GUIDE 2024

What are Employee Insurance Benefits?

What are the best insurance benefits for employees? Here’s an article on everything you need to know about employee insurance benefits.

Your business needs top talent to succeed. Your ability to attract and retain top talent depends on several factors, including compensation, company culture, and opportunities for growth.

One of the most critical factors candidates consider when choosing a job is the employee benefits package. According to a Randstad US survey

  • 61% of respondents prefer jobs with a lower salary but better benefits package
  • 66% of respondents considered benefits as the most significant factor when evaluating job offers
  • 55% of respondents left jobs because they found better benefits elsewhere.

The most fundamental types of employee benefits include retirement benefits, paid time off, childcare, student loan repayment, financial wellness programs, gym memberships, paid maternity leave, and paid parental leave.

Health insurance benefits are the most common employee benefit offered by companies. This article will examine the different types of insurance benefits you can offer your employees.

1. Health Insurance

Healthcare is expensive: according to US data for 2020

  • The annual health expenditure was over four trillion dollars.
  • Personal healthcare expenditure per resident was more than $10,000.

A healthy employee is a productive employee. By providing health benefits such as insurance plans, you support employees in getting required medical care and reduce their financial burden.

Health insurance includes medical insurance, dental insurance, and vision insurance.

Medical Insurance

Medical insurance covers medical expenses, including doctor visits, hospital stays, and prescription medications.

The employer and employee share the cost of insurance: the employer pays a portion of the premium, and the employee pays the remaining amount.

In a few cases, employers offer multiple plans, and employees select the coverage and cost combination that best suits their needs.

General insurance plans offered by health insurance companies include:

  • Health Maintenance Organizations (HMOs): Deliver a full range of healthcare services through a network of healthcare providers and facilities. A primary care doctor must refer employees to a specialist. HMO plans have lower out-of-pocket costs but provide lower flexibility in choosing providers.
  • Preferred Provider Organizations (PPOs): Employees can see any provider in the plan’s network without a referral. PPO plans have higher out-of-pocket costs but offer higher flexibility in choosing providers.
  • Exclusive Provider Organizations (EPOs): Similar to PPO plans, but do not cover out-of-network care except for emergencies.
  • Point-of-Service (POS): Combine features of HMO and PPO plans. Employees can choose a primary care physician and get referrals to see specialists. Employees can also see providers outside the plan’s network for higher out-of-pocket costs.
  • High-Deductible Health Plans (HDHPs): Lower monthly premiums with higher deductibles. Employees can open a Health Savings Account (HSA) to save tax-free money for medical expenses.
  • Catastrophic Plans: Low monthly premiums with high deductibles and are only available to certain people under age 30 or those who qualify for a hardship exemption.

In addition, the plans differ in the level of benefits they offer:

  • Platinum: Covers 90% of medical costs; your organization pays 10%
  • Gold: Covers 80% of medical expenses; your organization pays 20%
  • Silver: Covers 70% of medical expenses; your organization pays 30%
  • Bronze: Covers 60% of medical expenses; your organization pays 40%
  • Catastrophic: Protects from worst-case scenarios and pays after the participant reaches a steep deductible

According to March 2022 Bureau of Labor Statistics (BLS) data for single coverage:

  • For private industry, employers paid 80% of insurance premiums, and employees paid 20% of insurance premiums
  • For state and local governments, employers paid 86% of insurance premiums, and employees paid 14% of insurance premiums

Dental Insurance

Dental insurance covers dental care expenses, such as routine checkups, fillings, and other procedures. Many dental insurance plans cover preventative services such as regular cleanings, X-rays, and more extensive procedures like fillings, root canals, and crowns.

Dental insurance benefits help employees to stay on top of their oral health by making routine dental care more affordable. This can lead to better overall health outcomes and lower healthcare costs.

Dental insurance benefits vary widely in terms of the services they cover and the out-of-pocket costs for employees. Several plans offer coverage for preventative services such as routine cleanings and X-rays at little or no cost to the employee. For more extensive services, such as fillings or crowns, employees can be responsible for a percentage of the cost (often around 20-50%).

Vision Insurance

Vision insurance is usually an additional health benefit for employees. Routine eye exams, corrective lenses, and prescription glasses are typical procedures covered in vision plans. The plan usually covers a checkup once a year.

A major benefit of vision insurance is its preventive nature: regular eye exams can detect and prevent various eye conditions, including glaucoma, cataracts, and macular degeneration. By catching these conditions early, employees can receive treatment before they develop into more serious problems.

Vision insurance benefits vary widely in terms of the services they cover and the out-of-pocket costs for employees. Some plans offer coverage for routine eye exams and a portion of the cost of corrective lenses. Some plans offer coverage for more extensive procedures, such as LASIK surgery.

