Recipe for Insurance: Life, Health and Long-Term Disability
In the first article of our three-part series, we looked at employer-sponsored retirement plans and what to consider as you head into your company’s open enrollment period. I asked you to think about this in terms of “mise en place” (which is a technique for chefs to proactively lay out all required ingredients and supplies before undertaking a complicated recipe). You want to do the necessary research and analysis ahead of going into open enrollment, so don’t rush your decision and end up with a half-baked cake or, in this case, potentially lose out on the benefits offered to you.
In this article, we discuss the need for you to review the insurance coverage—life, health and disability—offered by your employer. Again, I suggest a measured approach to making these decisions. This is not a pinch of salt here, a sprinkle of sugar there. No, I believe these decisions need to be thought about carefully and analyzed in advance of the deadline for open enrollment.
Life insurance
First, it’s important to review how much life insurance coverage you and your family need. We believe there are quite a few variables that go into this equation, including your answers to the following five questions:
- What’s the state of your overall health?
- What expenses do you need to cover?
- Do you need to consider extra expenses like childcare and college?
- How much money do you have saved?
- Is there another source of income for your family?
If you’re not certain how to go about analyzing your health insurance needs, please reach out to your Corient Wealth Advisor to help you with this analysis.
After determining what your life insurance needs are, consider the most effective way to cover those needs. It’s time to pull out the “secret ingredient,” as your employer plan may not be the best option for you. Depending on your age and health status, you may be able to purchase life insurance outside of your employer at a reduced rate.
As another benefit, this insurance is portable whether you continue to work with your employer or not.1 If you have health issues that prevent you from obtaining life insurance on the open market, or if your employer covers the cost of insurance, your employer-based plan may be the preferred option to meet your insurance needs.
Health insurance
Plans and coverage can change, premiums may increase and your specific needs may change as well. Depending on your health, medical prescriptions and family circumstances, you may wish to consider if changing plans makes sense for your situation. Take into account your monthly premiums, deductibles and out-of-pocket maximums when considering what health insurance to choose.
Long-term disability insurance
While many employees consider covering their income in case of an untimely death, many don’t consider what would happen if they became disabled and couldn’t work. Most employers will offer disability insurance to cover about 60% of wages.2
Some employers let you choose if you want to pay for your benefits with post-tax or pre-tax dollars. If you choose to pay on a pre-tax basis, your benefits will be taxed when you receive them. If you pay on a post-tax basis, the benefits you receive will be income-tax-free when you receive them.3 Again, it’s time to crunch some numbers to decide which path to choose (i.e., to pay for the benefit with pre- or post-tax dollars) and to determine whether what your employer offers is enough to cover your disability insurance needs.
Learn more
The decisions you make during the open enrollment period may impact your long-term wealth. This article is the second in a three-part series on open enrollment. Click the links below to read the other two articles:
Part 1: Use “Mise en Place” When Electing Employer Benefits
Part 3: Open Enrollment: Consider the Entire Benefits Menu
1 https://www.nationwide.com/lc/resources/investing-and-retirement/articles/portable-life-insurance-coverage
2 https://www.dundaslife.com/blog/how-much-disability-insurance-do-i-need
3 https://americanfidelity.com/blog/supplemental/pre-and-post-tax-benefits
ABOUT THE AUTHOR
Abigail Rosen, MS Financial Planning
Abby is a Partner, Wealth Advisor in our Morristown, NJ, office. She is a CERTIFIED FINANCIAL PLANNER™ professional with over 17 years of experience in the financial industry. Prior to her career in finance, Abby was an officer in the United States Navy. Abby specializes in working with corporate executives to help them take full advantage of their available benefits, implement with respect to employer stock concentrations and manage their stock option strategies. She has a designation in Global Financial Planning. Previously, she served at legacy firm RegentAtlantic as a Wealth Advisor and Co-Head of the Corporate Executives Group.
She graduated with a Bachelor of Arts from the College of the Holy Cross and received a Master of Science (distinction) in Financial Planning from Bentley University. She was 2020 Citizen of the Year for her work as treasurer of the New Jersey Psychological Association Foundation and is treasurer of the Harding Township Educational Foundation (HTEF) and a Girl Scout troop leader.
CONTENT DISCLOSURE
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