U.S. life insurers expand paid leave coverage as state mandates widen

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Life insurers expand paid leave

Highlights

Thirteen states have mandated paid leave insurance and another ten have created voluntary private options, prompting insurers like MetLife, Principal, and Sun Life Financial to expand offerings.
Insurers emphasize bundling paid family leave with group benefits, leveraging integrated offerings to address employer demand for uniform coverage across multiple states and regulatory frameworks.
Sun Life Financial reported C$1.2 billion in fourth-quarter 2025 group benefits sales, up 45%, citing paid leave coverage growth and employer movement from public to private insurance programs.

State mandates drive product expansion

As reported by AM Best, insurers see paid family and medical leave insurance as an increasingly attractive addition to group benefits portfolios as state-level requirements spread and employers look for income replacement options beyond unpaid federal leave protections.

The federal Family Leave Act allows workers to take up to 12 weeks off for illness or family caregiving, but it does not require income to be paid during that time. That gap is supporting demand for insurance products that replace part of a worker's pay and can be combined with other workplace benefits.

MetLife says it writes the product in every state where coverage is mandated and typically sells it alongside disability and leave products rather than as a stand-alone offering. Todd Katz, executive vice president and head of group benefits at MetLife, says the benefit is often bundled with life insurance or dental coverage, helping support sales and retention across broader employer accounts.

Principal Financial Group also says the market is expanding as more states adopt programs with different structures. Kara Hoogensen, senior vice president of benefits and protection at Principal, says 13 states have approved some version of paid leave for employees and another 10 states have enacted legislation creating a voluntary option through private insurers, citing data from the National Conference of State Legislatures.

Maine begins requiring the coverage in May, while Maryland's program comes online in January 2028. Hoogensen says the mix of public, private and hybrid models varies by state, with some markets making public programs more viable and others, including Massachusetts and Oregon, allowing public and private plans to coexist more openly.

Group benefits strategy and employer demand

For insurers, the appeal of paid leave coverage lies less in stand-alone premiums and more in its role inside larger group benefits strategies. The product helps carriers offer a single administrative experience to employers with workers in multiple states, a feature executives say is especially valuable as state rules differ on eligibility, exemptions and plan design.

MetLife says that multistate employers often want one program for employees across places such as Minnesota, New York and Hawaii rather than separate systems. Katz says criticism of some state plans centers on the patchwork of different administrators, reinforcing demand for integrated private-sector offerings.

Principal says it mainly focuses on employers with fewer than 500 workers and positions its local market expertise as a way to help financial professionals and employers manage regulatory complexity. Hoogensen says there is growing recognition that the United States trails other developed countries in caregiver support, which is helping push more states toward paid leave frameworks.

Sun Life Financial says it is also widening its footprint. Sheila Sokolski, vice president of product management and portfolio management, says Sun Life added family leave insurance in seven new states in October, bringing its total to 24, and also offers the benefit in some states without mandates, including Pennsylvania, to attract employers with national operations.

Sun Life says some employers shift from public plans to private ones after seeking greater efficiency or expressing dissatisfaction with the public option. The company reported fourth-quarter 2025 group benefits sales of C$1.2 billion, up 45%, and says paid leave coverage is incorporated into its short-term disability business.

Sokolski says state-specific rules can still create hurdles, pointing to Connecticut's requirement for a majority employee vote before a private plan can be adopted. She also says usage trends are evolving, with more men taking the benefit as awareness and state education efforts improve.

Our earlier article on Fitch’s affirmation of Principal Financial Group’s ratings explained that the insurer’s U.S. operating subsidiaries kept their AA- insurer financial strength rating and the group maintained a stable outlook. We noted that the decision reflected strong operating performance and capitalization, supported by higher 2025 after-tax operating earnings and a conservative product risk profile, alongside manageable exposure to commercial real estate.

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