How to pick the right employer benefits plan for you

Every fourth quarter, your company's benefits department notifies you that it's time to make your annual insurance benefit elections. There are a variety of plans out there with varying employee contributions required.

These increasingly complex plans can leave you unsure of how to navigate through your options. How do you know you are making the best decisions for you and your family?

While every family's situation is different and the choices vary, here are a few things that you'll want to think about as you begin making your decisions.

Medical Insurance form, health insurance, employer health insurance
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Health insurance

It would be unusual—and atypical—to work at a large corporation and not avail yourself of available employer-sponsored health insurance coverage. While cost isn't everything, employer-sponsored plans certainly offer dramatic discounts compared to any coverage you can secure on your own.

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Add to the cost factor the ability of large companies to secure a product design unavailable to individual retail consumers and you are most likely going to stick with your group plan.

There also tends to be a greater level of support through group programs that are better equipped to provide claims service. Sometimes things go wrong, and when they do, it is unbelievably valuable to have the backing of your human resources department to help work with the insurer.

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Life insurance

While it is hard to make the case that you would be better off going outside of your company's benefits plan to purchase private health insurance, the same isn't always the case when it comes to your life insurance.

The exception to this would be employees with health issues that leave them unable to secure coverage other than through their employer's guaranteed issue program. Generally, a healthy employee may indeed find substantially lower rates through a retail insurer, so long as they are able to prove medical insurability.

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Additionally, since a younger employee is statistically more likely to change employers throughout his or her working career, there is the added concern of the portability of that life insurance when changing employers. While some group policies are indeed portable, it is usually an option available at a much higher premium, making this option cost-prohibitive.

From the insurer's perspective, there appears to be greater likelihood of adverse selection for those employees who would wish to retain their coverage. Meaning, there is greater likelihood that an employee is not considered healthy, which drives the need to retain the coverage.

Disability income insurance

One of the most overlooked insurance benefits tends to be income protection, or disability insurance. Most would agree that not having a regular paycheck would drastically change many families' lifestyles.

However, the amount of time and emphasis most employees and employers spend on this benefit is lacking. Disability is a statistically "more likely" event than death during your working years.This fact seems to be forgotten during the annual benefits enrollment process.

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Not only should you enroll for the maximum allowable coverage that your firm provides, but you should also supplement that coverage with an individually owned plan outside your employer's program. Many cutting-edge HR departments have caught on to the need to offer senior executives a supplemental plan that goes above and beyond what the employer's group plan offers.

They have also found that they can secure this coverage for their key executives at a steeper discount than what is available through a local insurance broker. These policies, with their discounts, are portable to the employee and at no additional cost to the corporation. It is an absolute must for any employee who depends on their ability to earn a living.

Auto and homeowners insurance

This can get tricky, as "the devil is always in the details." Making sure you get the right contract terms is a must. This is especially true in the affluent marketplace, where expensive homes and luxury vehicles are the norm.

If you are contemplating using a group plan to insure your home or car, remember that the standard policy might not be appropriate for you. While the coverage premium might be less expensive, it's worthless in the event your claim is denied due to insufficient coverage.

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Additionally, many insurance brokers will explain that their value is greatest at the time when you place a claim. While there is no supporting data to this statement, it may indeed be true and help justify the decision to not simply select the cheapest coverage.

Personal excess liability (umbrella)

There are tremendous advantages to considering your employer's plan on this type of coverage. The coverage is often not individually underwritten—which leads to steep discounts on your premium.

Typically, this type of coverage is offered by high-end insurance carriers, which often makes them desirable for those of us looking to the leaders in the field on this coverage.

One item to keep in mind, however: Make sure your coverage limits dovetail with your other lines of property and casualty coverage (homeowners and auto). Not taking this step can cost you significant money should you ever need to place a claim.

"Your financial advisors can also be a tremendous resource as you work through these benefits elections."

There are so many variables to take into consideration when choosing the appropriate benefits for your family. When selecting these plans, it is essential to know your history, future needs and the options available in each plan.

A keen understanding of those facts will help lead you to make the right choices. Your financial advisors can also be a tremendous resource as you work through these benefits elections.

In fact, it is not uncommon for your advisor to connect with your human resources direct contact to talk through your specific situation to confirm you're making smart elections.

—By Thomas Henske, special to Henske is a certifed financial planner and partner at Lenox Advisors.