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Posted by Alexandre Timothy, Group Insurance and Group Annuity Plans Advisor, avril 27 2017
Plan Implementation
Group Insurance: How much does it cost?

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According to the CLHIA (Canadian Life and Health Insurance Association), 69% of Canadians have access to a private group insurance plan. Consequently, if your business is growing and you are not offering group insurance, chances are you will soon be asking yourself a few important questions. 

Like the following questions:
  • Should I implement a group insurance plan?
  • How much does it cost? Can I afford it?
  • What type of plan should I offer?

I am often asked these questions and the answers can vary significantly from one company to the next. Some businesses should offer a very generous plan, whereas others should settle for a basic plan or even wait a few years before making the move. Below are some aspects that need to be considered when answering these questions.

When is it the right time to offer group insurance?

We generally contemplate offering a group insurance plan to our employees when one of the following situations occurs:

  • During a job interview, a promising applicant asks you if you provide benefits;
  • Your employees are increasingly asking you whether group insurance will be offered eventually;
  • The company had a good year and you want to offer your employees something extra.

Although you can set up a plan to provide for the financial security of your employees and act with due care, the fact is this primarily remains a business decision. Therefore, the investment must be profitable and group insurance must cost less than what it would cost not to have any.

The cost of not having any group insurance

The cost of not offering a group insurance plan is rather difficult to estimate. Implementing such a plan can improve employee health and wellness through access to better healthcare, thus reducing absenteeism and increasing productivity. But the fact remains that group insurance is often used as a tool to attract and retain key individuals.

The involuntary loss of an employee entails significant costs that we tend to underestimate, such as costs associated with job termination, overtime, hiring expenses, selection process, training, lost productivity, delayed project completion, deteriorating work environment and less motivated employees, labour disputes, legal proceedings, etc. Several studies show that these costs can represent 50% to 200% of the employee’s annual salary and up to 400% in some cases. Thus, losing an employee earning $50,000 per year could cost the business between $25,000 and $200,000. If group insurance enables you to retain one or two additional employees every year, this investment will likely prove highly profitable.

Budget

After determining your interest in offering group insurance, it is important to get an idea of the budget needed in order to ascertain whether the investment will actually be profitable for your business. Prices can vary from one company to the next, depending on the average age, nature of the industry, coverage offered and premium sharing between the employer and employees; however, generally, you need to budget a minimum of $1,000 to $1,500 per year and per employee. If this sounds too high, chances are your company is not at this stage yet. The average annual cost per employee can sometimes reach $5,000 or $6,000 in some organizations.

Making the move

After due consideration, if you conclude that the estimated cost of a group plan is lower than the cost of losing an employee, the time has come to seriously consider setting up such a plan. Your next step will be to find an advisor to assist you with implementing the right plan at the right price based on the needs of your organization and your employees. Please contact us!

Workplace Satisfaction

Group Insurance and Group Annuity Plans Advisor | With a Bachelor in finance, Alexandre Timothy understands the challenges and realities of his clients, both from a financial point of view as well as a level of human resources and benefits. With his new outlook in a traditional industry, Alexandre offers innovative solutions to ensure the sustainability of social benefits while meeting the needs of participants and employers. During his six years of experience, Alexandre has stood out for his creativity and integrity, becoming a highly valued adviser by many of his customers.
Alexandre Timothy, Group Insurance and Group Annuity Plans Advisor