Supercharge your group benefits with private insurance

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Supercharge your group benefits with private insurance

If you’re lucky, your employer has provided a pretty nice group benefits package full of fun and useful insurance products. But you might be wondering – is it enough? And how would I know?

There are several tools online to help you find answers, including ones from Bankrate and Yahoo Finance. Our own Personal Insurance Checkup is a neat calculator that looks at your current financial situation and identifies where you have insurance gaps or where you have more than you need.

If you find out you do need additional coverage, it’s probably in one of the three major categories below. Here’s how to address those gaps.

Health insurance

Does your employer’s health insurance plan not cover something you need? If you’re looking to expand your coverage, you’ll probably need to replace your company’s plan with something from the marketplace. For more information on how to do that, read our in-depth guide.

If your employer doesn’t offer dental or vision care, you can get both relatively inexpensively through the health insurance marketplace. You may also be interested in dental savings plans – in some cases, they can be a better deal than dental insurance.

Life Insurance

If you’re lucky, your employer offers some sort of life insurance policy. However, employer-provided life insurance policies are typically too small, oftentimes only providing a benefit of one or two years of your normal salary. While most people realize they’ll lose the coverage if they leave their job, many don’t realize that they may lose the coverage if they have to leave work due to illness. That means that if you’re diagnosed with a life-threatening illness, you may lose your life insurance right before your family actually needs it.

Your best bet is to get a private life insurance policy with a death benefit that matches your family’s needs. You could choose to get a policy with a benefit that augments your employer coverage – for example, you combine the two benefits to cover the total amount you want covered – but we think that getting a private policy for the full coverage need is a better solution due to the issues we outlined above.

Disability insurance

Your company may offer either short-term or long-term disability coverage – or maybe even both! You want both so that if some health condition prevents you from working in your chosen profession, you’ll be covered even after the short-term coverage period ends.

If your company only offers [glossary title="Short-term disability insurance" text="Insurance that provides income replacement for the first few weeks or months after a disability forces you stop working." align="bottom"]short-term disability coverage[/glossary] and you’re under 45, shop for a [glossary title="Long-term disability insurance" text="Insurance that provides income replacement after a disability forces you stop working. Typically covers you for years." align="bottom"]long-term disability plan[/glossary] on the private marketplace through a broker or agent. Your goal is to have coverage equivalent to 60 to 70% of your total salary, since that’s roughly your take-home pay after taxes. (Your disability benefit won’t be taxed unless the premium was paid by your employer.)

If your company is one of the rare ones that presently offers long-term disability coverage to its employees, make sure that it’s enough to meet that 60 to 70% goal. If not, shop for an additional long-term policy that can cover the gap. Your company’s benefit combined with a private policy will ensure that you’re never left without a paycheck replacement.

But even if your employer offers some amount of long-term disability coverage, you should consider buying a private policy that covers your entire need. That way, you’re fully protected regardless of your current job or benefits package.

So what if you’re over 45? If your company offers long-term disability coverage, be sure to take advantage of it regardless of whether it reaches that 60% threshold. You should still shop for a private long-term disability policy through a broker or agent, but as you grow older, long-term disability coverage becomes more expensive and covers fewer types of disability. If you can’t find a suitable private policy, at least the employer-offered coverage will partially help.

Finally, remember that if you don’t have any short-term disability benefit, you should immediately start building an emergency fund if you haven’t already. Long-term disability coverage doesn’t start paying a benefit until 3-6 months after you’re disabled, because short-term disability insurance is designed to cover the first months of disability. You’ll be thankful you set aside all that emergency cash if you find yourself in this situation.

Image: JP