Paula Christine's son just started a new job, and he had a pile of benefits paperwork dumped on him. Today, Paula welcomes Angela from Bridged Benefit Solutions to break it all down.
A phrase like "accidental death and dismemberment" sounds terrifying. But as Angela explains, it's a useful add-on to a life insurance policy that creates additional benefits for your loved ones should the unthinkable happen to you.
We also spend some time on life insurance policies, breaking them down as employee benefits and whether or not they can be portable if you leave your job. Also, should you have children or grandchildren, why you may want to purchase a policy for them. It's an awful thing to think about, but we've all seen the terrible stories behind GoFundMe accounts in times of tragedy.
What about short-term vs long-term disability? Ideally, you should have both, but Angela explains the differences between them. And Paula explains how this ties into financial planning and how it can interact with saving for an emergency fund.
We also talk about hospital policies, accident policies, and critical illness policies. Angela gives some examples of how these can pay out.
And what options do you have if you're self-employed, like Paula and Jon?
To reach Angela at Bridged Benefit Solutions, call her at 248-250-2420 or find her website at www.bridgedbens.com
If you have additional questions, email Paula Christine at Paula@PaulaChristine.com. You can also learn more online at www.PaulaChristine.com.
Paula: Hi, welcome to Beyond the Paycheck. I'm Paula Christine, and last week my son started a new position with a company and gave me a phone call about what all these things he had to sign up for in his employee benefits. And some were quite new to me, so I thought, it'd be a perfect time to talk to Angela from Bridge Benefit Solutions to go over what some of those choices are. So how are you today, Angela?
Angela: I'm great. Thank you for having me.
Paula: Some of the things I wasn't familiar with cuz I, being self-employed, I don't have a lot of those options. It was confusing for me to even answer some of those questions and I was really surprised that one of the things that he was offered was accidental death and dismemberment insurance, which I don't really understand why anybody offers that, but they do.
Why don't we just start with that one?
Angela: Okay. Accidental death and dismemberment sounds terrible. It's connected with the life insurance. So when I write it for my clients. I just connect it together so they don't have to elect separately. But you have to elect the life to get the accidental death and dismemberment.
And what that means is if you were to pass away in a manner that was an accident versus a natural causes, your benefit doubles. So if my employer offers me $20,000 of life in AD&D, and I have a heart attack, my beneficiary will receive $20,000. If I have the life A &D and I get in a car accident and pass away as a result of the car accident, my benefits doubled and I'll get $40,000.
So it's actually a very nice benefit. It's just has an unfortunate name. It's usually minimal though, like pennies to add that to your benefit. So it is a nice benefit if something is to happen.
Paula: So he also was offered life insurance, which I did tell him to sign up for, because most people don't have enough life insurance and don't purchase policies on their own.
So that's a great benefit. What happens though, if you sign up for that life insurance and you leave that employer? Can you take it with you?
Angela: Most policies you can. There's either portability or conversion that allows you to turn it into an individual policy. Depending how the policy is written, you may need to fill out medical questions or you may not.
It just depends how that employer's policy is written. Personally, I always recommend you take the life and accidental death that your employer offers if they pay for some, which oftentimes employers will, and then if they offer you additional or voluntary or supplemental life, then if you need just a small amount, maybe purchase it through your employer.
If you are young and healthy, though, I always recommend that you go to your financial planner and purchase that because what happens is when you purchase it through your employer, they have what's called guarantee issue, meaning they'll give you a certain amount of benefit without any medical questions, and that amount depends on your group size.
If you work for a group of 20, It might be like $30,000. So I'll give you without questions. If you work for a group of a thousand, they may give you $50,000 or $60,000 without medical questions, but that means that there's some unhealthy people in that group and that's rated for that. So that voluntary life through your employer is an awesome benefit if maybe you've been diagnosed with cancer, and you're in remission, or something's happened in your past, or you're uninsurable. But if you are young and healthy, I would say if you're gonna buy that additional life, go to your financial planner and then you don't have to worry about that being attached to your employer.
