Published on 14/11/2023
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Spotlight on death benefit coverage
With our recent benchmark study on supplementary pensions, we gained valuable insight into how employers in Belgium design supplementary pension plans for their employees. In the study, we analysed the data from 316,826 active affiliates in collective enterprise plans with 5,374 employers across 18 different sectors.
With our recent benchmark study on supplementary pensions, we gained valuable insight into how employers in Belgium design supplementary pension plans for their employees. In the study, we analysed the data from 316,826 active affiliates in collective enterprise plans with 5,374 employers across 18 different sectors.
An important component in supplementary pension plans is death benefit coverage. Did you know that
1 out of 10 Belgian die before reaching retirement age? This sobering figure highlights the importance of having a reliable financial safety net.
Fortunately, we know from the study that only 1.5% of AG plan participants have no death benefit coverage at all. Are you curious about how much your staff members will collect and the factors that come into play? In this article, we delve into the main findings from the study.
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Only 1.5% of AG plan participants have no death benefit coverage at all. |
Death benefit coverage, a key component in a group insurance plan
Death benefit coverage is an additional component in a group insurance plan that pays out benefits to the beneficiaries if your staff member passes away while still employed. This type of coverage can offer a much-needed financial safeguard in the wake of an employee’s income loss. In addition, staff members can use the death benefit coverage included in their group insurance plan as
collateral, for example as an alternative to outstanding balance insurance on a mortgage loan.
Extra flexibility and protection with supplementary death benefit coverage
Unlike the
state pension provided by the government, which comes with
certain conditions such as a minimum one-year marriage period, an age limit of 49 years, and income limits, the supplementary death benefit coverage offers a greater degree of flexibility and freedom. The employer has the liberty to set the applicable rules, such as whether beneficiaries receive a lump sum or an annuity, and whether the employee can choose the amount of death coverage. In this regard, the supplementary death benefit coverage serves as a valuable and sometimes even essential supplement to the state pension to
maintain a comfortable standard of living.
Diversity in death benefit coverage formulas
There are several options to choose from when setting the death benefit amount. Our benchmark study revealed the following statistics:
- For 21% of our plan participants, their beneficiaries will only be entitled to the accrued reserves upon death. This can be problematic for your younger employees, as they have only just started their careers and have limited financial resources. Yet people in this stage of life often have huge expenses to cover such as a mortgage or daycare costs. In these circumstances, it's all the more important for the beneficiaries to have death benefit coverage to fall back on.
- 70% of our plan participants have a pre-set death benefit, calculated based on their salary.
- 7.5% have mixed insurance, where the death benefit is a fixed percentage of the retirement benefit (e.g. half of the amount or double the amount).
Salary bracket and sector: two determining factors for the death benefit amount
When we look at how the pre-set death benefit amount is calculated, we see that
lower salary brackets are entitled to a lower death benefit. The
median ranges from 1.1 times the participant's annual salary for the lowest salary bracket to 2.4 times the annual salary for the highest bracket. We also see that the higher the salary bracket, the greater the variation. For the higher salary brackets, we get 3 to 4 times the annual salary for the 75th percentile.
The findings also reveal certain nuances to take into account. Loyal employees who have served the company for many years see their tenure reflected in their group insurance. For them, death benefit coverage is even more appealing as their beneficiaries will be entitled to a
higher death benefit.
This not only serves as a token of appreciation but also acts as an effective retention strategy. The assurance that their family will be financially secure if they were to pass away while in service provides an additional incentive for loyalty.
The sector of activity also plays a role, with the
median ranging from 1 to 3.5 times the annual salary.
Questions?
Want to take a closer look at the death benefit coverage your company provides for its staff members? Then contact our Sales department and find out how you can set up a comfortable safety net for your employees.
Interested in all the other findings from our benchmark study on supplementary pensions? Request a copy of our whitepaper.
Did you know that your staff members can check the size of their death benefit coverage themselves? That's right! With MyAG Employee Benefits, your staff members have access to this information anytime and anywhere and to plenty of other important details.