Insurance

More Perks at Work: A Guide to Maximizing Voluntary Benefits

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For many people in the working world, the onset of fall means it’s benefits election season: time for employees to review and choose from among the workplace benefits offered by their employer.

 

Known as the “open enrollment period,” this annual window for employees to evaluate and select benefits offers an excellent — yet often overlooked — opportunity for workers to maximize their on-the-job compensation by taking advantage of the voluntary benefits available to them, whether it’s certain forms of insurance or less traditional benefits such as wellness incentives, identity theft protection, or even pet insurance.

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Voluntary benefits are offered by employers as add-ons to a core benefits package. Employees usually pay for them out of their own pockets, in most cases via an automatic payroll deduction.

 

Don’t be deterred by the extra cost, and don’t infer from the “voluntary” label that they’re superfluous, however. From an employee’s perspective, voluntary benefits are a powerful way to enrich your compensation package, asserts Darin Shebesta, a certified financial planner with Jackson/Rosskelley Wealth Advisors in Scottsdale, Ariz. “Virtually every aspect of a person’s financial life is touched by their [workplace] benefits. But few people take the time to really look at them. They’re leaving benefits on the table that are rightfully theirs.”

 

Don’t let another open enrollment season pass without at least investigating the voluntary benefits offered by your employer. Here are some that can deliver valuable perks at an affordable price:

 

An employer-sponsored retirement plan typically comes with a limit on annual tax-favored contributions, depending on the type of plan. Shebesta suggests contributing as much as you can afford, not only into so-called “qualified” retirement accounts such as a 401(k), where money is taxed on the way out, not the way in (pre-tax), but also to a Roth account, where money is taxed on the way in, not the way out (after-tax).

 

If your employer has some form of program to match your retirement plan contributions, take full advantage of it, he says. These matching contributions essentially amount to extra income for you — income that, when invested, has a chance to grow over time.

 

Health insurance: If your employer offers a high-deductible health plan (HDHP) that comes with a health savings account (HSA) option, consider it. “Everybody should have access to an HSA for the flexibility they provide,” Shebesta says. That flexibility includes the ability to deposit a certain amount annually into the account tax-free, then take it out (also tax-free) to pay for qualifying medical expenses. For people over 50, it’s worth considering using HSA money to pay for a long-term care insurance (LTCI) policy, according to Shebesta, because LTCI can protect a person from potential financial devastation if they should require expensive care for an extended period.

 

It’s also worth taking advantage of health and wellness benefits and incentives, if your employer offers them, says Shebesta. Some employers may offer a health club membership or discounts on membership fees as a benefit to employees. Others may offer financial incentives to employees who undergo preventive medical tests, for example.

 

HSAs also function as useful retirement savings vehicles, providing an IRA (individual retirement account)-like home for pre-tax dollars, whereby funds deposited in the account can be withdrawn for non-medical purposes starting at age 65. As with funds inside a qualified IRA, the account owner will in most cases be required to pay income tax on that money on the way out. “The HSA works almost like an alternate retirement plan,” Shebesta explains. “It’s basically another pre-tax investment vehicle.”

 

Life insurance is a worthwhile investment, particularly when you have someone else dependent on you and your income, such as a spouse, life partner and/or children, he says. Oftentimes, a life insurance policy is more affordable when purchased through an employer, where a person may gain access to special group rates and/or avoid medical underwriting.

 

If your employer doesn’t offer disability insurance as a core benefit, it’s worth investing in is an optional benefit, according to Shebesta. Long-term disability insurance in particular is a valuable tool to protect your earning power — the biggest asset you have — by replacing income that’s lost if you’re no longer able to work due to an injury or disability. He suggests getting as much optional long-term and short-term disability insurance as possible.

 

Additional voluntary benefits worth considering:

  • Long-term care insurance, particularly for people 50 and over. LTCI coverage can be less expensive when purchased through a group. “Before age 50, I recommend focusing on disability coverage. After that, start looking at long-term care coverage,” Shebesta suggests.
  • Legal plans: Legal plans provide ready access to legal counsel from a network of attorneys, making them handy for services such as drawing up a will or a contract, filing or responding to a legal complaint, etc. “You pay a couple of bucks a month for what amounts to a couple thousand dollars worth of legal help,” says Shebesta.
  • Identity theft protection: Identity theft topped the Federal Trade Commission’s national ranking of consumer complaints for the 15th consecutive year in 2014.
  • Reimbursement for education expenses, such as graduate school.

