I recently met a new neighbour who told me he was the corporate council for a large company. When I explained my insurance connection to the legal profession, he quickly responded with : “I have all the insurance I need through my benefits at work”.
Before he could turn and run, I assured him I would not preach the virtues of buying insurance (unless he wanted to listen), but let him know I thought it was extremely important to have his coverage reviewed by an insurance expert to ensure he is adequately protected. In my experience, most people who rely on their employer for the majority of their insurance do so because they’ve never taken the time to understand the significant shortcomings typical of this type of insurance product.
Here are 5 things I think everyone should know about employee insurance benefits:
1. Coverage limits are well below the actual needs of most lawyers.
Although the dollar maximums of a typical employee group Life or Long Term Disability insurance plan may sound generous, in most situations these limits are far better suited to the needs of lower income employees, not those of a lawyer.
2. Significantly restricted contractual benefits when compared to individually owned policies for lawyers.
Except for very small employers, most insurers will offer insurance to all active employees even if their state of health would otherwise prevent them from owning insurance. To offset this claims risk, insurers impose contractual restrictions to significantly reduce or eliminate certain claims. This is particularly true of most employee Long Term Disability insurance benefits. Most personally owned, medically-underwritten policies will offer far more generous benefits to lawyers.
3. Limited flexibility to address your unique needs.
It’s very unlikely that your insurance needs are exactly the same as everyone else in your company. However, the “one size fits all” design of most employee benefit plans means you share the same level of coverage as everyone with a similar position to yours.
4. You could lose most or all of your insurance if you leave your job.
Most employee insurance benefits cannot be taken when you leave your job. If you have a health issue, you could be prevented from owning the same level of coverage you once had, or worse yet, you could be left with no insurance at all. While you may be able to find a new employer that can offer you similar benefits without proof of good health, it most certainly limits your employment options. What if you wanted to go into sole practice? Owning your own insurance takes part of the worry out of future changes to your health that could restrict your freedom to make personal career choices.
5. You don’t control your coverage.
Unless you are responsible for the employee benefit decisions at your firm, you have no control over the design and cost of your insurance benefits.Decisions to reduce or even cancel the insurance plan can be made without the consent of employees not currently on claim.
Even if you are involved in your firm’s plan decisions, poor claims history can result in an insurer’s need to significantly increase rates or a refusal to renew the contract.
I am not against the idea of owning insurance benefits through an employer. I have worked with thousands of employee group plans over the years and this insurance can offer adequate protection for many people. However, those that benefit most from this coverage typically have modest insurance needs, lower incomes, or could not otherwise obtain insurance due to health issues. For a healthy lawyer with a good income, relying heavily on a typical employer insurance plan is not a necessity or an ideal financial protection strategy.
Please note that my advice is not intended to replace that of a qualified insurance expert who has personally reviewed your specific benefits and insurance needs. If you want to learn more, before speaking to an insurance agent, the Canadian Bar Insurance Association offers excellent insurance education articles and planning tools for lawyers a www.barinsurance.com.