Salary is not the only compensation for work. What used to be called “fringe” benefits—things such as health insurance—are now a very significant part of compensation in most jobs. Unfortunately, the benefits are not as free as they once were. Increasingly, employees have to pay at least part of their cost. For that reason, you also now have more choices in what you receive. So it’s more important than ever to consider your benefits carefully, and select the best options for your family.
The advantage of signing up for insurance through work rather than on your own is that your employer’s group plan brings volume discounts. You can make changes to the coverage you are getting during the open enrollment period. This can vary by employer (and some may have two per year), but October is a popular month for open enrollment to begin. Once it’s over, you may be stuck with your selections until next year, although life events such as getting married, divorced, or having a child may allow you to make changes outside the open enrollment period (check with your human resources department for details).
Typically, an employer’s menu of coverage options will include:
- Health insurance
- Dental insurance
- Vision insurance
- Life insurance
- Accidental Death & Dismemberment (AD&D) insurance
- Disability insurance
For most people, health coverage is the most important one. Your decision about it will depend on your specific situation: What does the plan cover? How much of the cost is paid by your employer? What is available through your spouse’s employer?
Many couples with college-age kids automatically include them in their health plans. However, better options might be available. A client I met with recently has two children in college. Moving them onto coverage offered through their schools, and taking them off the group plan at work, saved the family a large amount of money.
Generally, I would avoid signing up for most of the special add-ons, such as AD&D, or cancer-specific coverage. Such bells and whistles are usually cheap, yes, but it’s for a reason (most never use them). I recommend putting those dollars into your 401K instead. Also, you should take advantage of employer-matching 401K contributions to the greatest extent.
One coverage I strongly recommend is disability. It pays when an injury or illness forces you to miss work for an extended period of time. Many people do not understand how often this happens. According to the Council for Disability Awareness, 1 in 4 of those who are 20-years-old now will experience a period of disability before they retire. Imagine having to cope with that as your paycheck suddenly stops coming.
Some employers offer group legal coverage, which can provide you with an attorney’s services at discounted or no cost. I don’t have a strong opinion on this, but I have heard positive feedback from people with the coverage, so it may make sense for you. As I mentioned before, much depends on the specifics of your situation as well as what your employer exactly offers. Check with your human resources department for specifics, and contact us at PARTNERSINWEALTH as well. We want to be your trusted single point of contact for discussing financial matters, someone who will help remove the guesswork and put you in control of the situation. To learn more about us, please contact Jim Waters, CFP®, at 713.964.4028 or firstname.lastname@example.org.