It’s that time again — annual enrollment, also known as open season or open enrollment. If you are lucky enough to be employed and receiving benefits from your employer, this is your opportunity to make changes to your elected benefit options. Even if you are happy with your current selections and don’t think any changes are warranted, it is a good idea to reassess your needs and stay informed about what is changing.
First things first: one of the biggest problems participants make during open enrollment is making last minute decisions. If you want to make informed decisions and manage your costs, the best thing to do is attend an open enrollment meeting. This is your opportunity to listen to a presentation by a broker consultant and/or the product vendors and, most importantly, ask questions. Here are some other important things to consider:
• Health Insurance. When choosing your health insurance option, remember this: health insurance is meant to be a financial safety net but is not meant to cover all costs. Look at your choices carefully including premiums, deductibles and co-pays. If you have frequent medical appointments or other needs and anticipate submitting numerous claims, consider selecting the option with the least out of pocket expenses such as a Health Maintenance Organization (HMO) or a basic Preferred Provider Organization (PPO). If you travel a lot within the U.S., consider a PPO with open access on a national basis so you are not stuck spending on out of plan services.
On the other hand, if your claim history is low and you think you will continue to be a light user of the benefits, see if a Health Savings Account (HSA) is available. An HSA typically has higher deductibles but you use pre-tax dollars to pay for your out-of-pocket costs and any money not spent will carry over year to year. Another way to use pre-tax dollars to pay for medical expenses is a flexible spending account (FSA) in which you can set aside a portion of your earnings to pay for qualified medical expenses. Just remember, if you don’t spend what you put aside during a calendar year, you will lose the money. So plan carefully and remember you cannot claim over-the-counter medications for FSAs or HSAs beginning in 2011.
• Dental Insurance. Many employees do not opt for dental insurance because they think the premiums are too high. This may be true, but the premiums are a pre-tax expense and certain services are provided free, such as two cleanings a year. If you have access to a dental PPO, the services are provided at discounted PPO rates, so even if the plan does not pay for certain services like orthodontia, you may still get the benefit of a discount.
• Life Insurance. It is always a good idea to talk to a financial professional who can help you access your overall life insurance needs in relation to your long term goals, your current income and expenses, and what you want your legacy to be. Once you have determined your overall need, you can then determine whether a group policy, a private policy or a combination of the two is appropriate for you. Group life insurance can be a great opportunity to get life insurance coverage quickly and without going through the underwriting process which can be timely and lead to exclusions or denial of coverage. For some, group life insurance may not provide enough protection and particularly for those who are healthy, the cost of group benefits may be more than you can get privately.
• Disability Insurance. Many white-collar employers offer short- and long-term disability insurance. Disability insurance is important to consider as this will protect some of your income in the event you become disabled. Again, however, many factors go into a determination of how much and what type of disability coverage is appropriate. Often group coverage only protects up to 60 percent of your income (and sometimes even less) up to a limit. Additionally if your premiums are paid by your employer on a before-tax basis, you will be taxed on any benefits you receive. Private disability insurance on the other hand can be paid with after-tax dollars, which might allow you to receive benefits tax free.
This material is for informational purposes only and is not intended to act as specific advice. Please talk to a financial professional prior to investing and a tax advisor for tax advice. Benefit guarantees for insurance are subject to the claims paying ability of the insurer.