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Why paid parental leave insurance is an untapped opportunity

Paid parental leave insurance is a new financial product, but it can be a game-changing benefit of employment and an untapped opportunity for brokers, agents and advisors.

How does it work?

Employers with 25 to 5,000 employees will have their companies conduct a census that will be used to prepare a quote for paid parental leave coverage. This count includes things like the ages and genders of employees.

The employer will also need to select policy details. For example, do they want to replace 60% or 100% of an employee’s weekly salary while on parental leave? Do they want the benefits to last six weeks or sixteen weeks?

If they like what they see in the quote, they can go ahead and get paid parental leave insurance. All employees are covered by this policy, regardless of whether they smoke, have a negative health history or are expecting children soon. The employer pays its monthly premium just like any other insurance coverage, and there is no cost to the employees.

When an employee male or female – takes parental leave for childbirth, adoption or foster parenting, the employer must file a claim. The employee will continue to receive their salary during parental leave, and the employer will receive compensation from the carrier up to $2,000 per week per employee.

If an employer already offers paid parental leave as an employee benefit, they can still purchase paid parental leave insurance and still be reimbursed.

Now that we’ve discussed how paid parental leave insurance works, let’s talk about why this insurance coverage/employee benefit plan is about to take off.

The following sections also discuss conversations advisors may have with employer clients regarding paid parental leave insurance.

Previous options are missing

One of the reasons paid parental leave insurance is a great opportunity for benefit counselors is that the other options are limited at best.

At the federal level, the US is the only developed country without paid family leave. There is the Family & Medical Leave Act (FMLA), but this is an unpaid program that protects the job, but not the income that makes the work worthwhile.

At the state level, 11 states and Washington DC offer their own paid family leave programs. So not only are there 39 states that don’t offer paid family leave, but paid parental leave insurance could actually supplement the small number of state-based programs.

For example, a California-based employer may purchase a policy with a 50% income replacement benefit, which is typically less expensive than a 100% income replacement benefit. This benefit could then supplement the state program in California, where approximately 50% of their weekly income is replaced.

Outside of government-paid family leave programs, not much is happening on the private side either. Nothing but 25% of US workers have access to paid family leave through their employer.

It would be an understatement to say that the market to sell paid parental leave insurance as an employee benefit is untapped. That may not be the case in five years, but the early bird gets the worm.

The rarity of paid parental leave is a selling point in its own right, but it can also form the basis for a strong conversation with employers interested in buying these benefits.

Recruiting and retaining top talent

With paid parental leave lacking in the US, employers who take out paid parental leave insurance will immediately stand out in the endless competition to recruit and retain the best workforce talent.

Since the pandemic ushered in remote working culture and The Great Resignation, there seems to have been a shift in the balance of power between employer and employee. There are more jobs than employees to fill them, and employees have used this influence to ensure they get the most out of their current or future employer. A company that does not offer the best and most up-to-date employment conditions is missing out on the most coveted talent.

Given that only 25% of employees have access to paid family leave, what better way for an employer to differentiate itself than by offering paid parental leave insurance as an employee benefit? A In fact a study of unum found that 86% of millennials are less likely to quit if they are offered paid parental leave.

Employers who are among the early adopters of paid parental leave insurance should reap the benefits. They immediately stand out from other companies and get an upgrade as a potential landing spot for workforce talent.

When talking to employers about paid parental leave insurance, it should be a very effective selling point.

A meaningful advantage

Not only will paid parental leave insurance make your employer clients a more attractive destination for talent, it will also really help their employees.

It’s hard to think of a bad benefits package; most serve a useful and well-intentioned purpose. That said, it would be fair to say that some employee benefits make more sense than others.

An employee-paid lunch once a week is great, as is summer Fridays when the office closes at 3 p.m. But can any of these ever make more sense than paid parental leave insurance? It gives employees peace of mind knowing they can take months off to care for a newborn or young child and continue to receive their paychecks, paying for groceries, diapers and everything in between.

A survey of 1,000 active women aged 18 to 44 found that 74% would run out of savings if they had to continue unpaid maternity leave for eight weeks.

An employer with paid parental leave insurance can ensure that the above never happens to their employees, which is as powerful a selling point as any.

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Mike Brown is the communications director at Windthe leading online income protection company.

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