Maximizing Work Benefits – Life and Disability Insurance

Employers offer benefits to attract and keep employees, yet many workers fail to capitalize on all of the benefits your employer offers. You could be leaving cost effective coverage on the table when you don’t understand all your benefits and compare pricing to ensure you sign up for the correct level of coverage.

Fall is the time most employers give you the opportunity to enroll or change your selections of benefits. A time to evaluate your needs and choose appropriate levels of coverage for the next 12 months. Two common employer benefits include life and disability insurance. While no one wants to seriously consider what would happen if you could no longer work or died, avoiding the topic could be costly to your family.

The average cost of a funeral ranges from $11,000 to $20,000, and ongoing care for a disability can wreck family finances for years. Proper coverage could mitigate a lower level of savings, and enable your family to stay afloat if a crisis hits home.  

Employees are not required to carry life or disability insurance, but the protections are worth considering. Companies will often pay for a life insurance policy covering one year salary or base pay for employees, which is typically not adequate coverage for a family needing more than burial costs. The existence of debt, owning a home, or supporting dependent children, all increase the need for life and disability insurance coverage.

In addition to life insurance, disability claims can cover missed work for a planned surgery, time away from an unexpected illness or accident, as well as long-term coverage when a permanent disability strikes. Disability insurance will either cover short or long term needs, and many workers carry both for full protection.

Have Your Family Circumstances Changed?

Life changes can result in adjustments to insurance needs. If you added to your family size, increased debt loads, or altered total household income, it is important to reevaluate coverage. Adult children gaining financial independence or adding care for elderly parents may also lead to changes in insurance needs. One key benefit to obtaining insurance through your employer is that you might avoid required health checks typically required through private companies.

To determine how much life insurance coverage you need, check online insurance calculators to help evaluate your needs and decide the appropriate level of coverage based on your needs and budget. In some cases, you can include a spouse or children on the same policy at very attractive rates.

Changes to Your Premium

For life insurance, you choose either term or permanent coverage. Term insurance is less expensive for the largest amount of coverage and premiums increase with age. Term policies do not often transfer if you switch jobs and renew at an increased rate annually for a one-year term. Private policies allow you to lock in rates for 5, 10, 20 or 30-year terms.

Permanent life insurance can build cash value, have a steadier premium, and will follow you if you change jobs. The cost is higher based on how much insurance you want and your age. The cash value serves as an investment in addition to the insurance. Term policies only cover the life, and if the policy lapses before you use it, you get no benefit for the premiums paid.

Companies often pay for a term insurance policy for employees at one or two times your annual salary. You pay any difference for additional coverage. Higher levels of coverage may require qualifying with a health exam.

Short Term Versus Long Term Disability Insurance

If you choose to invest in short-term disability, the policy will pay if you are injured, have an accident, or health issue at 100% of your salary, not including variable pay, which might include overtime or commissions. The typical coverage requires a two week waiting period before paying benefits and will last up to six months. Anything beyond that period converts to long term coverage. The first two weeks typically require the use of sick or vacation days to prevent a lapse in pay.

For instance, if you break your leg while playing basketball, you may use short-term disability coverage while you are out of work for four weeks. Disability coverage will usually make weekly payments during your time away from work. Policies based payout on income, not a specific coverage level.

Long term disability picks up where short-term policies end. They cover a range of circumstances that may result in loss of ability to work without requiring full or complete disability to file a claim. The payment you receive from long-term disability is typically only 60% of base pay, which can alleviate the financial strain of a long-term illness. However, to have 100% pay replacement you may need to consider a supplemental policy. Illnesses such as cancer or an accident requiring multiple surgeries may qualify. If you do become permanently disabled, long-term policies offer coverage for set amounts depending on the circumstances. The policy will pay until a doctor releases you and approves a return to work. For non-permanent injuries, policies usually pay a preset daily amount based on income.

Disability Supplemental Policies

Long term coverage offers a lower payout which fails to replace income fully. When savings are small, or you depend on the full income, a supplemental policy can bridge the gap. Some employers offer supplemental policies that will allow your benefit to reach 100% of income replacement in case a long-term event impacts your ability to work. These types of policies make payouts per week or per day amount instead of being a percentage of your base pay. Companies such as AFLAC provide private supplemental policies if they are not available through work.

Disability Policies Offered By Employers

Disability Insurance does not accrue value and may not follow you in a change of employment. Health checks and pre-existing conditions are usually not required. Employers often offer more affordable disability coverage than the open market, due to rate agreements with employers.

Life and Disability Insurance In The Open Market

Many providers offer affordable rates not dependent on an employer. Healthy adults may find better rates based on your health, rather than group rates, which account for both healthy and unhealthy workers. Convenient online rate quotes can offer a comparison before choosing a work policy. The big advantage of a private policy is the ability to lower rates through a health screening and the ability to keep the policy regardless of where you work.

While you have the opportunity to gain easy access to insurance, take a few minutes to ensure you have protected your family for the upcoming year.

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