Life insurance benefits for retired workers

Monthly Labor Review, Sept, 1990 by Margaret Simons, Cynthia Thompson

Although conversion may provide the only available source of life insurance for older individuals, the premium rates for such benefits are generally greater than those applied to younger individuals. This is because these rates are typically influenced by the risk associated with insuring older individuals.(12)

The need for substantial life insurance benefits for retired workers is often less than that for younger workers. Typically, children are grown, major purchases-such as houses-are not anticipated, and a retirement nest egg may have been saved. Lump-sum payments may be needed for funeral expenses at the time of death, but perhaps for little else. In contrast, survivors may be more concerned about a continuing source of income, such as periodic pension or Social Security payments. Both private pension plans and Social Security provide survivor benefits, which maintain a source of income for surviving spouses. (13) TABULAR DATA OMITTED (1) Benefits studied include lunch and rest periods; holidays; vacations; personal, funeral, jury duty, military, parental, and sick leave; sickness and accident, long-term disability, and life insurance; health care coverage; and private retirement/capital accumulation plans. For detailed survey results, see Employee Benefits in State and Local Governments, 1987, Bulletin 2309 (Bureau of Labor Statistics, 1988); and Employee Benefits in Medium and Large Firms, 1989, Bulletin 2363 (Bureau of Labor Statistics, 1990). (2) The Employee Benefits Survey covers active employees only, and not retirees. Consequently, the data in this article refer to the percentage of current employees participating in plans calling for the eventual provision of retiree benefits. (3) Survey data on the incidence and characteristics of benefits are available for all full-time workers and for three broad classes of full-time workers: professional and administrative; technical and clerical; and production and service workers. The first two groups are often combined to provide data on "white-collar" workers, in contrast to "blue-collar" production and service employees. (4) For additional details on variations among public- and private-sector employee benefits, see Allan P. Blostin, Thomas P. Burke, and Lora M. Lovejoy, "Disability and insurance plans in the public and private sectors," Monthly Labor Review, December 1988, pp. 9-17. (5) See Employee Benefits in Medium and Large Firms, 1989, p. 98. (6) For a discussion of life insurance for older individuals, see Dan M. McGill, Life Insurance (Homewood, IL, Richard D. Irwin, Inc., 1977), pp. 416-18. (7) For a more complete discussion of retiree life insurance funding, see William H. Rabel, "Permanent Forms of Group Life Insurance"; and James E. Roberts and Ronald T. Martin, "Retired Lives Reserve," in Jerry S. Rosenbloom, editor, Handbook of Employee Benefits: Design, Funding and Administration Homewood, IL, Dow Jones-Irwin, 1984). (8) Because of the small number of life insurance plan participants with benefits reduced once to a percent of active worker coverage, data were insufficient to present a detailed distribution of the features of such plans. (9) In addition to specifying a minimum benefit amount, some plans imposed a maximum dollar limit on retiree life insurance benefits. For example, a plan might reduce benefits to 50 percent of that provided during active employment, but impose a $20,000 maximum on the amount of protection available. (10) For more information, see Michael A. Miller, "Age-related reductions in workers' life insurance," Monthly Labor Review, September 1985, pp. 29-34. (11) Participants in life insurance plans with conversion features, but no other provisions for retiree benefits, were not included among the counts of workers with retiree life insurance benefits for this analysis. (12) For additional details on life insurance conversion, see McGill, Life Insurance, pp. 689-90. (13) For additional details on survivor benefits in pension plans, see Donald Bell and Avy Graham, "Surviving spouse's benefits in private pension plans," Monthly Labor Review, April 1984, pp. 23-31. A note on communications