Group Benefit Insurance Plans
There are now 11 stock insurance companies that underwrite and provide group benefit insurance plans to businesses in Ontario. The majority of these insurers require firms with a minimum of 5 full-time employees. Two of these markets will insure a firm with as few as 2 employees. There are also numerous association plans that will insure a one person firm, and a growing number of specialty programs that will provide a variety of group type coverages. We do our very best to keep abreast of the new and various group products being marketed in Ontario, including the plans we cannot offer.
Group insurance generally consists of one or more of the following:
- Core Coverage
- Life & AD&D Insurance
- Disability Insurance
- Optional Coverage
- Extended Health Coverage
- Vision Care
- Dependent Life Insurance
- Employee Assistance Programs
- Cost Plus Programs
The core coverage with most benefit plans is Life and Disability insurance. At one time these were the only coverages available within benefit plans. One of the reasons life insurance is a mandatory coverage with most benefit plans is because it provides a profit every year to insurers. Life and Disability insurance are the true insurance portion of benefit plans. As the claims are fully pooled with all insurers, insured firms will not be individually targeted for rate increases upon renewal due to poor claim experience.
I am not alone when I say that for most working people, disability is the most important coverage to have in place. I point out to all of my clients that although it's great to have dental coverage in place, if a person is unable to work for six to twelve months due to a disability, the dental insurance isn't going to make the mortgage payments or put food on the table.
Life & AD&D Insurance
The number of options of Life Insurance coverage available within a group benefit plan will differ from one insurer to the next, however the usual options include 1X, 2X, or 3X an employee's annual income. A firm can also choose to have a "Level" or "Flat" coverage amount for all participants, such as $25,000 for all employees. The life coverage can also be "Capped" for all participants at certain amounts upon request of the employer.
Life premiums are based on three basic factors, an employee's income, age, and occupation. Most insurers will offer a premium rate based on the demographics of a firm's employees. Therefore, a firm with a greater number of older employees will be offered a higher premium rate than a firm with mostly younger employees. Occupations are defined into Categories; Accountants could be a Class "A" while an Auto Mechanic could be a Class "C" for example. Insurers can increase their base premium rates due to the overall claims experience of their entire block of business.
AD&D stands for Accidental Death and Dismemberment. If an insured employee dies by accidental causes, their beneficiary will receive double the face amount of the life insurance coverage under the AD. If an employee loses an eye, hand or their hearing, for example, under the Dismemberment coverage they will receive a claim payment based on a scale provided by their insurer's plan.
As the cost of the Life premium is considered a taxable benefit, I recommend to many of my firm clients that they design their benefit plan with the lowest flat amount of coverage for all of the participants of their plan. The lowest flat amount offered by many insurance companies is $25,000.
I have read that 90% of the people who actually have disability insurance in Canada have acquired it through their employer's group benefit plan. If purchased through a group benefit plan, disability insurance can cost 50% less or better than an individual disability policy with the equivalent coverage. It is really the best deal, if you wish to look at it in those terms, out of all the coverages provided within group benefit plans.
Although there are many options available there are two types of disability coverage. They are:
- Weekly Indemnity (WI), otherwise known as Short Term Disability (STD), and,
- Long Term Disability (LTD).
WI provides income during the first 4 to 6 months of disability. It is paid to claimants on a weekly basis. Depending upon the insurer there can be a number of options which provide different elimination (waiting) periods and payment periods (e.g., 15 Day Wait/15 Week Pay or 31 Day Wait/13 Week Pay). WI is mostly acquired by business owners who don't pay into EI.
LTD options generally have a 120 day (4 month) waiting period, as LTD is structured around EI and its disability payments. LTD options can include income replacement payment periods of 2 years, 5 years, or Payable to Age 65. In most cases the definition of disability with group plans is, "Own Occupation" for the first 2 Years of disability and "Any Occupation" afterwards. Therefore, in order to receive disability income beyond 2 years, a person cannot be capable of performing "Any" gainful occupation for which the employee is or may become qualified.
Disability income is NOT taxable if the employee pays 100% of the premium. A popular design for the benefit amount payable is: 67% of the first $2,500 of earnings, 50% of next $4,000 and 40% of any excess, with a maximum benefit limit of $5,000. This is called a Graded benefit payment. Another option would be a Flat 60 to 67% of current gross earnings which would be preferrable to the higher paid participants.