 

…and the list goes on. The selection of voluntary benefits that an employer can offer employees is broad and expanding. What’s more, offering voluntary benefits costs employers virtually nothing, as employees are the ones paying for them. So if you hear about a voluntary benefit you think your employer should offer, Shebesta says, “don’t be shy about approaching the HR department about it.”

 

November 2015 — This column is provided by the Financial Planning Association® (FPA®) of Northeastern New York, the principle professional organization for Certified Financial PlannerTM (CFP®) professionals. FPA is the community that fosters the value of financial planning and advances the financial planning profession and its members demonstrate and support a professional commitment to education and a client-centered financial planning process. Please credit FPA of Northeastern New York if you use this column in whole or in part.

The Financial Planning Association is the owner of trademark, service mark and collective membership mark rights in: FPA, FPA/Logo and FINANCIAL PLANNING ASSOCIATION. The marks may not be used without written permission from the Financial Planning Association.

Eight Oft-Overlooked But Potentially Indispensable Types of Insurance

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Most people don’t blink when it comes time to reach into their pockets to pay for health insurance, homeowners insurance, auto insurance or even short-term disability or life insurance coverage because they see value in paying an insurance company to help protect them financially from the risks they face in going about certain key aspects of their lives.

 

But depending on personal and professional circumstances and needs, it also may make sense to consider other lesser-known but valuable forms of insurance, beyond the obvious types of policies you may already own. These frequently overlooked insurance products provide people with much-needed coverage in areas where they may be vulnerable, often for a relatively modest price.

 

Below are a handful of insurance products worth considering. Before you invest in any of them, be sure to visit with a financial and/or insurance professional with the expertise to assess your insurance needs and recommend appropriate types and amounts of coverage. “It’s important to have a thorough conversation with an insurance expert so you know what you have and what you need,” explains Brian Kuhn, a certified financial planner with Fulton, Md.-based PSG Clarity, a division of Planning Solutions Group. Visit the Financial Planning Association’s national database at www.PlannerSearch.org to find a Certified Financial Planner™ (CFP®) in your area.

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Umbrella insurance provides an extra layer of personal liability protection on top of auto, homeowners, accident and other types of insurance. Umbrella policies protect people and their assets from risks that could exceed the coverage limits of traditional kinds of insurance policies, such as an auto accident involving an uninsured driver, or a serious accident at your home that triggers a lawsuit. “The premiums [on accident insurance] are relatively low and it provides great peace of mind,” says Denver-based certified financial planner Kristi C. Sullivan.

 

Long-term disability insurance also provides an extra layer of protection on top of another common form of insurance, in this case short-term disability. While short-term disability typically provides coverage (usually in the form of income replacement) for a short period of time, such as several months, long-term disability insurance typically provides benefits for several years or more, making it a good fit for the primary income-earner in a household, for whom the loss of that income could be catastrophic.

 

Errors & omissions (E&O) insurance makes sense for people in a wide range of professions, insuring them against potential personal liabilities related to any errors or omissions they make while on the job.

 

Identity theft (IDT) insurance is gaining appeal as identity theft become more prevalent. An IDT policy keeps a close watch on a policyholder’s credit ratings and credit activity, flags suspicious activity and moves to remediate any damage if the person’s identity and personal information are compromised. “It’s pretty cheap to purchase and makes sense if you have a lot of online transaction activity,” notes Kuhn.

 

Renters insurance is a wise choice for people who live in rental housing, providing protection for their personal property.

 

Business overhead insurance provides funds to a business owner to cover business overhead expenses when the company is forced to go without one of its key revenue-producers for a period of time, due to illness, injury, etc.

 

Long-term care insurance provides coverage to people who need nursing home or in-home care for a period of time later in life. Coverage is available via a stand-alone policy or with other hybrid products that deliver long-term care benefits via a life insurance policy or an annuity contract.

 

Accident insurance can come in handy if you have children or you are accident-prone, providing additional coverage and benefits above what a health insurance plan offers. An accident policy can also provide funds to bridge the gap in a high-deductible health plan.

 

This column is provided by the Financial Planning Association® (FPA®) of Northeastern New York, the principle professional organization for Certified Financial PlannerTM (CFP®) professionals. FPA is the community that fosters the value of financial planning and advances the financial planning profession and its members demonstrate and support a professional commitment to education and a client-centered financial planning process. Please credit FPA of Northeastern New York if you use this column in whole or in part.

The Financial Planning Association is the owner of trademark, service mark and collective membership mark rights in: FPA, FPA/Logo and FINANCIAL PLANNING ASSOCIATION. The marks may not be used without written permission from the Financial Planning Association.