2. Disability Insurance

Disability insurance plans provide financial protection to employees who cannot work because of an illness or injury. These plans offer a source of income in case of a disability, which helps cover medical expenses and other bills.

There are two main types of disability insurance plans: short-term disability insurance and long-term disability insurance.

Short-term Disability insurance

Short-term disability insurance covers employees for up to six months. It covers issues such as recovery from surgery or a broken bone. The benefits cover a certain percentage of the employee’s regular salary.

The waiting period for short-term disability insurance plans ranges from one to seven days. During this time, the employee can avail of sick or vacation time. Employees can receive benefits after the waiting period is over.

According to the BLS, 43% of private industry workers and 27% of state and local government workers had access to short-term disability insurance in March 2022.

Long-Term Disability Insurance

Long-term disability insurance covers employees for an extended period, sometimes until retirement age. It covers issues such as chronic illnesses or disabilities.

The waiting period for long-term disability insurance plans ranges from 30 days to six months. Employees can start receiving benefits after the waiting period is complete.

According to BLS data, 35% of private industry workers and 39% of state and local government workers had access to long-term disability insurance in March 2022.

Voluntary Disability Insurance

Voluntary disability insurance plans benefit employees who want extra coverage or employees who are not eligible for employer-sponsored disability insurance plans. Some employers offer voluntary disability insurance plans, but employees pay the premiums.

Claims Process

The claims process for disability insurance can be complicated, and employees must understand the process to receive timely benefits.

To file a claim for disability insurance, employees must provide medical documentation from their doctor proving they cannot work due to an illness or injury. The insurance company will review the documentation and determine whether or not the employee is eligible for benefits.

Eligible employees will receive payments according to the terms of their policy.

Employees can appeal if the insurance company denies the benefits. The appeals process can be lengthy and complicated, and employees might need assistance from an experienced attorney.

3. Life Insurance

Life insurance provides financial support to an employee’s beneficiaries in the event of their death. It pays out a lump sum to designated beneficiaries upon the policyholder’s death.

Life insurance benefits can help to cover expenses such as funeral costs, outstanding debts, and ongoing living expenses for the policyholder’s loved ones.

According to the BLS, life insurance was available to 57% of private industry workers and 83% of state and local government workers in March 2022.

Types of Life Insurance Plans

There are two main life insurance plans: term life insurance and permanent life insurance.

  • Term life insurance provides coverage for a specific period of time, typically 10, 20, or 30 years. It does not feature a savings component. If the policyholder dies during the policy term, the designated beneficiaries receive the death benefit. Term life insurance is often more affordable than permanent life insurance, making it a popular choice for many employees.
  • Permanent life insurance, or whole life insurance, provides coverage for the policyholder’s entire life as long as the premiums are paid. In addition to the death benefit, permanent life insurance policies also have a cash value component that accumulates over time. These policies can be more expensive than term life insurance, but they offer lifelong protection and provide additional financial benefits.

How to Determine the Appropriate Amount of Coverage

When evaluating life insurance benefits, it is important to consider the appropriate amount of coverage for each employee. The coverage needed will depend on various factors, including the employee’s age, income, and family situation.

A common rule of thumb is to have coverage equal to 10 times the employee’s annual salary. However, this may not be appropriate for everyone. Employees with young children or significant outstanding debts need more coverage, while those who are older or have grown children need less.

Employers can offer various coverage options to help employees find the right coverage for their individual needs. Additionally, many employers offer the option for employees to purchase additional coverage above and beyond the standard coverage offered by the company.

4. Accident Insurance

Accident insurance provides financial protection to employees in the event of accidental injuries.

Coverage options and limitations for accident insurance vary depending on the policy. Typically, accident insurance provides coverage for medical expenses related to accidental injuries, such as broken bones, burns, and concussions. Some policies provide coverage for lost income due to the accident or for certain types of disabilities resulting from the accident.

However, it is important to note that accident insurance has limitations. For example, it may not cover injuries resulting from non-accidental events, such as illnesses or self-inflicted injuries. Additionally, coverage can be limited based on the severity of the injury and the cost of treatment.

One way that accident insurance differs from other types of insurance benefits is that it is specifically designed to provide coverage for accidental injuries. Other benefits, such as health or disability insurance, cover medical and health issues.

Another way accident insurance differs from other types of insurance benefits is that it is typically less expensive. Accident insurance premiums are generally lower than premiums for other insurance benefits, making it a more affordable option for employees who can not afford more comprehensive coverage.

Accident insurance also benefits employees participating in high-risk activities, such as sports or hobbies. These activities increase the likelihood of an accidental injury, and accident insurance can provide an extra layer of protection.

