I saved $ 3,000 a few years ago when I decided to buy new health insurance. My wife and I decided to have a child; After extensive research, we decided on a plan with higher premiums but lower expenses. Coupled with the $ 1,000 we received for signing a compensation plan, we ended up being $ 3,000 better off than we would have been under the status quo.
How long did it take? It took an hour of planning and research. That’s an excellent hourly rate.
Most business leaders and senior managers often look to the status quo instead of delving into the details. I get it.
With their demanding jobs, they work late into the night and have endless to-do lists. Open enrollment documents can be confusing as they are made up of a alphabet soup of acronyms. Should I sign up for a PPO or HDHP? Am I entitled to an HSA? Do I need STDI and LTDI?
Before I became a wealth planner, in my eight years as a firefighter / paramedic, I saw people from all walks of life struggling with injuries, illnesses and losses. Nobody wants this to ever happen, but if they do, the right insurance (ex. Health insurance, life insurance, disability insurance) can make a huge difference in your finances and wellbeing.
As with most other well-done tasks, it takes time and research to get it right. Instead of getting bogged down in the details of your plan, here are four recommendations for anyone signing up for company benefit plans this fall:
Top Priority – Choose the Right Health Plan for You
Let’s look at three common types of health insurance. How they work:
An Organization for the Preservation of Health (HMO) plan usually offers the lowest costs, but the least flexibility. A group of medical care providers have a long-term care contract; HMOs value cost control and precaution in order to offer low premiums and expenses. However, you need to work with a family doctor to coordinate all care, keep costs down, and see doctors on the network – except for emergencies. A referral is required to see a specialist.
A preferred provider organization (PPO) is an association of medical service providers. It works with an insurance company to offer its services at discounted prices, so maintaining within this network cuts costs. There is more freedom under a PPO because you don’t need a referral to see a specialist. But there is likely to be a higher outlay.
As the name indicates, a high deductible health plan (HDHP) has lower premiums, but higher deductibles. These plans often appeal to people with few health issues who are unlikely to hit the deductible, which must be at least $ 1,400 for an individual or $ 2,800 for a family in 2022.
A major benefit of these plans is access to a health savings account (HSA). These accounts offer triple tax play. You can save for your future by depositing money before taxes. Your contributions grow tax-free and when used for qualified medical expenses, the distributions are also tax-free. Those who pay annually for several years can accumulate a lot of money if it is not needed for health care in the meantime.
Which plan is right for you and your family? You can compare the costs and benefits of each one. Try the calculators here and here to see which tariff type is better for you.
Register with the disability insurance
There are two types of disability insurance: short-term and long-term. Many companies offer a free group benefit for employees, and individuals can also choose to pay for this out of pocket.
Regardless of the choice, I recommend long-term disability insurance for most professionals. You shouldn’t dismiss this as something you don’t need because you will never be handicapped. A car accident can happen at any time and affect your mobility, eyesight, hearing, and cognitive skills. According to LLIS, a 30-year-old is four times more likely to become disabled than to die before age 65.
The occupational disability insurance replaces part of your income if you cannot work due to illness or an accident. A standard policy will typically cover 60% of your base salary and may not take into account bonuses, commissions and performance awards. Also, there is generally a cap – for example, $ 10,000 / month – on what you can do.
A policy tied to your savings can offer enough money. If not, you should take out supplementary insurance through your company or a private insurer. And unless you have thousands of dollars in an emergency fund, I highly recommend getting short-term disability insurance. These plans have short waiting times (seven to 30 days) and can fill the gap until long-term disability insurance begins.
One thing to know about taxes: if you could pay your disability insurance premiums in dollars after tax, all benefits you received would be income tax-free. If your employer pays your premiums and does not count these costs as income for you, your disability benefits may be taxable when you receive them.
Choose the right amount of life insurance
When your family depends on your income, life insurance is almost always a necessity.
Many employers offer a minimum amount – 1 to 3 times your salary – as a group benefit. This is a good start, but you will likely need more if you have kids and a mortgage. But how much? The simple rule of thumb to cover outstanding debts, child education costs, and current income for surviving family members is to keep 10 to 12 times your income. A financial professional can do detailed, personalized calculations for you.
Many companies allow their employees to take out additional insurance; This option is a significant benefit for those who are not eligible for a private policy for health reasons. For healthy individuals, consider getting a policy from an outside insurance company. It could be less expensive and you don’t have to worry about portability if you quit your job.
Don’t miss out on the potential additional benefits
More and more companies are adding significant benefits that were previously not a traditional part of their offering.
According to the MassMutual Financial Wellness Trends Study from February 2020, 6 out of 10 companies now offer or have implemented financial wellness programs in their companies. Other benefits now available from some employers include counseling, vacation purchase plans, long-term care and flexible spending accounts (FSAs), tuition reimbursement, and other special benefits.
Open enrollment can sneak up on you during a busy time of the year. But when it does start, take an hour to study your options and make informed decisions about your benefits. Do your numbers, contact a specialist, and make sure this part of your family’s financial planning is in order.
Wealth Planner, Brightworth
Matthew Broom is a wealth planner at Brightworth, an Atlanta-based wealth management company. He looks after wealthy clients in the areas of old-age provision, investment management and comprehensive investment advice. Matthew, a former firefighter and medic, uses his real-world problem solving experience to develop bespoke financial strategies for the company’s clients.