Asked and Answered: What are voluntary benefits?

Often overlooked, voluntary benefits can be a fantastic addition to a primary healthcare plan. They can help you with different aspects of your life like covering your living expenses, lost wages and other types of much-needed health insurance.

While employer coverage doesn't always account for these extra benefits (you may need to cover 100% of the costs) there is the benefit of a group rate through your employer. In other words, many of these voluntary benefits come at a steep discount. (And we like those.)

Just because your employer may offer many options, doesn't mean you need to choose all of them. It also doesn't mean you need to ignore them, either. With so much uncertainty - whether it's the current job landscape or even other health concerns - it may be a good idea to look into these options.

Read on to find out some of the most popular ones employers offer, what it may cover and who it's best for.

Critical illness

This type of insurance can be a great addition to your regular health insurance premium. It'll give you a lump sum amount if you end up being diagnosed with a critical illness covered in your plan - including but not limited to end-stage renal failure, coronary artery bypass surgery, a heart attack, stroke and even a major organ transplant.

The idea behind this type of insurance is that even though you may already have a comprehensive plan, expensive treatments like the ones mentioned above may still cripple your family or loved ones financially. The lump sum amount will be paid directly to you so it can be used where it's most needed.

Who this is best for is those who are younger (think millennials and ones in their prime working years), especially those with dependents. It's similar to term life insurance in that when a critical illness does happen, you get paid once. It is solely to help pay for expenses that your regular health plan won't cover.

Long-term disability

Long-term disability (LTD) insurance helps to cover costs in the event you cannot work anymore. What happens is that LTD insurance will replace part of your paycheck because of illness or accident - what that is depends on your individual policy. In essence what you're doing is insuring that you'll still receive a paycheck so that you can pay for regular expenses.

LTD insurance is best for those who may not have a lot of paid time or or other sources of income should that be needed to cover your expenses. Typically, this type of insurance is for those actively working and usually in places that aren't considered too risk by insurers.

Vision and dental insurance

Most employers typically offer some sort of vision and dental insurance plan, where it'll cover things such as eye exams, discounts on treatments (e.g. eye care accessories), teeth cleaning, crowns and dentures. These may be cheaper out of pocket or not - it totally depends on your current health situation.

For example, for those who are older and have a family history of eye diseases, having vision insurance could be a godsend. Or if you're young and have healthy teeth and gums, it may not make sense to get dental insurance if all you're doing is getting your teeth cleaned once a year.

These are just a handful of the available benefits being offered. Others can include accident, hospital indemnity and even identity theft insurance. No matter what you do, you'll want to take a careful look at your current situation and speak with a trusted professional about what you may or may not need.

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Are voluntary benefits worth it?

While health coverage gets all the attention during open enrollment, chances are your company offers a wide range of voluntary benefits that you have the ability to take advantage of.

Let's outline some of the most common voluntary benefit options and how they can affect your budget.

Life insurance

Life insurance functions similarly to other forms of insurance where a policy holder will pay monthly premiums for coverage that will kick in when a specific event outlined in the policy takes place. Employers may offer automatic enrollment in life insurance that is company paid and/or there may be the option to voluntarily elect additional coverage for a premium.

In either case, life insurance is a lump sum payment paid out to beneficiaries of the policyholder upon his/her death to cover a wide variety of expenses. There are three primary types of life insurance:

  • Universal life insurance: Much like the name implies, universal life insurance is a type of permanent insurance that will cover the policyholder for his/her entire lifetime. These policies tend to be more flexible than other types with the ability to raise or lower your premium payment and coverage options over the course of your lifetime. However, they are also the most expensive and typically have the highest premium payments.
  • Term life insurance: This type of life insurance differs from universal life insurance in that they will provide financial protection for a specific period of time, such as 10 to 20 years. These policies have the advantage of a static premium that will remain the same over the course of the coverage period selected, at which point policyholders could renew their coverage, but often at a higher rate. Term life insurance is a great option for those wishing to replace potential income during their working years and are often the most cost-effective option.
  • Whole life insurance: Last but not least, whole life insurance is a policy that offers permanent life insurance coverage, and is often used as an estate planning tool to help preserve wealth that a policyholder will plan to transfer to beneficiaries. This is often the most expensive life insurance option, but it does offer fixed premiums and has cash value, which means that it accumulate over time on a tax-deferred basis.

Disability insurance

Disability insurance, also known as income protection, is an elected benefit where an employee pays a portion of his/her paycheck for coverage in the event of a debilitating accident or illness that causes them to be unable to fulfill the duties of their job. Disability insurance coverage is designed to replace anywhere from 45 to 65% of your gross income on a tax-free basis to ensure that you can still earn income during your recovery.

Disability insurance policies may be short or long-term and vary widely in terms of coverage periods and premiums, so employees should assess these plans based on their own needs or the possibility that they will be faced with a medical/emergency situation in the future.

Accidental insurance

Accidental insurance, also known as accidental death and dismemberment (AD&D) insurance, can be purchased through most health insurance portals as a stand-alone plan or it can even be a rider on a life insurance policy. This insurance pays the account holder or plan beneficiaries in the event of an accidental death, or an injury that causes you to lose the ability to hear, see or speak, or lose a body part. These payouts differ from plan to plan and are closely linked to the type of injury that occurs.

Wellness programs

Wellness programs are typically employer-sponsored benefits that are intended to improve and promote the health and fitness of employees to help both the employer and employee save money on medical expenses in the future. These programs can also be offered by insurance plans directly to enrollees.

These programs work by the employer or insurance plan sponsor providing financial incentives to employees to participate in activities that can boost their overall health. These can include gym memberships, smoking cessation programs, preventative health screenings, diabetes management programs and much more.

Still have open enrollment questions?