How to Navigate Life’s Hard Questions During Open Enrollment

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Open Enrollment season is upon us, and with it the yearly opportunity to make sure we’re taking advantage of all the workplace perks we are entitled to. This means checking that we’ve signed on to get tax breaks on commuting, health care costs, and child care. It also means being sure we’re enrolled in our retirement accounts so we can build wealth to secure our future. 

Woo hoo! Less taxes, more money!

But once we get past the no brainers, the questions get harder. In fact, they force us to contend with our own mortality. For a lot of us, signing up for workplace benefits is the first time we consider things like life insurance and disability insurance and it forces us to confront some of life’s hardest questions:

What will happen to my loved ones if I die?

How would I support myself if I could no longer work?

Would my partner/children/parents be taken care of if something happened to me?

I know. This feels a little dark. But at the Financial Gym we specialize in helping people have hard conversations, and this is no exception. Here are some of the questions you should ask yourself to decide which benefits you should enroll in, and how much insurance you need.

How Much Life Insurance Do I Need?

Dying is pretty expensive, and if we haven’t prepared for these costs, our families will have to foot the bill. Some of us have enough in assets to cover these costs or have families for whom the $20,000 to $30,000 it costs to cover end of life needs is a drop in the bucket.

The rest of us need life insurance.

If your workplace offers life insurance, you probably have one or two options available to you. The first is basic coverage. A basic life insurance plan typically has a death benefit of $20,000 to $30,000 and is meant to cover end of life needs like cremation, burial, and a funeral. This is often free to the employee, or very low cost. 

If it is free, then this is a no brainer. If there is a cost, it is often under $10 per month, and so you likely want to take advantage of it. You will keep the insurance as long as you are employed with that company, but you will lose the coverage if you change jobs or otherwise stop working there. (This is sometimes referred to as a “separation of service.”)

On top of that, many employers offer the option to sign up for supplemental insurance. This is pretty much what it sounds like: it supplements your basic life insurance plan and provides your beneficiaries with more money as a death benefit when you die. 

Typically this will be a little more costly than basic coverage, and how much you pay will depend on your health and how much you want your loved ones to receive if you pass away. This one is also a little more involved. You’ll have to fill out a health questionnaire and answer questions about your medical history and your family’s medical history. You will also have to designate how much you want to leave to loved ones in the event of your death. In some cases you can designate up to a certain dollar amount without having to go through a doctor to get a physical. For instance, you may be able to sign up for up to $150,000 without having to do a comprehensive medical exam, but if you want to have a larger death benefit, you’ll have to go through a medical professional. 

Again, you will keep this insurance as long as you work with your current employer, but once you part ways you lose the policy. If you think that you will change jobs, you may want to get a policy independent of an employer so you know that you are covered even if your life changes. If this is the case, you can seek out a low cost term life insurance policy that covers the line items mentioned above. You can check PolicyGenius to get quotes.

Who Should Sign Up for Disability Insurance?

In addition to life insurance policies, many employers offer disability insurance. Disability insurance protects you and your partner or dependents from the loss of your salary if you experience an illness or injury that prevents you from working. 

Different policies have different payouts, and you should read the fine print to see what yours offers, but in general they each cover a percentage of your salary for a certain period of time. Short term disability insurance, for example, may cover 66% of your salary for a period of up to 6 months. Long term disability insurance may cover 50% of your salary for a longer period of time, often 2, 5, or 10 years, and in some cases up to retirement. 

Short term disability can also be a part of your family planning when you are figuring out how you will cover costs after having a child. You will need to check with your insurance provider, but in many cases you can receive short term disability after you give birth. This can range from 6 to 12 weeks, and how long you have may be different depending on whether you had a vaginal birth or a C-section, and whether there were complications that impact your ability to work afterwards. Short term disability does not cover paternity leave.

Disability insurance is often much cheaper through an employer group plan than through a private policy. It is a good idea to get disability insurance if you would be negatively impacted by the loss of your salary. That means it’s a good idea for most humans. If you are self employed or your employer does not offer a low cost disability insurance policy as a benefit, you should get a quote and sign up through PolicyGenius.

Are Life Insurance and Disability Insurance worth the cost?

It can be hard to part with our hard earned cash, and more so when it’s hard to imagine when the thing we’re paying for will come into question. However, one of the reasons we pay for insurance is for peace of mind. We shell out money for car insurance so we can protect ourselves from getting sued or being car-less after an accident. We pay for homeowners insurance in case there is a natural disaster or other unforeseen circumstances. We pay for renters insurance in case we are robbed or our possessions are destroyed somehow. 

It’s no different with life and disability insurance. At the end of the day, in the best case scenario, all the money we spent on insurance is a total waste of money because we never needed it in the first place. If this is the case, it’s because we’ve avoided the worst of what life could have thrown at us, and we are extremely fortunate people. More often, however, we will experience some kind of adversity in our lives and having prepared for the worst case scenario will give us peace and keep the people we love protected.