A life insurance renewal is like buying a new car. Cost is always a determining factor in making your final selection. But you may also take into consideration things such as safety ratings, options or fuel efficiency. The same is true for a life insurance renewal. Here are three things that schools, cities and counties should look for in their life insurance renewal.
Premium
Schools, cities and counties are used to feeling the pinch of cash-strapped budgets and accounting for where every dollar goes. So when you receive an increase on your life insurance renewal, you may be wondering why.
Life insurance carriers look at a group’s loss ratio and “experience” to determine your premium. Loss ratio is the ratio of total losses incurred in claims plus adjustment expenses divided by the total premiums earned. For example, if an insurance company pays $60 in claims for every $100 they collect in premium, then your organization’s loss ratio is 60%. “Experience” is essentially a statistical compilation relating losses to premiums.
Open claims is another item that may affect premium pricing. Employees who are currently disabled and are out on Life Waiver of Premium[1] are considered open claims by the carrier. They are expecting these pending claims to ‘close’ or pay out sooner rather than later.
Certain policy details within your plan may also be premium drivers. These include provisions such as covered retirees, no age reductions[2], or having an AD&D (Accidental Death and Dismemberment) rider. Making tweaks to these benefits could reduce your overall premium.
Matching Your Employee Contracts
With every life insurance renewal, make sure that your employee contracts and policy are a match, and get your policy amended if any changes have occurred. Here are a few key questions to ask to avoid major gaps that could leave your organization exposed:
- Have any changes been made recently due to negotiations?
- If employees’ salaries are covered – have the salaries increased over the last year or two?
- Does the contract provide continued life insurance coverage for employees during certain types of paid or unpaid leaves of absence?
Insurance Carrier Customer Service
Lastly, renewal time may be a good time to reflect back on the insurance carrier’s customer service. Poor customer service may be a good reason for schools, cities and counties to consider shopping the market even if they receive a pass (ie: no premium increase) on their life insurance renewal. How was your last claims experience? Did you find it easy to reach a representative and get your concerns addressed? Were grieving families treated with respect?
Your agent or consultant is a great resource to help you understand how your group is priced and can act as a liaison for you if you are having problems with the carrier.
For more information on life insurance or for a quote, contact your NIS Representative.
[1] Some Life Insurance policies have a Waiver of Premium provision whereby employees out of work due to a disability can have their life insurance premium payments waived until they come back to work.
[2] Age reduction is when the life insurance amount benefit reduces according to a graduated schedule when the insured reaches certain age milestones, usually 60, 65 and 70.
National Insurance Services is not a law firm and no opinion, suggestion, or recommendation of the firm or its employees shall constitute legal advice. Readers are advised to consult with their own attorney for a determination of their legal rights, responsibilities and liabilities, including the interpretation of any statute or regulation, or its application to the readers’ business activities.
