The critical role of employee benefits in facilitating financial security

Employers across the United States are committed to helping protect their employees' health and financial security. They are offering more benefits than ever before and are continuing to cover an average of 80% of healthcare premium costs, according to the Bureau of Labor Statistics. Many are also paying for portions of dental, vision, and other insurance coverages.

Not only is this the right thing to do, it's good for business: Research shows that offering a comprehensive benefits package to employees helps with talent attraction, retention, employee health and overall employee satisfaction with their employer. And, nearly two-thirds of business owners surveyed in the Principal Business Owner Insights say they want to offer more benefits to employees. 

While this shows great momentum, there is still work to be done. In today's workforce, employers, employees and policymakers each have a critical role to play in ensuring workplace benefits provide real, lasting protection — transforming them into vital pillars of long-term financial well-being.

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The threat of rising costs and health emergencies on financial security

If you're entering the workforce for the first time, you are often unprepared to fully understand or maximize your benefit offerings. Without thoughtful guidance and robust offerings, a single unexpected health event could derail financial stability.

Consider the rise of high-deductible health plans. For many, the annual deductible for these plans can be anywhere from around $1,500 for individuals to upwards of $4,000 for families. More than 1 in 3 U.S. adults (37%) used their emergency savings in the past 12 months, with many pulling between $1,000-$2,499, according to Bankrate's 2025 Annual Emergency Savings Report. Even a single medical emergency could easily derail one's financial security. To prepare for such situations, employees look to the benefits provided through their employers to protect their income and avoid pulling from emergency savings or taking on medical debt. 

This is one of the reasons I am such a big proponent of disability insurance. Disability insurance protects an employee's income through income replacement in the event that an employee experiences an accident or illness that leaves them unable to work for a period of time. And, what continues to be a staggering statistic that many workers overlook is that, per data from the Social Security Administration, nearly 1 in 4 Americans will experience disability before retirement.

Workers are also looking for ways to close the gap between their emergency savings and their deductible costs in the case of an accident or injury. For example, many young professionals participate in intramural sports like volleyball, softball and basketball leagues. Without having emergency savings built up yet, a fractured bone can quickly turn into a major financial setback. 

Benefits like accident and hospital indemnity insurance can bridge financial gaps that arise from unexpected health events and rising healthcare costs by providing direct payments that can help to cover out-of-pocket expenses and other related costs.

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The value/cost challenge for employers

Employers are clear that they want to continue providing benefits to employees, yet they regularly cite the cost of providing benefits as a key barrier. However, recent research from Principal 2025 SMB Behavioral Insights finds employers overestimate the cost of benefits by up to 3 times the actual cost. 

While it's important to provide education to resolve this misconception, another allows employers to offer more protection to employees through voluntary benefits. Voluntary benefits are offered by an employer but are paid for by the employee via payroll deduction. This gives employers the ability to offer more benefits without incurring a high cost, while also allowing employees to access critical benefits and personalize their coverage. 

For these benefits, like the accident or critical illness insurance mentioned previously, education on how they can protect the financial security of employees is critical.

Additionally, strong partnership between employers and the government is key to continuing benefits access through the workplace. Fortunately, numerous tax policy provisions enacted over the past ten years have played a key role in encouraging employers to provide valuable employee benefits. Policies like the Employer Credit for Paid Family and Medical Leave make it easier for employers to cover the cost of paying employees on leave by giving businesses the opportunity to earn a paid leave tax credit. Additional policies like Secure 2.0 offer new tax credits intended to help cover the costs for small and midsized employers that choose to offer new defined contribution plans, which can help broaden coverage and increase retirement savings to employees who would otherwise not have had access.

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From "work perks" to essentials

Workplace benefits aren't just perks — they're powerful tools that support employees' health, financial stability and overall well-being. And the Principal Financial Well-Being Index shows the majority of workers, more than 60%, consider life, dental and vision insurance, as well as paid family and medical leave, to be extremely valuable. 

But for these programs to truly make an impact, it takes engagement on all sides. New employees need guidance to make informed decisions, employers must continue to invest in comprehensive offerings and supportive government policy can ease the burden of cost and expand access. When all three work in tandem, benefits become more than just a checkbox during onboarding — they become a foundation for a more secure future.