Making Cents: Taking a Closer Look at Your Employee Benefits
By: John P. Napolitano, CFP®, CPA, PFS, MST
Most people think about their employee benefits on two occasions. First is the day that you start a new job and have a pile of paperwork in front of you to sign. The second time is when you have an issue; whether a claim or some other problem when you need to refresh your memory as to what you have. The bad news about deciding to understand what you have when you need to use it is that you may not have what you need. Of course, it is better to know this in advance of any issues that may arise.
Let’s take a closer look at the disability insurance that you have from work. Group disability policies come in two general flavors. Short term and long term. Short term will pay benefits for a period of 90 days up to a year or two. Long term disability may pay for substantially longer. Most will pay benefits up to your company’s normal retirement age or age 65, but any policy can have terms and benefits that may differ.
Under the long term category, you have another sub category. That is whether the policy will pay you under any circumstances or only if you are disabled to a point where you couldn’t work anywhere. The former is called “own occupation” coverage, meaning that the benefits will flow if you are unable to perform the substantial duties of your current position. The later, called any occupation will only pay benefits if you cannot perform any type of work – even if it is well below your education level and abilities. That really means that if you can wash dishes at your favorite restaurant, you will not collect on your benefits.
One of the most important parts of your disability coverage at work is its adequacy. Do you have enough disability insurance? This is a little more difficult to estimate than figuring out how much life insurance you may need because with a disability you are still alive and may incur increased medical or other care expenses in addition to your regular living expenses.
Next take a look at your group life insurance coverage. The first consideration is how much do you have and is it enough. Go to any of the dozens of insurance needs analysis calculators on the internet and figure out how much you need. If the group coverage does the trick, you may be good for now. One limitation of a group life policy is that the coverage doesn’t stay with you if you change jobs or get laid off. If you anticipate a job change or feel unsure about stability in the workplace, consider buying your own coverage. Group life insurance is generally group term insurance, so to get an apples to apples cost comparison investigate the cost of term life insurance coverage as a supplement or an alternative to the group life insurance plan.
John P. Napolitano CFP®, CPA is CEO of U. S. Wealth Management in Braintree, MA. Visit JohnPNapolitano on LinkedIn or uswealthnapolitano.com. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. John Napolitano is a registered principal with and securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through US Financial Advisors, a Registered Investment Advisor. US Financial Advisors and US Wealth Management are separate entities from LPL Financial. He can be reached at 781-849-9200.