5. Critical Illness Insurance

Critical illness insurance provides financial protection to employees in the event of serious illnesses. Common critical illnesses covered by this type of insurance include cancer, heart attack, and stroke. These illnesses can be costly to treat and can require a significant amount of time off work. Critical illness insurance can provide employees with the financial support they need to cover medical expenses and other costs associated with these illnesses.

Coverage options and limitations for critical illness insurance vary depending on the policy. Typically, critical illness insurance provides coverage for medical expenses related to specific serious illnesses, such as cancer, heart attack, and stroke. Some policies provide coverage for other types of critical illnesses, such as kidney failure or multiple sclerosis.

However, it is important to note that critical illness insurance has limitations. For example, it may not cover all medical expenses related to the illness or may have a waiting period before coverage begins. Additionally, coverage may be limited based on the severity of the illness and the cost of treatment.

The importance of critical illness insurance for employees cannot be overstated. A serious illness can be financially devastating, especially if it requires expensive medical treatment or causes the employee to miss work. Critical illness insurance can help alleviate some of the financial burdens of a serious illness and allow employees to focus on their recovery.

In addition to providing financial protection, critical illness insurance can also offer peace of mind to employees. Knowing that they have coverage in the event of a serious illness can help alleviate some of the stress and anxiety associated with a potential health crisis.

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Factors to Consider When Choosing Insurance Benefits for Employees

Several factors come into play when you choose insurance benefits for your employees. Let’s consider each of these factors in more detail.

1. Employer’s Budget and Resources

Perhaps the most important factor to consider when choosing insurance benefits for your employees is your budget and resources. You can only offer the insurance benefits that you can afford and which do not put an excessive strain on your finances.

You can compare different insurance plans and providers to find the most cost-effective option that provides adequate employee coverage.

2. Employee Needs and Preferences

Another important factor to consider is the needs and preferences of your employees. You can conduct surveys or hold employee meetings to understand their healthcare needs and preferences.

Analysis of the survey results and employee feedback will help you choose insurance plans that provide the necessary coverage that meet the needs and preferences of your employees.

3. Legal Requirements and Regulations

An additional important factor to consider is legal requirements and regulations. Federal and state laws require employers to provide certain insurance benefits, such as workers’ compensation, disability insurance, and health insurance. Therefore, you must comply with all legal requirements and regulations when selecting employee insurance benefits.

4. Cost-Sharing Options

Cost-sharing options, such as co-payments, deductibles, and out-of-pocket maximums, can help you manage the cost of insurance benefits while still providing employees with adequate coverage.

You can also evaluate whether you want to offer multiple insurance plans with varying levels of coverage and cost-sharing options to meet the needs of different employees.


With well-designed employee benefits packages, you can attract and retain top talent.

The specific insurance benefits you can offer will vary depending on your company’s size, budget, and other factors.

Selecting employee benefits is a complex process that requires consideration of several factors. By choosing the right insurance benefits, you can provide employees with the necessary coverage to protect their health and well-being while also managing the cost of insurance benefits.


Here are some of the most frequently asked questions related to insurance benefits for employees.

What are insurance benefits for employees?

Insurance benefits for employees are types of insurance coverage provided by an employer as part of a benefits package. These benefits may include health insurance, dental insurance, vision insurance, life insurance, disability insurance, and more.

Why are insurance benefits important for employees?

Insurance benefits are important for employees because they provide financial protection during a medical emergency or other unexpected events and help improve employee satisfaction. Insurance helps employees cover the cost of medical treatment, prescriptions, and other healthcare expenses, which can be expensive and difficult to pay out of pocket.

Do all employers provide insurance benefits to their employees?

All employers do not provide insurance benefits to their employees. The availability of insurance benefits depends on the employer’s budget, resources, and overall benefits package. However, offering insurance benefits can be a valuable way for employers to attract and retain talented employees.

Are employees required to contribute to the cost of insurance benefits?

Many employers require employees to contribute to the cost of insurance benefits, such as through payroll deductions. However, the amount of the employee contribution will vary depending on the employer and the type of insurance benefit.

Can employees opt out of insurance benefits?

Employees can opt out of insurance benefits if they have coverage through another source, such as a spouse’s employer-sponsored plan. However, it is important for employees to carefully consider their options and the potential risks and benefits of opting out of insurance coverage.

Can employees change their insurance benefits during open enrollment?

Many employers allow employees to change their insurance benefits during an annual open enrollment period. This is typically a set period of time each year when employees can review their benefits options and make changes if necessary.


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Josh Fechter
Josh Fechter is the founder of HR.University. He's a certified HR professional and has managed global teams across 5 different continents including their benefits and payroll. You can connect with him on LinkedIn here.