Even with the Affordable Care Act, your employer is the first place to look for health insurance. Why? Health insurance is still not affordable for many people, and your employer pays for a portion of your health insurance costs.
This specific benefit is a major expense for employers. So much so that if a company employs less than 50 full-time workers, it is not legally required to offer health insurance. If you work at a small business, this is why you may not have health insurance offered to you.
If you don’t have health insurance through work, give our health insurance advisor a call to see what your options are.
Health Savings Account
Because health insurance isn’t cheap, high deductible plans have increased in popularity. This is an arrangement where you are on the hook for more before the insurance company pays. As a result, your monthly premiums are lower.
To help with the burden of having to pay more if you need health care, Health Savings Accounts (HSA’s) were introduced. An HSA allows you to put money in pre-tax and take it out tax-free to pay for medical expenses.
If you have a high deductible health plan, an HSA is a no-brainer. You can open one during your employer’s open enrollment. To encourage more people to sign up for high deductible plans (because it saves the employer money too), many employers will deposit money into your HSA for you.
A 401(k) is a must have employee benefit if your employer offers a matching contribution. Think of the matching contribution as a guaranteed return on your investment. For instance, if your employer offers a 3% match, you will get money if you contribute at least 3% of your paycheck.
While some people are worried about things like the investment options offered by their 401(k), getting this employer contribution means a 401(k) is the first place you should be contributing.
Long-Term Disability Insurance
Long-term disability insurance (LTD) is designed to replace your paycheck if you cannot work due to illness or injury. This is a must have employee benefit because the average Social Security Disability monthly payment is only $1,236 a month.
If you have LTD available, it’s imperative to read the fine print when signing up for coverage. You need to be aware of the following details:
- How much income will it replace? An LTD policy will typically replace 50% to 66% of your income if disabled. However, this usually includes only base pay and does not include variable compensation like bonuses or commissions.
- How long will benefits last? They can provide benefits for as little as two years or until you turn 65. The longer, the better. If you have a permanent disability but only receive benefits for two years, what will you do when those payments stop?
- Will benefits be taxable income? If your employer pays the premiums, disability benefits will be taxable income to you. This further reduces the net income you will receive if disabled. If you pay the premiums, benefits will be tax-free.
- How do they define “disability?” Some LTD policies define being disabled as being unable to perform the duties of your regular occupation. Others will change the definition after a couple years of being disabled to being unable to perform the duties of any occupation.
Even if you have long-term disability provided through work, it’s a good idea to get your own individual policy to supplement.
For example, if your group LTD policy will replace 60% of your income but won’t include your bonuses, you can get an individual policy to supplement. Or, if you change jobs and lose your LTD, you still have your individual policy providing coverage.
Use this link to get a quote for your own individual disability insurance policy.
The Good-To-Have Benefits
These options provide good benefits at great rates!
Short-Term Disability Insurance
Short-term disability insurance also replaces your paycheck if you are unable to work due to illness or injury. However, a short-term disability policy provides coverage for a much shorter time period—usually three to six months. The benefit amount is also limited to anywhere from 40% to 60% of your income and will start once you complete a waiting period (a week to a month).
Injured on the job? Worker’s compensation will cover you. Short-term disability is for injuries sustained outside of work as well as for illnesses
Short-term disability is often provided and paid for by your employer, so you might not need to sign up for it. Unlike long-term disability, short-term disability is good to have but not necessarily essential. A long-term disability will ruin your finances without proper planning.
Dental and Vision Insurance
There are big differences between getting dental and vision plans on your own and getting them through your employer. With a group plan, the insurance companies are insuring a large group of people, which makes it easier for them to manage their risk.
If you don’t have an employer dental or vision plan and try to get one on your own, you’ll find that the costs are much higher, and the benefits aren’t very attractive. Why? Insurance companies find a lot of people who are trying to buy a dental plan are doing it because they need expensive dental work. Buying insurance right before you need it seems like a wise move, right?
The insurance companies know this, which is why it’s harder to find a really good individual dental or vision plan. Moreover, they might come with a waiting period where you’ll be unable to use their benefits for the first 12 months. This is to discourage people from signing up right before they get a root canal.
If you have dental and vision insurance available to you from your employer, it’s a benefit that’s good to have!
A group life insurance policy is a common perk available to employees.
Often an employer will provide a basic coverage where your death benefit is equal to your annual pay. You have the option to increase your coverage or to obtain coverage for your spouse. At lower amounts, you might not even need a medical exam.
Don’t get me wrong—life insurance is a must have. However, life insurance through your employer isn’t essential. I prefer an individual life insurance policy outside of work. The danger of getting most or all of your life insurance through your job is if you end up changing employers (and subsequently losing your insurance). What if you developed health issues in the meantime? You might be unable to purchase life insurance at that time.
Buying your own individual life insurance is a way to “lock in” your coverage, regardless of your future job changes.
The Optional Benefits
These benefits aren’t essential, but they can be beneficial. With optional benefits, the cost versus the benefit is hard to calculate.
If you don’t have a pet, you might be surprised to know there is such a thing as pet insurance. However, pets require medical care, so why not have insurance? Most of your pet’s preventive care isn’t expensive and can easily be paid out-of-pocket. However, if your pet has chronic illnesses, an insurance policy can be a great way to limit your financial exposure.
Accidental Death & Dismemberment
AD&D is a type of policy that covers–you guessed it—accidental death and dismemberment. Unlike a life insurance policy, AD&D pays out only if you die in an accident.
The dismemberment portion of the AD&D policy will pay a benefit if you lose a limb, are paralyzed, or lose hearing, sight, or speech.
As you can see, an AD&D policy is very narrow in its coverages, which is why it’s pretty cheap. I personally don’t have AD&D, because I feel good being covered by my life insurance and long-term disability.
Accident Insurance and Critical Illness
These are examples of supplemental policies, meaning they supplement your health insurance coverage. They are not designed to function as your primary health coverage.
- Accident insurance plans pay you a cash benefit after you suffer an accident (i.e. broken bones, emergency room visit).
- Critical illness insurance pays you a cash benefit for certain medical emergencies like a heart attack, stroke, or cancer.
Why would someone consider these if they already have health insurance?
Someone with a health insurance plan with a very high deductible might benefit from an accident insurance policy, since he/she will be responsible for more medical bills if an accident happens.
The bottom line
Employee benefits provide a great way to insure against catastrophic risks and put away money for your future.