Open enrollment season is the time every year when employees can opt in to different kinds of insurance offered through workplace benefits programs.
When worst-case scenarios happen, insurance helps cover the cost of unexpected expenses, so you and your family have a better chance of avoiding financial hardship.
Many workplaces offer health insurance but also benefits like life insurance, pet insurance, and disability insurance that you can buy during open enrollment season.
There’s generally only one time of year when you can opt in to different kinds of insurance offered by your employer, and it’s coming soon. To get ready for open enrollment season, here’s a look at the types of insurance many employers are offering these days, how each kind can offer some protection from financial hardship if an accident or emergency happens, and potential costs.
Health insurance: Am I fully insured if I have a health insurance plan through work?
If you have a full-time job with a mid- to large-size employer, chances are your workplace offers health insurance, and your employer will ask you to confirm what you want for health coverage each year. But even when you have health insurance, you can have significant out-of-pocket costs for medical care.
Let’s say you have a high-deductible health insurance plan through work. If your plan has a $1,500 deductible, that means you would pay all your medical bills for the year until you reach $1,500 in medical expenses, and then your medical coverage would kick in. After your coverage kicks in, you still may be on the hook for paying a percentage of medical costs which could cause financial hardship. Supplemental health insurance can cover some of those expenses.
Active athletes can be good candidates for supplemental health insurance. After all, one broken arm from a crash on a snowboard run through the halfpipe could rack up several thousands of dollars in bills.
Ask yourself how you would pay your deductible if an accident were to happen. If you’d have to beg, borrow, or “steal” from your savings, consider boosting what you have saved in your emergency fund, or talk to a financial professional to see if supplemental health insurance makes sense for you.
Common types of supplemental health insurance
Supplemental health insurance can come in many forms, and it’s possible your employer offers more than one. You still would rely on your employer-provided plan for primary coverage, but supplemental health insurance can provide a little extra cash in an emergency:
Accident insurance
In the event of an accident, this provides your family with help paying bills. Double check what types of accidents your policy would cover. A fly ball to the face from playing softball might count. A broken ankle from a rough landing after skydiving might not.
Cancer insurance
Coverage would include costs associated with treatment if you are diagnosed with cancer.
Hospital indemnity insurance
Some workplace health insurance plans don’t cover costs of a lengthy hospital stay. There are also limits to hospital indemnity insurance, but the cash payout can defray costs of an extended stay and go toward paying household bills while you are in the hospital.
Critical illness insurance
Not to be confused with long term care coverage, critical illness insurance provides cash, typically paid in a lump sum, to help you and your family in a time of need. Check which conditions or illnesses are covered and which aren’t so there are no surprises.
Life insurance: How much life insurance do I need?
Some employers offer life insurance as a standard benefit, without you needing to opt in. But the death benefit paid to your survivors if you should pass might only equal one year’s salary. That might not be enough for your family to make up for your paycheck.
There are many benefits of life insurance, but one of the most compelling reasons to get it may be the sense of financial security it can give your family if the worst should happen. Among parents, 2 in 5 say they are barely or not at all financially secure,1 according to the trade association LIMRA, making it important that the surviving spouse have financial support if the other parent should pass.
To calculate how much life insurance coverage to buy, estimate how much your survivors would need from your paycheck over the length of time you had expected to be around. So for example, a couple in their 50s may have built a financial plan based on the assumption they would both retire at age 65. Each partner may want to buy enough life insurance coverage equal to one year’s salary multiplied by the number of years left until retirement, so the surviving partner may have a chance of fulfilling that financial plan if one partner dies.
Some insurance agents suggest purchasing 10 to 15 times your current salary,2 but again, a financial professional can help you determine whether that number makes sense.
Even if you are single, you may have debts and expenses that your loved ones would need help covering while they settle your estate. You may have heard of the DIME method for determining how much life insurance coverage you need. It stands for debt, income, mortgage, and education. In other words, you would purchase enough life insurance to cover:
Outstanding debt, including credit card debt
Your income or salary, so that roommates, partners, or children aren’t struggling to pay household bills without it
Mortgage payments or rent payments until survivors decide whether to keep your home or move
Education expenses for yourself, like any remaining student loan payments, but also college funds for children, if the surviving parent would have trouble saving for a child’s college expenses
Short- and long-term disability insurance
Disability insurance helps you recover part of your income if an injury or illness leaves you unable to work. Sometimes this benefit is paid by employees and sometimes by employers. Often when your employer pays for disability insurance, they may offer additional coverage for a fee. To decide if this supplementary coverage is for you, consider if you’ll be able to cover the rest of your salary if you were unable to work.
Check the terms, but short-term disability insurance may only replace a portion of your income for a few months, while long-term disability insurance would apply to longer periods.
Pet insurance for Fido and Fluffy
Pets are like family members. As they get older, their medical expenses can be as pricey as medical bills for humans.
The good news is, it’s becoming more and more common for employers to offer pet insurance. Nearly half of employers in a recent survey said they’d offer it in 2021, and seven in 10 employers said they planned to offer it in 2022.3
Still think it’s not for you? Nearly 4 million cats and dogs were insured in 2021, according to the North American Pet Health Insurance Association.4
How much will it cost?
The greater the benefit or payout, the greater the monthly premium is likely to be. Prices also are influenced by a variety of factors. Budget for costs that are equivalent to paying 50 cents to $3 per day for extra insurance coverage.
The average monthly payment for pet insurance for a dog in 2021 was $48.66,5 according to the North American Pet Health Insurance Association. Some may see that as a bargain, since treating some pet illnesses can cost hundreds if not thousands of dollars.
Think about the extra insurance benefits you’d like to have, so you’re ready when open enrollment season arrives.
Things to consider
Do you know how you would pay your healthcare deductible if an accident sends you to the hospital?
If the worst were to happen, how would your survivors cover household expenses in your absence?
Do you have student loans, a mortgage, or credit card debt that would need to be paid by your survivors if you pass before that debt is paid off?
Could you pay for your beloved pet to have surgery if Fluffy gets hit by a car?
Do monthly premiums for extra coverage fit within your budget?
Transamerica Resources, Inc. is an Aegon company and is affiliated with various companies which include, but are not limited to, insurance companies and broker dealers. Transamerica Resources, Inc. does not offer insurance products or securities. The information provided is for educational purposes only and should not be construed as insurance, securities, ERISA, tax, investment, legal, medical or financial advice or guidance. Please consult your personal independent professionals for answers to your specific questions.
