Do's and Don'ts of Employee Benefits

By Kerrie Beene, CFP®

During October and November a majority of people will be having open enrollment for benefits.  We encourage you to take the time to thoroughly review your benefit options. Make sure you pick the best options for your situation and do not leave any benefits on the table.   Below are some do’s and don’ts when reviewing your employee benefits.

Do

1. Take the time to compare the medical, dental, and vision plan options.  While it may be easiest to pick the plan with the lowest premium, that plan may not be the best option for your situation.  Some factors to consider when reviewing your plan are:

   1. Premiums

   2. Out of Pocket Expenses

   3. Prescription drug coverage

   4. Networks (Before switching plans or signing up for a new one, check the availability of doctors within that network) 

2. Sign up for disability coverage.  It is easy to think nothing will happen to us, however, a 35 year old has a 50% chance of becoming disabled for a 90 day period or longer before the age of 65.  While you can purchase a policy from an outside source, employer options are often the best place to start.

3. Sign up for life insurance.  Your personal situation will depend on how much life insurance you need but your employer is often the lowest cost provider.  Take the time to analyze how much life insurance you may need and maximize the benefit available to you through your employer and then seek outside insurance if needed. 

4. Take advantage of employer sponsored retirement plans. This could be a 401k, 403b, 457b, Simple IRA, etc.  Most employers offer a match, such as 3% of your salary.  This is money you do not want to leave on the table.  Be sure to contribute at least the percentage your employer matches to ensure you receive the full benefit.

5. Ask questions.  If there is a benefit you do not understand, reach out to your human resources manager and ask questions. 

Don’t

1. Wait until the last minute to enroll in your benefits.  Review your benefits as soon as possible and make sure you understand the options available.  If there is a benefit you don’t understand, reach out and get clarification.

2. Sign up for benefits based on your co-workers choices.  Make sure you are picking the best options for your personal situation.

3. Rule out supplemental disability options.  Some employers offer a supplement policy that will add coverage above and beyond the basic policy. Think about how much of your pay you would need if something were to happen and you needed to file for disability.  If the policy covers 60% of your salary, will you be able to manage without the other 40%?

4. Rule out the high deductible plan.  While signing up for a policy with a higher deductible can be scary, the health savings account available with this plan makes this a very attractive option.  For more information on health savings accounts, check out this article.

5. Rule out “other” benefits available.  Sometimes employers offer benefits such as dependent care spending accounts and legal plans.  If your employer offers a legal plan, this is something you could take advantage of if you need Estate Planning Documents set up. 

The short and sweet of liability insurance

By Becky Eason, CFP®

What is liability insurance?

By: Becky Eason, CFP®

Do you know your insurance coverage? If you don’t, you’re not alone. It’s fair to say that most people don’t know what their insurance coverage limits are and what exclusions they have. For the month of September we are going to be focused on liability insurance. Liability insurance is found within many types of insurance policies, but the most common are home, auto and renters. You can even purchase a stand alone liability policy, known as an umbrella policy. You might be wondering, what is liability insurance? It’s a part of your general insurance policy that protects you, the policy holder, from a lawsuit and helps cover the cost of damage from an accident. 

The most common use of liability insurance that we see is from auto insurance. Within your auto insurance policy there are two types of liability coverage. The first is bodily injury, which can cover medical expenses, loss of income and funeral expenses for the victims of an accident. It can also cover the legal fees of the policyholder if the accident results in a lawsuit. Bodily injury coverage is often stated in per person and per accident coverage limits. If you have a policy that has coverage of $250,000 per person and $500,000 per accident then the most your policy will pay per accident is $500,000, even if you have four injured people. The second type of liability coverage within an auto policy is property damage. This covers the cost to either repair or replace the vehicle, or vehicles, and personal property, such as mailboxes, of the other involved parties in an accident. If the damage from an accident exceeds your policy limits then you, the policy holder, can be held liable for the excess damage amounts.

The next most common is homeowner’s liability insurance. If you have a mortgage on your home then homeowner’s insurance is typically a requirement, and liability insurance is embedded within your homeowner’s policy. This protects you, the homeowner, against accidents involving bodily injury or property damage to others. You are protected for damages caused by any member of your household, including pets, and you don’t have to be sued for your home liability insurance coverage to kick in. Covered damages can include a tree falling on a neighbor's car, your dog biting a visitor, or someone tripping and falling on your sidewalk, just to name a few. 

If you have a renter’s insurance policy then your coverage needs are similar to those of homeowners, but they do differ slightly. As a renter, you don’t own the property but you can still be held liable for injuries and property damage. A great example of this is if you have a child who unintentionally breaks your neighbor’s window while out playing. Your liability insurance will likely pay to have that window replaced. 

In addition to auto, home and renter’s liability insurance you can purchase an umbrella policy. An umbrella policy is a personal liability insurance that provides coverage above and beyond your home, auto, or renter’s liability insurance. Umbrella insurance generally starts with coverage of $1 million. If you have $500,000 of liability insurance on your auto and home policy and you have a $1 million umbrella policy you now have $1.5 million of liability coverage. If you have significant assets outside of your retirement accounts then it might be a good idea to run an analysis to see if you should get additional coverage. Something that many people aren’t aware of is that if you are sued then you may have to pay up to 20% of your income for 20 years to the party who is suing you (depending on the State you live in). This can add up to be a significant amount of money.

Insurance is a product that allows you to transfer financial risk (risk of those noted above happening); we hope you never have to use, but if you find yourself in a situation where you need it you want to make sure that you have sufficient coverage. It’s a good idea to get updated quotes every few years because life happens, things change and you may find you need different coverage. Through the requoting process you might even find a better rate and/or coverage.