Too busy to study health insurance options for your company? Do these four things
You saved $3,000 two years ago when choosing a new health insurance plan. My wife and I decided to have a baby. After much research, we chose a plan with higher premiums but lower petty cash. Combined with the $1000 benefit we got for signing up for a compensation plan, we ended up with $3,000 better than we are in the status quo.
How long did this take? It took an hour of planning and research. This is an excellent hourly rate.
Most corporate executives and senior managers often deal with the status quo rather than diving into the details. I get it.
With their tough jobs, they work late at night and have to-do lists that never end. Open registration documents can be confusing, as they are made up of an alphabetical set of abbreviations. Should I sign up for a PPO or HDHP? Do I qualify for 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 battling injuries, disease, and losses. Nobody ever wants that to happen, but if it does, the right insurance (for example, medical, life, and disability insurance) can make a huge difference to your finances and well-being.
Like most other well-done tasks, getting it right takes time and research. Instead of getting bogged down in the details of your plan, here are four recommendations for anyone signing up for corporate benefit plans this fall:
TOP PRIORITY – CHOOSE THE RIGHT HEALTH PLAN FOR YOU
Let’s look at three common types of health insurance. Here’s how it works:
Health Maintenance Organization (HMO) The plan usually offers less cost but less flexibility. a group of Medical providers have a contract to provide care; HMOs emphasize cost control and preventive care to provide low premiums and out-of-pocket expenses. But you need to work with a primary doctor to coordinate all care, cut costs, and see doctors in the network—except for emergencies. A referral is needed to see a specialist.
Preferred Provider Organization (PPO) It is an association of medical service providers. It works with an insurance company to offer its services at discounted rates, so getting care within this network lowers costs. There is more freedom under a PPO, because you do not need a referral to see a specialist. But there are likely to be higher out-of-pocket costs.
As her name says High Deductible Health Plan (HDHPLower premiums but higher discounts. These plans often appeal to people with few health problems who likely won’t reach the deductible, which should be at least for 2022. $1,400 for an individual or $2,800 for a family.
A vital feature of these plans is access to a Health Savings Account (HSA). These accounts offer triple tax play. You can save for your future by contributing money on a pre-tax basis. Your contributions become tax deductible, and if they are used for qualifying medical expenses, the distributions are also tax deductible. A person who makes annual contributions for several years can raise a large amount of money if there is no need for health care in the meantime.
Registering for disability insurance
There are two types of disability insurance coverage: short-term and long-term. Many companies offer group benefits to employees at no cost, and individuals may also choose to pay out of their pocket for this coverage.
Whatever the choice, I highly recommend long-term disability insurance to most working professionals. Don’t dismiss this as something you don’t need because it will never be disabled. A car accident can happen at any time, affecting your movement, vision, hearing, and cognitive abilities. According to LLIS, a 30-year-old is four times more likely to become disabled than to die before the age of 65.
Disability insurance replaces a portion of your income when you are unable to work due to illness or injury. The standard policy usually covers 60% of your base salary and may not take into account bonuses, commissions, and incentives. Also, there is generally a maximum — like $10,000 per month — for your benefits.
The policy combined with your cash savings may provide enough money. If not, consider purchasing supplemental coverage through your company or private insurance company. And if you don’t have several thousand dollars in an emergency fund, I highly recommend signing up for short-term disability insurance. These plans have short waiting periods (seven to 30 days) and can fill the gap until long-term disability insurance begins.
One thing to know about taxes: If you can pay your disability insurance premiums with after-tax dollars, any interest received will be exempt from income tax. If your employer pays your premiums and doesn’t count them as income, your disability benefits may be taxed on receipt.
Select the appropriate amount of life insurance
If your family depends on your income, life insurance is always a necessity.
Many employers offer a lower amount — 1 to 3 times your salary — as a group benefit. This is a great start, but you will likely need more if you have children and a mortgage. but how much? To cover outstanding debts, education costs for children, and continued income for surviving family members, a simple rule of thumb is to keep your earnings 10 to 12 times as much. A financial professional can make detailed and personalized accounts for you.
Many companies enable their employees to purchase additional insurance; This option is a significant benefit for those who may not qualify for a private policy due to health issues. For healthy individuals, consider getting an insurance policy from a third-party insurance company. It may be less expensive, and you won’t have to worry about portability if you leave your job.
Finally, don’t miss out on the potential additional benefits
More companies are adding important features that were not a traditional part of their offerings.
According to the February 2020 MassMutual Financial Wellness Trends study, 6 out of 10 companies now offer or have implemented financial wellness programs at their companies. Other benefits now available with some employers include counseling, vacation purchase plans, dependent care, flexible spending accounts (FSAs), tuition reimbursement, and other specialized benefits.
Open enrollment can sneak up on you during a busy time of the year. But when you get started, take an hour to study your options and make informed decisions about your advantages. Run your numbers, consult a professional, and make sure this part of your family’s financial planning is in order.
Wealth Chart, Brightworth
Matthew Broome is a wealth planner for Atlanta-based Brightworth Wealth Management. He serves high net worth clients in the areas of retirement planning, investment management, and comprehensive wealth advice. Matthew, a former firefighter and paramedic, uses his expertise in real-world problem-solving to develop customized financial strategies for the company’s clients.