Paula: Yeah, I always recommend people buy, at minimum, term insurance. Especially if they're young and healthy because you can take that with you no matter where you go. And sometimes the insurance through an employer is not portable. I know I was just talking to a client on a different manner and he was saying that he's got $200,000 in life insurance and I'm like, that's great. $100,000 of it is through your employer and the other one you bought through your employer, but do you even know if it's portable? It's great you have $200,000, as long as you're employed.
Angela: And what happens? Maybe you work there 20 years, you become sick, right? You get diagnosed with something, you're uninsurable, you leave that employment. Now you're unable to go on and get insured somewhere else. Yeah, I, I do recommend to do it outside of your employer.
Other than, like I said, that maybe that $20,000 or $50,000 just to cover some basic expenses. But if you're using it as part of your financial planning and looking at larger amounts, I would do that outside of your employer.
Paula: And you can also get that insurance on your children and your spouse too, through your employer, even if it's just a little bit in case something happens and you have that emergency money.
Angela: Correct. And I will tell you, there's nothing worse than going out and doing open and enrollment meeting and selling people, $10,000 coverage on their children. It's a terrible thought. But I've been on the other end too, where something's happened and we've been able to provide to them with that check. It's terrible to think about, but things
Paula: happen. I've seen it before, where people don't have the means to properly bury their child and they're reaching out to family members and friends to help, but those small little policies will help take care of that.
Jon: How many times have you seen something like that on a GoFundMe page? It's just awful.
You read this terrible story. Yeah.
Paula: You see it all the time.
Angela: Yeah, and you could do it through your employer to get like $10,000 on your child. It's gonna depend on your policy, but it's maybe like a $1.30 a month. It's inexpensive in the grand scheme of things versus like you said, being in a position where you're putting up a GoFundMe.
Paula: Yeah, I always recommend that clients get a policy on their children too, as soon as they can when they're younger, when they're born. You never know what's gonna happen in life and it makes them, or allows them to have life insurance stuff happens. And I know personally I have policies on all of my children. I should probably get it on my grandchildren too.
Angela: Yeah, that's actually great advice. So I'm in a position where I'm healthy, but my dad passed away of a heart attack when he was 56, and they look at that too. So if you have a parent who had cancer or heart condition, I'm no longer at preferred rates.
Luckily we got it. We were younger before that happened, but once that happens, that's now on my record also.
Paula: Yeah. And it doesn't matter that you take care of yourself. You may not even have a heart attack. But they have to look at your family history.
Angela: Yep. If one of your parents or a sibling or something has it, it's now becomes part of your medical record.
Paula: Let's move on to a different subject. So we've talked about this before. I know we did a podcast early on about disability insurance, which a lot of people don't understand, but really, truly need it. If it's available through your employer, it's something that you should definitely sign up for. So just talk briefly about what short-term and long-term disability covers.
Angela: Really your ability to earn an income is your biggest asset.
So what disability does is covers that asset if you are to be disabled. For, as the name says, short term disability usually is a three to six month period. And then long-term would kick in either at three months or six months, depending on what the short-term policy was. You can have one without the other.
An ideal world you would have both. Oftentimes we'll see employers pay for this, which is a huge benefit, but if you have the opportunity to purchase it and your employer does not provide it, Definitely something you wanna look into. It's all age rated and depends on your income, but if something were to happen, say I have appendicitis and I end up in the hospital for three or four days and then I'm out for three or four days and it turns out I can't work for two weeks. This would pay me a portion of my income while I was out. Short-term covers pregnancies, but if you buy your own, it won't cover if you're already pregnant. So that's really important for, like you said, a young female who may be thinking about having a family. You have to purchase the insurance before you're pregnant.
Paula: My daughter-in-law, actually, she changed employers right in the middle of her pregnancy and they covered her.
Angela: So if the employer pays for the coverage, they will, if it's employer provided. If the employer offers it as a benefit. So if it's voluntary, then it won't cover it, but yeah, if you're just working for an employer and they cover it, then it will.
Paula: Well, that's good to know.
Angela: Yeah. Yeah. There's no pre-existing conditions if you're working, if it's just an employer sponsored program.
Paula: Okay. So the employer pays for it, no preexisting conditions. If you have to pay for it on your own, then you have preexisting conditions.
Angela: Correct. Because they figure if you're paying on your own right, you're choosing when to buy it, so you're more likely to have some adverse selection there.
