee needs and gives employers the agility to react and adapt to the future. (For more information on this topic, see Colonial Life's October 2010 white paper Workplace Forecast: Perspectives on Benefits in the Next Five Years.)

Jeff Brown is senior vice president and chief marketing officer at Colonial Life & Accident Insurance Co., a provider of insurance benefits for employees and their families through the workplace, along with individual benefits education, enrollment technology and personal service.​

Job Finder

Find an HR Job Near You
Post a Job


Find the Right Vendor for Your HR Needs

SHRM’s HR Vendor Directory contains over 10,000 companies

Search & Connect