The optional coverages usually include Extended Health Coverage (EHC), which can include Prescription Drugs, as well as Vision Care, Dental, Dependant Life Insurance, Employee Assistance Programs, Critical Illness and Business Overhead Expense. A number of options for each area of coverage can be acquired depending upon the insurer providing the plan. Rates differ of course for Family or a Single employees, and some insurers offer a Couple rate. A dependant child is a non-working person under 21 and can be extended to students up to age 25.
Extended Health Coverage
Extended Health Care (EHC) is the second most important insurance coverage to have in place today. In addition to coverage for prescription drugs there are other covered services such as semi-private hospital room, nursing care, ground and air ambulance costs, diabetic and colostomy supplies, medical equipment, breast prosthesis, paramedical services (e.g., physiotherapy, chiropractors, naturopaths), wheelchairs, respirators, hospital beds, orthotics, hearing aids, eye exams, and much more. It also provides Emergency Medical Assistance and Out of Province/Country Coverage too.
Provincial health plans have many shortfalls. If a person is seriously ill or injured today, EHC will save their family from experiencing a possible catastrophic financial loss.
There are numerous EHC options, again depending upon the insurer, which can include reimbursement or drug card claim systems. Many plans also have a provision for 12 or 24 month Survivor's Benefit which will ensure that an employee's family will have continued EHC coverage after an employee dies at no cost to the family or firm.
Depending upon the insurer, there are a number of Vision Care options. The usual coverage options I see provide up to $100, $150, and or $200 coverage every 24 months for adults. Most companies will provide the same limits for children, but it will reimburse this same amount every 12 month period. Some insurers will allow the limit of their visioncare coverage to be applied towards the cost of laser eye surgery.
Although an insurance company may have many options of Dental coverage, there are 3 levels of coverage that is generally available. Keep in mind that firms with less than 5 employees may be limited to Basic services with most insurers.
The three levels of coverage are as follows:
- basic (with or without endodontics & periodontics)
Basic can include twice yearly recall exams, consultations, topical fluoride applications, scaling, polishing, pit and fissure sealants, x-rays, space maintainers, basic restorative, endodontic and periodontic services (root canals & gum disease), oral surgery, and repairs, rebasing and relining dentures (except replacing or adding teeth).
Major provides metal inlays/onlays, crowns, and prosthodontic appliances (fixed bridgework and dentures).
Orthodontic services sometimes has a lifetime limit of coverage and may be reserved for dependents up to age 17. If this coverage is desired it is best to confirm limitations and exclusions with the insurer.
Dependant Life Insurance
Dependant life insurance can provide inexpensive final expenses coverage for an employee's spouse and children. Depending upon the insuring company there are two to three options. The most popular option provides $10,000 coverage on a spouse and $5,000 on each dependant child.
Employee Assistance Programs
Employee Assistance Programs are becoming more popular for firms to acquire with their benefit plan. It provides Counselling Services for employees and their family members for stress, marital, substance abuse, financial, and other problems. The purpose of this program is to assist employees and their dependents with personal difficulties when they arise which in turn will help to ensure that their performance at work isn't affected.
Cost Plus Programs
Most benefit plan underwriters offer their firm clients a Cost Plus Program. It is a program that has been utilized by large corporations for years to provide perks to their management and key employees. At the discretion of the business owner, the Cost Plus program will allow the firm to reimburse its participants for any out of pocket medical, drug, dental and vision care expenses that are not covered under their plan design. For example, if a firm has basic dental coverage in place and the owner, or one of his dependent family members required major dental work, Cost Plus would allow the firm to reimburse the owner the amount of the service needed and show it as a business expense, just as it does with its actual benefit plan premiums.
The majority of my firm clients include basic dental coverage with their benefit plans, and the owners use their Cost Plus Program to pay for their major dental requirements. Other expenses that my clients have used Cost Plus for is to reimburse themselves for eye glasses, laser eye surgery, an elevator in the home for a disabled dependant, their dental and health deductibles and for Chiropractic and Massage services which exceeded their benefit limits.
Why pay the high cost for major dental each month when you don't require the services every year? Cost Plus is a cost effective tool to allow a business owner to reduce and get control of their group insurance costs. There is an administrative cost, but only when it is utilized.
so that I can assist you to aquire your own affordable insurance policy. Free quotations can be provided by phone, fax or email.