Three Ways Voluntary Benefits Are Important to Financial Wellness
No one ever thinks they will be the one to experience an unexpected and costly medical event. But while the risk of something like a cancer diagnosis or a car accident may seem low to some, the reality is consumers need more than just good luck to best protect their families and finances.
Insurance coverages offered at the workplace, such as disability, accident or critical illness insurance, can help protect income and savings, leading to less financial stress. Without the right protections in place, an accident or illness can derail retirement savings, disrupt someone’s ability to provide for their family or drive them into additional debt.
“Many consumers tend to focus on health insurance as their number one priority during benefits selection,” said Michael Fradkin, senior vice president, head of Group Products and Underwriting, for Lincoln Financial Group. “While that’s certainly important, general medical insurance doesn’t always cover everything, leading to unforeseen costs and high deductibles. Education is key to help Americans realize their employers may offer additional workplace benefits and solutions that could be the right fit for their situation.”
Already, consumers’ wallets have been stretched thin by the pandemic. According to Lincoln Financial’s November 2020 Consumer Sentiment Tracker, Americans are especially concerned about paying for unexpected medical expenses (58%) and covering day-to-day expenses (52%).
But here’s the good news -- voluntary benefits can help solve for some of these issues. Here are three ways that these solutions can play an important role in consumers’ overall financial wellness.
- Paycheck Protection. Disability insurance provides paycheck protection, so if someone is unable to work due to an illness or injury, they won’t lose their source of income.
- Bridging the Expense Gap. Again, health insurance does not cover all expenses. However, accident insurance can help bridge the gap by covering costs like high deductibles or ambulance trips. For example, if a child breaks a leg playing on the football field this season.
- Coverage of Day-to-Day Expenses. Critical illness insurance provides much-needed funds while someone is recovering from a lengthy illness like cancer, covering expenses like mortgage payments, childcare, food and more.
According to Lincoln Financial’s 2019 Financial Focus Study, adoption rates of ancillary benefits like these still remain low — only 35 percent of people say they have accident insurance, 23 percent have short-term disability, 22 percent have long-term disability and just 16 percent have critical illness insurance.
Educating employees about their benefits is even more important in the wake of COVID-19, and it presents a tremendous opportunity for employers to help their employees understand how the benefits offered can provide financial peace of mind. Additionally, some employers offer financial wellness tools, which are especially valuable for employees to create a personalized action plan and improve their financial well-being — whether they are creating a budget, building an emergency fund or paying down debt — and achieve their goals.
“So often, employees feel rushed and overwhelmed to make their benefit selections in the midst of back-to-school season, fall sports and other activities,” said Fradkin. “Now is the perfect time to start exploring the benefits and tools your employer offers and ensuring you have a holistic financial plan in place.”