Too busy to study your company’s health insurance options? Do these 4 things
I saved $ 3,000 a few years ago by choosing a new medicare plan. My wife and I have decided to have a child; after much research, we chose a plan with higher premiums but lower reimbursable costs. Coupled with the $ 1,000 benefit we got by signing up for a compensation plan, we found ourselves in a better position of $ 3,000 than we would have been under the status quo.
How long did it take? It took an hour of planning and research. It’s a great hourly rate.
Most business leaders and senior executives often opt for the status quo rather than delving into the details. I understand.
With their demanding jobs, they work late at night and have endless to-do lists. Open registration documents can be confusing, consisting of acronym alphabet soup. Should I sign up for a PPO or HDHP? Am I eligible for an HSA? Do I need STDI and LTDI?
Prior to becoming a wealth planner, in my eight years as a firefighter / paramedic, I saw people from all walks of life struggle with injury, illness and loss. No one ever wants this to happen, but if it does, the right insurance (i.e., medical, life, disability) can make a significant difference in your finances and well-being.
Like most other jobs done well, 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 benefit plans this fall:
Top priority – Choose the right health plan for you
Let’s take a look at three common types of health insurance. Here is how they work:
A health maintenance organization (HMO) the plan generally offers the lowest cost but the least flexibility. A group of health care providers have a contract to provide care; HMOs focus on cost control and preventative care to provide low premiums and disbursements. But you have to work with an attending physician to coordinate all care, reduce costs, and consult network physicians, except in emergencies. A referral is needed to see a specialist.
A Preferred Supplier Organization (PPO) is an association of medical providers. He works with an insurance company to offer his services at reduced prices, so getting care within that network cuts costs. There is more freedom in a PPO because you don’t need a referral to see a specialist. But there are probably higher reimbursable costs.
As indicated by his name, a high deductible health plan (HDHP) has lower premiums but higher deductibles. These plans often appeal to people with few health problems who are unlikely to reach the deductible amount, which for 2022 must be at least $ 1,400 for an individual or $ 2,800 for a family.
A key advantage of these plans is access to a Health Savings Account (CSH). These accounts offer the triple tax game. You can save for your future by contributing before tax. Your contributions grow tax-free and, if used on qualifying medical expenses, distributions are tax-free as well. A person who pays contributions annually for several years can accumulate a large sum of money if they do not need health care in the meantime.
Subscribe to disability insurance
There are two types of disability insurance coverage: short term and long term. Many companies offer a group benefit to employees free of charge, and individuals can also choose to pay out of pocket for this coverage.
Whatever the choice, I highly recommend long term disability insurance for most working professionals. Don’t think of it as something you don’t need because you will never be disabled. A car accident can happen at any time, affecting your mobility, vision, hearing and cognitive abilities. According to LLIS, a 30-year-old is four times more likely to become disabled than to die before age 65.
Disability insurance replaces part of your income when you cannot work due to illness or injury. A standard policy typically covers 60% of your base salary and may not take into account bonuses, commissions, and incentive bonuses. Also, there is usually a cap – like $ 10,000 / month – on your benefits.
A policy coupled with your cash savings can provide enough money. If not, consider purchasing additional coverage through your company or a private insurer. And, if you don’t have several thousand dollars in an emergency fund, I highly recommend that you purchase short term disability insurance. These plans have short initial waiting periods (seven to 30 days) and can bridge the gap until long term disability insurance takes effect.
One thing to know about taxes: If you can pay disability insurance premiums with after-tax dollars, any benefit received would be tax-free. If your employer pays your premiums and does not charge you this cost as income, your disability benefits may be taxable upon receipt.
Choosing the right amount of life insurance
If your family depends on your income, life insurance is almost always a necessity.
Many employers offer a minimum amount – 1x to 3x your salary – as a group benefit. It’s a good start, but you’ll probably need more if you have kids and a mortgage. But how many? To cover unpaid debts, children’s education costs, and the permanent income of surviving family members, a simple rule of thumb is to maintain 10 to 12 times your income. A financial professional can perform detailed and personalized calculations for you.
Many companies allow their employees to purchase additional insurance; this option is a significant benefit for those who may not be eligible for a private policy due to health concerns. For healthy people, consider getting a policy from an outside insurance company. It could be cheaper and you won’t have to worry about portability if you quit your job.
Finally, do not miss the possible additional benefits
More and more companies are adding significant benefits that were not traditionally part of their offerings.
According to the MassMutual Financial Wellness Trends study from February 2020, 6 out of 10 companies offer or have implemented financial wellness programs in their business. Other benefits now available with some employers include counseling, vacation buyback plans, dependent care and flexible spending accounts (FSA), tuition reimbursement and other specialty benefits.
Open registration may surprise you during a busy time of the year. But when that starts, take an hour to explore your options and make informed decisions about your benefits. Do your math, see a specialist, and make sure this part of your family’s financial planning is in good shape.
Wealth Planner, Brightworth
Matthew Broom is a wealth planner for Brightworth, an Atlanta-based wealth management company. He serves high net worth clients in the areas of retirement planning, investment management and comprehensive wealth management advice. A former firefighter and paramedic, Matthew uses his real-world problem-solving expertise to develop personalized financial strategies for the company’s clients.