Depending on where you work, its possible that up to 30% of Your Compensation is employee benefits.[i] For a hypothetical worker earning a $100,000 salary, their benefits package of health insurance, 401(k) match, long-term disability benefit, group life insurance and assorted other benefits can be valued at over $40,000!
When that email about Open Enrollment comes around it sometimes can get buried beneath other priorities. Your benefit packages may have changed or maybe you are required to opt-in to a new benefit being offered. Please take the time to review your Employee Benefits as they are likely a large component of your overall financial plan.
Here are a few points to consider as you go through the Open Enrollment Period:
Medical Insurance is typically the biggest benefit offered by employers. Some insurance companies have been making benefit changes and increasing deductibles and co-pays in an effort to keep premiums lower. Also, this is a good time to review the doctor access list for your 2018 Medical Coverage.
Group Long-Term Disability Insurance
This is insurance for your paycheck.
In the event you lose your ability to work due to illness or an accident, long-term disability insurance coverage provides you with a monthly payment for a set amount of time as stated in the contract. The typical coverage offered by an employer is a benefit equal to 60% of your monthly pre-disability income and typically is 100% taxable.
A couple of things to look for are the definition of disability, waiting period, duration of the benefit (how long benefits are paid) and whether or not the benefits are capped at an amount less than 60% of your monthly income. Also, check to see if the benefit covers all of your income and not just your base salary.
Group Term Life Insurance
This benefit provides you with a limited term life insurance benefit with no medical underwriting. The insurance companies typically offer between three-to-five times your base salary as a life insurance benefit.
Some advantages of this benefit to consider are that it doesn’t require a medical exam and the premiums are usually relatively cheap as compared to a fixed-term policy. Some disadvantages to consider are the amount of coverage is typically less than ½ of your total insurability and may not adequately cover your family loss. Also, the benefit is tied to your job and typically will cost you more to keep should you leave your employer.
Open Enrollment is coming up soon, so please be on the lookout and take the time to review and understand your benefit selections. Don’t wait until you need to use your benefits to become an expert.
Thank you for reading!
[i] Employer Cost for Employee Compensation – June 2017. U.S. Department of Labor. https://www.bls.gov/news.release/pdf/ecec.pdf