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Life Insurance

How Does Spouse Life Insurance Work?

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Published On: April 22, 2021

Insurance coverage can provide a vital safety net for employees in businesses of all sizes. Because extra benefits and insurance options can significantly contribute to employee happiness and their dedication to the company, it’s in every business’s best interest to understand what supplemental coverage their employees desire. Spousal life insurance is a common type of this additional insurance. By providing your employees with the option to obtain a financial safety net in the event of sudden and unexpected death, you are showing them that you care about their needs.

Let’s take a closer look at the details surrounding spousal group life insurance. 

Understanding the Ins and Outs of Spouse Group Life Insurance

Spouse life insurance is a form of dependent life insurance and can be defined simply as group life insurance coverage that is purchased for a partner or spouse. Beneficiaries are named to receive a payout, known as a death benefit, in the event of a loved one’s untimely death. The goal of the death benefit is to ensure that surviving family members are not left with overwhelming financial burdens such as mortgage payments, funeral costs, and cost of living.  This is a specific benefit meant just for the spouse, but not other beneficiaries such as children.

What Spousal Insurance Options Are Available?

When an employee makes an annual election for coverage, they will also be able to make an election to cover their Spouse. This option is usually in flat dollar amounts. $15,000 to $150,000 of Group Term Spousal Life Insurance Coverage. Size of the group and the age gender mix of the group will determine the maximum amount of coverage made available.

What Factors Affect Life Insurance Rates?

Because life insurance results in a significant payout should the policyholder pass away, insurers need to take a number of factors into consideration when determining the cost of an individual’s monthly payment. This essentially equates to the amount of risk a buyer presents.

Typically, because group insurance risk is spread out among the whole group and levels of coverage are determined at a guaranteed issue level, there usually is not health information required. 

However; the insurance company does consider the following factors when looking at a group life coverage census: 

  • Age: Insurers know that young people are far less likely to suffer from sudden health problems and will most likely be paying into their policy for years before it gets paid out. As a result, they pose the least amount of risk and benefit from lower premiums.
  • Gender: Insurers and insurance carriers rely on statistical models when determining risk. Because women live an average of five years longer than men and therefore will spend additional time paying their premiums, their premiums tend to be lower.
  • Smoking: Smoker and non-smoker rates may be offered.

How Can My Employees Buy Spousal Life Insurance?

Much like health insurance, if spouse group life insurance is offered, it can only be purchased during open enrollment or after certain qualifying events that allow for special enrollment. Unlike health insurance, however, coverage may not begin immediately; for example, a policy that was purchased for your spouse during open enrollment (November 1st to December 15th) may not go into effect until January 1st.

If spousal group life Insurance is not offered, the spouse can purchase individual life insurance through an insurance agent. In addition, voluntary individual employee pay and all payroll deducted coverage could also be considered. These are typically not considered group life plans. Both options are typically more in premium for the spouse than group term spousal life coverage.

Giving your employees the option of enrolling in spouse life insurance communicates that you understand their personal needs; because spouse life insurance can guarantee the protection of a household’s wellbeing should something sudden and unexpected occur, you will be providing an essential form of financial support. Whether you’re a benefits manager at a large corporation or a small business owner with a handful of employees, your workers will see your dedication to their livelihood and financial security. Are your competitors offering their employees spouse life insurance?

Download your custom benefits benchmark report to see which benefits employers within your industry, location and company size are offering their employees.  Looking for more exclusive content? Check out what’s trending on the Mployer Advisor blog, and be sure to catch the latest episode of This Week in Benefits.

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Weller Emmons

Vice President of Operations, Mployer Advisor

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