10/15/2014 03:28 pm ET Updated Dec 15, 2014

Are You Making the Most of Your Employee Benefits?

Dear Readers,

Do you usually ignore the Open Enrollment period for your employee benefits? While it's easy to feel that once you've signed up everything is covered, times and benefits change. So each year, usually in the fall, most employers offer the opportunity to modify your choices. To make sure you're not missing out, here's a list of benefits you should review -- and why.

Health insurance -- Do you have the right coverage at the right price?
You never want to be complacent about health care, so double check that you have the most comprehensive and cost-effective insurance coverage your employer offers. Here are some things to look for:

  • What are your current choices? For example, you may be able to choose between a PPO, which usually offers more flexibility, and an HMO, which often is lower cost.
  • As you compare plans, pay attention to what is -- and isn't -- covered. (Preventive care? Prescription drugs? Physical therapy?) Is there a network that affects your choice of doctors?
  • On the cost side, look beyond the premium. While a lower-cost plan may catch your eye, it's important to compare annual deductibles (the amount you pay before insurance begins), co-payments (a fixed amount you pay for a service), co-insurance (the percentage of covered costs you're responsible for after you meet the deductible), and out-of-pocket maximums (the most you'll have to pay before insurance pays 100 percent). A lower premium might actually mean higher out-of-pocket expenses.
  • Re-examine your family needs. Has anything changed? A new baby? A health issue? You can use last year's health care expenses as a guide, but it's smart to look ahead as well.
  • Do you have dental and vision coverage? They're generally a good deal.
  • Consider a health savings account (HSA) or flexible spending account (FSA), if available. Both allow you to set aside pre-tax dollars to cover future medical expenses. (Realize, though, that all but $500 of your FSA contributions are 'use or lose' each calendar year.)
  • Finally, coordinate with your spouse. If you have a choice between employer plans, choose carefully. You might even be able to mix and match. For instance, one plan may offer low-cost vision coverage that the other doesn't.

Another thought: If you work for a small company, the options available through the Affordable Care Act may actually offer more. So be sure to do your research and look at all the choices available to you, through your employer or otherwise.

Life insurance -- How much do you need at this point in time?
Group life insurance is a good news/bad news story. On the plus side, as an employee your basic coverage is generally free or low-cost, and you're not required to undergo a physical exam to qualify. Signing up is a no-brainer.

On the down side, the basic coverage is probably not sufficient -- especially if you have a partner or young children who depend on you for financial support. In that case, compare the cost of purchasing supplemental group coverage to a private policy. Your group rates will likely be lower, but the policy may not be portable -- that is, you may not be able to take it with you if you leave your job.

To quickly estimate how much insurance you need, use the 4 percent rule. A $1 million policy can generate about $40,000 a year in income. A $2 million policy can generate about $80,000 a year. Calculate your family's needs, add up your savings and purchase enough insurance to fill the gap.

Disability insurance -- What will you do if you can't work?
Just in case you're thinking that disability insurance is a waste of money, you should know that over 1 in 4 of today's 20 year-olds will become disabled before they retire. In other words, unless you are confident that you will be fine without an income for an extended period of time, you need to have disability insurance.

As you review your choices, check to see if your company offers just short-term (up to two years) coverage, or long-term as well. Although long-term coverage will add to your expense, it can be a great addition to your long-term financial health. Group rates are generally very attractive for both.

Long-term care insurance -- Will you need it?
Long-term care insurance premiums are a long-term commitment if you start paying them too young. If your company offers long-term care insurance, check the premiums at different ages, the terms of the coverage and the portability of the policy. The most cost-effective time to purchase a policy is between ages 50 and 65.

Dependent care, domestic partner benefits, group legal services -- Are they available?
Large companies with robust employee benefits packages may offer even more. Check to see if your company package includes:

  • A Dependent Care FSA -- Similar to an FSA for health care, this allows you to set aside pre-tax dollars up to a maximum of $5,000 per year per family. One caveat: A couple is only eligible if both spouses work, are looking for work, or going to school full-time.
  • Partner benefits -- Some companies offer health insurance to domestic partners.
  • Group legal services -- An employer may also offer basic legal services for a low monthly cost.

While we're talking about Open Enrollment, I want to remind anyone with Medicare that October 15 to December 7 is your window of opportunity to make changes to Medicare Advantage plans and prescription drug plans.

Yes, it's a lot of detail, but think of it this way: A benefits tune-up this fall can be the best foundation for your finances all year round.

Looking for answers to your retirement questions? Check out Carrie's new book, "The Charles Schwab Guide to Finances After Fifty: Answers to Your Most Important Money Questions."

Read more at You can e-mail Carrie at This column is no substitute for an individualized recommendation, tax, legal or personalized investment advice. Where specific advice is necessary or appropriate, consult with a qualified tax advisor, CPA, financial planner or investment manager.


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