There are a number of insurance coverages that could be offered to you through your employer in the form of employee benefits. It’s important to understand what is available to you and the value of these benefits. Your employer may be able to offer you lower premiums than you could find on your own, or they may even choose to offer some coverages at no cost to you.
Health insurance is one of the most important employee benefits a company can offer its employees—but it can also be one of the most complicated. The paperwork for picking your medical plan will likely be full of unfamiliar insurance terminology, but here are a few of the basics:
- Premium: The price of an insurance policy. Typically, your company will cover some of that premium, while you’ll pay for a portion out of your paycheck. Some companies will pay the premium in full.
- Deductible: The amount paid out of pocket for medical expenses by the insured before the insurance company starts to cover costs.
- Copay: A fixed payment for a covered medical expense, paid by the insured each time a medical service is accessed, such as a doctor visit. Also known as a copayment.
- Coinsurance: The percentage of health care bills the insurance company will pay for after the insured has met the deductible. For example, your insurance company may pay 80% of costs after the deductible is met, while you will be responsible for 20%.
- High-Deductible Health Plan (HDHP): A type of insurance plan that has a higher deductible than most in exchange for a relatively low premium. You’ll typically get standard preventive care for free—such as an annual physical—but any bills beyond that you’ll have to pay out of pocket until you hit a high amount.
- Health Savings Account (HSA): An account that lets you save pre-tax dollars to help pay for out-of-pocket medical expenses; your employer might even help fund the account with its own contributions. But there are annual limits to how much you can contribute to an HSA—currently $3,350 for an individual—and you can only open one if your current health plan is labeled an HDHP.
- Flexible Spending Account (FSA): An account similar to an HSA in that it lets you save pre-tax money each year from your paycheck to cover health-related costs, but you’re not required to pair it with an HDHP. But unlike an HSA, the contribution limits are lower, at $2,550; it’s mostly “use it or lose it,” meaning you can’t roll over the funds to use for the following year; and you can get an FSA only if your employer offers one.
- Health Maintenance Organization (HMO): This type of health plan is typically considered one of the most affordable options, thanks to its low premiums. However, an HMO will typically only cover services offered by health care providers that fall within their network. So you’ll want to research which medical service providers in your area are included in your HMO network prior to receiving care.
- Preferred Provider Organization (PPO): If you’d like more flexibility when it comes to choosing your doctor, you may want to consider choosing a PPO. This is a type of health plan that allows you to see whichever doctor you like, but you’ll pay more out of pocket for using providers that don’t fall within their network. PPO premiums are, in general, higher than those for HMOs.
Young and healthy people rarely believe a physical ailment will keep them from earning a paycheck, but think about this: A 20-year-old has a one in four chance of becoming disabled before they reach retirement, according to the Social Security Administration.
Disability insurance pays out a percentage of your salary if an illness or injury prevents you from working. There are generally two types: short-term, which typically lasts up to six months; and long-term, which can last for a number of years or up until your retirement age, depending on the policy. They’ll generally cover 60% of your income for the time you’re out, and you typically pay for a portion of the premium out of your paycheck.
If your employer offers disability coverage as a part of its employee benefits package, it’s worth looking into because your company can likely take advantage of group discounted rates. In some cases your employer might even offer some coverage at no cost to you.
Though life insurance is an important asset for future financial security, many employees don’t realize its importance. Envision the debt and financial responsibilities that loved ones would face in the event of your death. How will your family support themselves? Who will have the responsibility of paying your debt? Life insurance can help relieve these burdens.
Employer-sponsored life insurance can be offered in a variety of ways via an employee benefits package. Employers may offer a term policy, permanent coverage or both. Cost-sharing also varies, as some employers cover the full cost, some require employees to pay the full premium and others split the cost with employees.
A common scenario is an employer offering a group-term policy at no cost to the employee, with a fixed coverage amount, or an amount that is a multiple of annual salary (usually one to five times annual pay). Group-term policies often end when an employee leaves the organization (or dies), but employees may be able to convert it to a permanent policy or renew it upon leaving.
Many employers who offer such a group-term policy also offer additional voluntary coverage options, in which the employee pays the full cost but still realizes the benefit of group premium rates and pre-tax payroll deductions.