The other piece that's important to remember it's usually only a portion of your income, so it's usually between 60% and 70% of your income. If your employer pays the premium, then your benefit is taxed. If you pay the premium, then your benefit is not taxed. So the government's gonna get their money one way or the other.
They're either going to get it when they pay out your benefit, or they're going to take it from your premium. You pay your premium with post-tax dollars and then your benefit is not taxed. So that's huge. If you're getting a 60% benefit and then it's taxed, you could be looking at 40% of your income.
Paula: Yeah, I know. When you think about if you're planning on becoming pregnant or having to take time off to know, have knee surgery or something like that, at least you know that you're gonna get a portion of your income taxable or not. That's a great benefit to have when you think about going off for four to six weeks and not having any income coming in will likely put you in a budgeting nightmare.
Angela: Yeah, it's huge. And then the long term, would cover something longer term. So either at, it would start at three months or six months, depending when the short term ended, and then go until you were no longer disabled or until you were eligible for social security.
Paula: So what other kind of benefits are out there other than health, dental, and vision?
Angela: Yeah, so there's a lot of plans. AFLAC is the biggest carrier right there. There's a lot of companies out there, but AFLAC does a fantastic job of marketing and they offer some different plans. Sometimes they're called work site benefits or supplemental benefits, and there's three kinda main policies you see when it comes to those.
So one is a hospital policy. And what happens is if you're hospitalized, it pays a flat benefit. And again, it depends on the policy. For the sake of example, let's say it pays $500 the day you're hospitalized and then pays you maybe another two or $300 a day as long as you, you remain hospitalized. So what that's nice for is maybe you have a really high deductible health plan, maybe you have, a $5,000 deductible health plan and you think, if I went in the hospital I might as well not have insurance cause I don't have $5,000. So then this hospital benefit would kick in and would give you some money to pay that deductible. So it's a nice way to fill that gap. One of the other policies is an accident policy, and I would say this is probably the most popular.
So an accident policy pays like a menu of benefits and again, each policy's different, but you'll get a menu up front and be like, if you have to get. An x-ray because of an accident, it's $50. If you have to have surgery because of an accident, you get a thousand dollars. It goes through all the way through an ER visit.
We see that a lot because you can purchase that on your spouse and children. I see a lot of parents who have kids who play sports use that. And they almost always get their money back.
Paula: I know my, I have friends, I swear to God, their child, I think he's probably been in the hospital. He seems to get injured every sporting season.
And he plays a couple different sports. It's Very good athlete, but always seems to get injured. They probably would like that coverage.
Angela: It's great coverage for a lot of different scenarios, but I know people who have younger children who play sports love it. And then the third policy we see a lot is it's called critical illness.
And each policy outlines it's usually about seven specific diseases. So it'll be maybe heart attacks, stroke, cancer, and if you encounter one of those health things, then you'll get paid a flat lump sum. So it could be $10,000, it could be $20,000, just depending on the policy. I will say five years ago, if we'd had this conversation, I would've told you that I don't believe in these coverages, but I've seen enough people now use them that I've totally changed my mind on these.
I've, I've seen someone with a heart attack, owe $7,000, or I'm sorry. He owed $5,000 deductible. Got $7,000 payment from his critical illness policy. So was able to pay that off, have some extra money, pay some extra bills, get help to help him get better. So there really is big value as we see insurance deductibles go up in some of these policies.
Paula: But if we add all of that up I would imagine it would get expensive.
Angela: It can. Yeah. So a general rule is you never want to pay more than about two hours a week for your coverage. So whatever your weekly amount is for that coverage, it shouldn't exceed two hours of your pay.
Paula: Oh, that's good to know that. Including your health insurance, which can
Angela: Correct. Yeah. I'm sorry. Just for those, yeah, just for those supplemental things. Okay. Yeah, and I normally don't recommend somebody by all three. I look at their situation, like if you were hospitalized, would you need that money to pay the deductible?
Do you have kids who are likely to get in an accident? Did your dad have a heart attack young and there's a chance that you will? And also that critical illness might make more sense. So I usually, yeah, I don't recommend they stack all three. We just think through their situation and where their gaps are.
