Why Employees Drop Benefits, and What Can Be Done?

Why Employees Drop Benefits, and What Can Be Done

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Author

Kimberly A. Landry
Associate Research Director, Workplace Benefits Research
LIMRA and LOMA

August 2025

Adequate employee participation rates are essential to the stability and ongoing success of a workplace benefits plan. As a result, benefits providers must not only convince employees to enroll in the first place, but also persuade them to keep their coverage year after year. However, findings from LIMRA’s 2025 BEAT Study show that 12 percent of workers have dropped a benefit they were previously enrolled in sometime during the past two years. A better understanding of which benefits employees choose to drop — and why — can indicate strategies that might encourage employees to maintain their coverage in the future.

Dropping Coverage

The most frequently dropped benefits are vision, medical and dental insurance — all benefits in which workers are more likely to be enrolled in the first place. After those, however, employees tend to drop some less popular offerings such as legal services plans, pet insurance, disability and supplemental health products. Opting out of these plans could leave employees without important financial protections they might need in the future.

The No. 1 reason employees cite for dropping benefits is that they did not use the coverage enough to be worth it (Figure 1). Notably, many insurance benefits — such as life, disability and supplemental health insurance — offer protections that most people hope they will never need. However, this dynamic can make it difficult for workers to recognize the value of these products, especially given the human tendency to underestimate the odds that something bad will ever happen to them.

Figure 1. Reasons for Dropping Benefits

Based on employees who dropped a benefit within the past two years. Multiple responses allowed.

Source: 2025 BEAT Study: Benefits and Employee Attitude Tracker, LIMRA

Employees also tend to drop coverage due to monetary concerns, indicating either that the cost of the benefit went up, the cost of other benefits went up, or they simply wanted to reduce their overall spending on benefits. After several years of high inflation, household budgets are stretched tighter than ever, and workers will likely continue to scrutinize their benefits spending very closely.

In addition, 16 percent of employees who dropped a benefit did so because they felt the coverage was no longer needed. This reasoning makes sense in some instances, such as an employee dropping pet insurance if they no longer have a pet. But other benefits, such as disability, accident, and critical illness plans, are designed to protect against misfortunes that are hard to predict. Employees who drop these coverages due to a lack of need might require more education about the intent of these products.

In rare instances, employees have dropped benefits because they received poor service from the insurance carrier or had a bad experience with a claim. While it is encouraging that these numbers are low, they still point to opportunities for carriers to improve their customer experience, since ideally no one would be dropping coverage for this reason.

Reasons for dropping vary a bit by product:

For medical and dental, employees tend to opt out due to cost increases or because they obtained the coverage from another source, such as a spouse’s employer or a public program. Some workers also drop dental because they didn’t use the benefit enough.
For pet insurance and legal plans, the top three reasons for dropping include cost, not using the benefit enough, and no longer needing the coverage.
For most other benefits, including vision, life, accidental death and dismemberment, disability, and supplemental health plans, the predominant reasons for dropping are cost increases, wanting to reduce spending, and feeling they didn’t use the benefits enough to be worth it. It is notable that, with the exception of vision insurance, most of these are products that employees would not want to use.

Retention Strategies

In light of these objections, there are a number of strategies that carriers and other benefit providers might employ to encourage workers to keep their benefits:

Consider value adds. Value-added services, such as wellness benefits and employee assistance programs, provide features that employees can use on otherwise low-incidence products, thereby helping workers feel they are getting value from the benefit. It is important to make sure these features are aligned with the base product and compliant with state regulations.

Ensure claims get filed. Employees sometimes neglect to file valid claims because they don’t understand their coverage or forget they have it, particularly when it comes to products like accident insurance. Claims integration strategies, which allow a claim on one benefit to automatically trigger relevant claims on other lines of coverage, can help ensure that workers are making full use of their benefits packages. Campaigns to periodically remind employees about their benefits are also helpful in making sure claims don’t fall through the cracks.

Focus on affordability. With cost concerns top of mind, it is essential to make sure benefit offerings are affordable to employees. The median monthly amount workers are willing to spend out of pocket for benefits is only $150, leaving very little left over for other products after paying for medical coverage.

Improve education. Dropping benefits is often an indication that employees don’t understand or appreciate the value of the offerings, which points to a need for better education about benefits. The optimal benefit communication strategies incorporate a multichannel approach, provide personalized guidance to employees, and include multiple touchpoints throughout the year.

Conclusion

When employees drop benefits, they are left without access to valuable financial protections they might need in the future. To address this challenge, carriers and other benefits providers must understand workers’ reasons for opting out and take steps to mitigate those concerns. Doing so will contribute to the ongoing success of employers’ benefit programs and the long-term financial security of employees.

About the Research

LIMRA’s BEAT study (Benefits and Employee Attitude Tracker) is an annual survey exploring employee attitudes toward workplace benefits and general employment issues. The 2025 research surveyed more than 4,000 U.S. employees in January 2025. Read the full report here.

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