Because you never know when the day before is … the day before.
Live for today, plan for tomorrow. That includes knowing your workplace insurance benefits so you can use them if you or your family need them.
I pondered this question recently so I dug out my employee benefits package to see how things shake down. Overall I thought it was a rather comprehensive plan (which I am very fortunate to have). I reached out to LSM Insurance (affiliate) to get their professional take.
Our basic coverage includes the following:
- Basic life insurance
- Basic AD&D (Accidental Death & Dismemberment) insurance
- Long-term disability coverage, and
- Business travel accident insurance.
Basic life insurance
This benefit is 100% employee paid. For this reason, should I leave our organization (or the organization leaves me) I also have term life insurance to provide some benefits to my wife. We figure we need at least benefits coverage to pay off all outstanding debts and cover lost income for a few years. We have decided that amount should be $500,000.
Our workplace premiums provide a death benefit of 1.5 times our annual salary to a maximum of $1 million. This amount is paid to my designated beneficiary in the event of my death from any cause. Our workplace basic life insurance coverage declines after age 65, while still employed. Reduced basic life insurance coverage is however available upon retirement.
There’s also an option to purchase additional life insurance coverage, again 100% employee paid, but I haven’t taken advantage of this given we both have existing term insurance outside work.
Typically, I would advise couples and people with a mortgage and other debts to have enough life insurance to pay off their mortgage and outstanding debts plus at least one year salary. This will allow their beneficiaries to be debt free and continue to live in the style they have become accustomed to living. The extra money could be invested to make it last longer than a year or at least give the surviving spouse time to find another source of income without falling behind on household expenses. The loss of a loved one is a tragic experience. Adding a load of debt and the strain of less money coming in to this tragedy could be too much for the survivors to bear. They could end up losing their home and maybe even need to rely on social assistance to make ends meet. Mortgage insurance isn’t enough – that only pays off the house, leaving all of the other expenses for the surviving spouse to worry about.
This benefit is 100% employer paid. The benefit is 1.5 times our annual salary equal to the basic life insurance benefit. In addition to my basic life insurance, these benefits are paid to my beneficiary if I die within 365 days as a direct result of a covered accident. If I suffer from certain loss(es), as a result of an accident, then benefits are also paid up to 100% even if I don’t die.
Coverage is also reduced over time, after age 65, on the same schedule as basic life insurance.
AD&D coverage is not available upon retirement.
Most employers offer AD&D coverage. The amount of the policy is generally based on your salary, sometimes up to twice your annual earnings, with the option to buy additional coverage. Your benefit package should outline exactly how much more coverage you can buy and how much it will cost. Plans vary from one company to another, and depend on the size of the company. Smaller companies typically provide smaller benefit packages. In the case of dismemberment, the insurance policy pays a flat amount for a lost leg or arm. Some policies also cover the loss of fingers and toes. Since Worker’s Compensation covers accidents on the job, most insurance policies will pay out no matter where you are or what you are doing when you lose your limb. I’m not a huge fan of these plans as the chances of an accidental death and dismemberment are relatively small. Adequate life and disability coverage is a better option.
Long-term disability coverage
This benefit is 66.7% employer paid and 33.3% employee paid. The qualifying period for the long-term disability benefit coverage is 15 weeks OR following expiration of our sick leave benefits, whatever is greater. LTD provides 75% of our monthly pre-disability earnings for employees with >4 years of employment (66.7% for less than four years).
Under our plan, employees are considered totally disabled when continuous disability results from an illness or bodily injury that renders the employee physically or mentally unfit (i.e., unable to perform the essential duties of normal occupation). This seems pretty standard. In my opinion, this is rather strong coverage because our waiting period to determine total disability is 24 months.
Any take LSM?
Many companies don’t pay for long-term disability insurance. Employees are typically required to pay the entire cost of the premiums themselves, if they want the coverage. Buying their own policy may be a better choice because they might be able to get a lower rate than what the company provider offers. This is one type of coverage that can’t be bought through a spousal plan. A standard waiting period on an individual disability policy is 90 days shorter waiting periods are available but at a significantly higher cost. The biggest financial risk is a long-term disability.
Business travel accident insurance
This last benefit is 100% employer paid. This coverage works with the AD&D-type benefits for serious injuries while travelling on business. As an employee, we are automatically enrolled for this coverage on our first day of work. Benefits are payable if I die while travelling anywhere in the world for business. There are also maximum benefits payable for rehabilitation, family transportation services, and other benefits should I be injured while travelling and/or need medical care.
Our business travel coverage is not available upon retirement.
If you plan to leave the country, even on a short trip to U.S., you should get the best travel insurance you can afford. Your plan should include health, life and disability coverage to help you avoid huge bills such as hospital costs or medical treatments. Even minor treatments can cost a bundle. If you are taking a plane, you may want to look into flight cancellation, lost luggage, document replacement and trip interruption. When travelling for business, your employer should provide your insurance coverage because if anything happens, he will be responsible for any and all expenses you incur, including lost or stolen equipment and personal liability.
LSM summary – anything else you would recommend and why; closing thoughts?
Company benefits rarely provide insurance for children, so you may want to look at a children’s rider or an individual policy. Permanent life insurance plans for children allow the insured to crystallize their current age for benefits – and can be paid up in a limited number of years.
But by far the biggest mistake people make is not having enough coverage. Consider getting a free quote and perform a needs analysis to ensure you have the right and appropriate coverage.
I am very fortunate to have the benefits I have above including the extended health care coverage that I didn’t discuss today. That’s an article for another day. I want to thank LSM insurance for their industry perspective.
Have you looked at your workplace insurance benefits lately? What are you or not covered for? Do you know?