Paula: And so all of those coverages that we talked about other than maybe life insurance being portable, as soon as you leave your employer, those coverages are gone.
Angela: Not necessarily, it depends how they're written. Again, like Aflac will sometimes write individual policies and then you can take them with you and just do a direct bill. So really the only value there is the payroll deduction when you're still at your employer, but then you can take the policy with you.
Paula: What are options out there for someone like myself and Jon who are self-employed? I know we both have disability insurance long term, but are any of those other things available for us?
Angela: They are. It depends on the carrier. Each of them has different, but most companies have individual policies where they can sell to one person.
And then group policies where they'll need, a minimum of three or four, just like with other benefits, your group coverage is gonna have better coverage cuz you know, you're putting more people together in the group. But yeah, the individual plans are usually available to everybody.
They're not always cost effective. When you buy an, on an individual basis, just depending on your age and what you're looking to do. But they are available
Paula: A bummer because there is a lot of self-employed people out there and. We have limited options when it comes to protecting ourselves.
Angela: Yeah, I agree. And the other option, and it, this is not for everybody, but it, it's an option out there is to self-fund that yourself. So if I get in a position and they tell me, okay, your short-term disability is gonna be a hundred dollars a month if I can get to a point where I'm diligent about putting aside that a hundred dollars a month, I still run a risk that I get disabled before I put aside six months of premium. But there, you can put that aside yourself. The majority of us, though, myself included, just that aren't that disciplined to do that.
Paula: Depending on what you make and what your other expenses are, that could be difficult to even get to that point to fund.
You should have three to six months of your expenses in an emergency account anyway, so that if you did have a short term disability, that would help. But it would not help in the long term. I know I have enough in savings to cover me for three months, and then I have another savings account that covers me for a little bit longer.
I have two different ways that I do manage my money, but I do have a long-term disability policy. That kicks in after 90 days.
Angela: It's tough. If you said, should I buy one or the other? If I can only afford one? And it just depends, right? If you're someone who's not gonna make it a week without that disability, I would suggest looking at the short term, cuz it's gonna be less expensive, it's gonna get you through those six months.
In the grand scheme of things, you're probably more likely to have a short-term disability than a long-term. But that long-term is right, could be for the rest of your life. So that's important too. So if you're someone who could get through those three to six months, then maybe look at just the long term if you wanna buy one or the other.
Paula: Yeah. Personally I would think long term and just build your emergency account. Would be my opinion. Because depending on what happens too, not being able to work and then depending on social security disability to get you through for the rest of your life, it's. It's just not an option in my realm, I just don't even think that. Talk about never, ever getting ahead, ever.
Angela: No, I agree. And I, it could take years for social security to kick in. So who, how are you paying your bills in the meantime to get approved?
Paula: Yeah. You're likely to lose everything. Anyway, great information.
I should have had my son call you instead of me.
Angela: Always happy to talk benefits.
Paula: I've learned a lot because, I just don't have those options, so I wasn't really familiar. With a lot of what, a lot of those covered and there are some good benefits inside of there.
Angela: Yeah. And I think it's important that employees understand what they're being offered.
I think employees don't always see the value. And employers are oftentimes paying out a lot of money for benefits. But if the employees don't value it or don't understand how to use them, it doesn't matter how good their benefits are,
Paula: I think it's that they don't understand it. And then all I see is this is coming outta my check.
This is coming outta my check. And most people live paycheck to paycheck anyway. So I think when you think about that's never gonna happen to me. I don't have to worry about it until it does happen to you. And then you wish you would've. Yes. But. Yeah, I get it. We're all human and we're trying to do the best we can.
Angela: Yep. No, and I've been, I've been there young and starting out and you just don't have the money. It's just not an option. So you're just hoping for the best.
Paula: So if anybody wants to reach out to Angela and discuss benefits, how can they get ahold of you?
Angela: They can gimme a call 248 250 2420. Or my website is www.bRidgedbens.com.
Paula: Thank you so much. I did learn a lot today, so if anybody would like to reach out to me, they can reach out to me at paula@paulachristine.com or check out my website at paulachristine.com. Thanks again, Angela.
Angela: Thank you.