Most employers offer a variety of plans, including:
- EPO (Exclusive Provider Organization).
- HMO (Health Maintenance Organization).
- POS (Point of Service).
- PPO (Preferred Provider Organization).
You might also have the opportunity to open a flexible spending account (FSA), health savings account (HSA) or health reimbursement account (HRA).
The FSA lets you and your spouse set aside up to $2,600 each to pay for medical expenses tax-free during the year. Typically, you must use the money by year-end or lose it (although some FSAs will cover expenses through March 15 of the following year). So, you must estimate how much you think you’ll spend on health care over the next 12 months.
By comparison, an HSA (which is also tax-deductible) lets you contribute up to $6,900 for a family in 2018, and another $1,000 if you’re over 55. Unlike with an FSA, you don’t have to use all the money in one year; instead, you can roll it forward. HSAs are generally used when you have a high-deductible insurance plan.
You generally can’t contribute to both an HSA and an FSA at the same time — except that some employers offer HSA eligible, limited-purpose FSAs that cover only certain expenses, such as dental and vision costs.
Finally, an HRA is funded by your employer to help you pay for deductibles, coinsurance and PPO copays. (You can’t use it to pay for monthly health insurance premiums.) You can pair an HRA with any health insurance plan.
2. Life insurance
If your employer offers life insurance, you should take it — but never assume that’s all the life insurance you need. Such policies usually provide a death benefit of only one or two times your annual salary, and that’s probably not enough to adequately protect a spouse and children. Also, this benefit goes away if you quit or lose your job — but your risk of death doesn’t.
Buying life insurance on young children generally isn’t cost-effective or necessary. We generally don’t recommend taking voluntary accidental death and disability insurance or critical illness insurance either, as they also tend not to be cost-effective.
3. Disability insurance
Do, however, take short-term and long-term disability insurance. But pay for it with after-tax money — not pre-tax, even if you are offered that option. That’s because paying for the insurance pre-tax turns any disability checks you receive into taxable income. Paying the premiums after-tax keeps the benefits tax-free.
4. Long-term care insurance
We often recommend long-term care insurance because of the exploding cost of care. If you buy a long-term care policy through your employer, remember that you lose the coverage if you quit or lose your job. So shop in the commercial marketplace for the best policy you can find, and then compare it with the policy offered by your employer — or perhaps use a private policy to supplement your workplace coverage.