When starting a new job, you are bombarded with forms to complete. Some, like tax withholding forms, are familiar. Anything related to insurance benefits can be overwhelming. It does not matter if someone is starting a first job or has been in the workforce for decades. It can be daunting. Let’s take a very brief look at the most common types of benefits you might be offered:
- Medical insurance. This can be downright intimidating. Take a deep breath. The human resources department should provide you with a summary of benefits, which will show you the plan’s deductible and basic terms. On a high level, you should know what your per-paycheck premium will be, what your deductible is, what the maximum benefit amount is, and when your plan year begins and ends. You can dig deeper to learn exactly how your plan works. For example, when you go to the doctor, do you pay a co-payment? Do you pay the full charge until you meet your deductible?
- Dental, vision, cancer, and other insurance. Some employers offer plans that cover expenses beyond traditional medical plans. I recommend that you consider what your costs are if you pay these expenses out of pocket and compare that amount to the premium for the coverage. Also, make sure you understand exactly what is covered and whether or not waiting periods will be imposed. Some plans might cover cleanings and fillings right away. Then, you must have coverage under the plan for a year or so before it will cover major dental work like crowns.
- Health savings account (HSA). If your company’s medical plan has a high deductible, you may have the opportunity to have a health savings account. Your employer may allow you to deduct pre-tax dollars to fund the account. Monies in a health savings account can be used for qualifying medical expenses (see IRS website for details). The account balance belongs to you and can be “rolled” from year to year, allowing you to accumulate dollars for larger expenses in future years.
- Flexible spending accounts (FSA). While these accounts resemble HSAs, the balance does not “roll” from year to year. You must use the funds within a specified timeframe or lose them. Also, in some situations, the accounts can only be used for qualifying vision and dental expenses.
- Life insurance. Some employers might include a minimal amount of coverage as a perk. You could have the option to purchase more. As with any life insurance policy, examine the cost and need for coverage. Is it cost effective to purchase it through your employer? If you leave the company, is the plan portable?
- Long-term disability coverage. Just as you do with life insurance, carefully examine the long-term disability policy. Meant to offer assistance in the event of disability, the plan could help you cover expenses. However, a standalone plan outside of an employer plan may offer better coverage at an affordable rate.
If you decide to decline coverage now but want it later, will the insurer request a medical exam? Ask, because the answer could influence your decision. Some insurers have a “no questions asked” policy for new enrollees but are strict for anyone who signs up after initial employment.
You are probably wondering how you can sort out all of this stuff. Your company’s human resource department should be able to answer most questions. Ask others in the company what their experience has been with certain benefits, particularly medical insurance. Seek assistance from friends and family who have been in the workforce and know “how this stuff works.” And, of course, your financial advisor is happy to help.
Starting a new job is scary enough. Selecting benefits does not have to be a nightmare.
Cristy Freeman, AAMS®
Senior Operations Associate