When you get a job, your employer may have informed you that aside from a paycheck, you will be receiving some additional benefits. Some of the most important benefits a company may offer comes by way of insurance. For this article, I want to focus on life and disability insurance. Determining what insurance benefits you select will depend on your unique situation. Keep in mind, some employers may give you numerous insurance options to choose from, while others may offer the bare minimum. Nevertheless, read through the entire benefits packet that they give you!
Most people are well aware of the importance of health insurance but not so much when it comes to life and disability insurance. Here’s a recommendation…take some time to truly determine how much life and disability insurance you need. The life insurance that’s offered through your employer is the cheapest that you will find, typically because your employer is fronting most, if not all, of the premium payments for you. You will generally find that they may offer flat rates of coverage at varying cost to you or they may have it where you’re entitled to an amount equal to one or two times your salary. If what they are offering isn’t enough, consult an insurance agent to determine how much additional coverage you need to fill your gap. Having adequate life insurance is of the utmost importance because if your household has two wage earners and one passes away or the breadwinner of your family was no longer here, the remaining family members would most certainly appreciate having money for the final expenses and the ability to maintain their current lifestyle. The grieving phase will be challenging enough, but adding financial troubles into the mix, just makes things that much tougher on your family.
When it comes to disability insurance, the same rules apply. Your employer is fronting most, if not all, of the premium payments for you. Many of us don’t see the value of having disability coverage, but here’s some food for thought. If you were seriously sick or injured and unable to work, how would you pay your bills? If you answered that question by saying you have an adequate amount of emergency funds (3-6 months worth of expenses) saved, then you may be okay. If you don’t have such an amount, then disability coverage becomes your savior. Essentially, it enables you to maintain your current lifestyle. What happens for the majority of people is that they fail to have the all-important emergency fund, which results in them having to tap other resources like their investment or retirement accounts, or credit cards. None of those sources should be utilized if at all possible. Your employer may only offer short-term disability or a combination of short and long-term disability coverage. Remember, read your benefits packet because this is something you need to know. Again, just like with life insurance, if what your company offers isn’t enough, consult an insurance agent to determine how much additional coverage you need to fill your gap. [Just so you know, you will never be able to get 100% disability coverage, primarily because if you could get 100% of your earnings without working, you would never go back to work.]
Having a firm grasp of your insurance offerings through work is critical. There may be gaps within your overall insurance plan and you need to make sure they are filled. Insurance is THE foundation of a financial plan. If you are not adequately protected, then you are putting your investment and retirement accounts in serious jeopardy. Think of it this way, if you were going to build a house, would you start on the second floor? Of course not!! You set the foundation, which allows you to build the remainder of the house. There have been numerous studies conducted about the staggering number of people who are under-insured in this country, please don’t let this be you. If you don’t care about insurance studies, ask a family member or close friend if they or someone they know has been negatively impacted by having an inadequate amount of insurance…then you will understand.