Get Ready For Open Season - Part 3

Tip # 205 - Get Ready For Open Season – Part 3. In this series we are discussing getting prepared for the open season enrollment that usually occur in places of employment this time of year. In Part 1 of this series, we discussed health care options, and in Part 2 we discussed the 401(k). In this last part of the series we will discuss other insurance options you may have such as life insurance, disability insurance, or a FLEX plan.

Some companies provide a certain level of life insurance to their employees – oftentimes it’s twice the salary they are making. If you are single with no dependents, that is probably enough life insurance to carry. On the other hand, if you have a family dependent on you and you lose your life, then twice your salary is likely not enough to take care of your family if you should die. Now the question becomes, do you buy the insurance through your company at open season or do you buy a policy on your own? I think a lot depends on how long you hope to stay at your job. If you buy insurance through them and then leave in five years, you will need to pick up life insurance on your own, if you still wish to carry it. The older you are, the more expensive it is, and the harder it may be to obtain. If that’s the case, it may be more beneficial to you to buy a term policy on your own and not buy any extra through your company. On the other hand, if you plan to stay at your company until you retire and you have no reason to think they will let you go, then buying life insurance through the company might be an option for you. But before you buy, make sure you shop around on your own; you may find that you can get a better or as good of a price on your own. If that’s the case, it’s probably better to buy a term policy on your own.

Disability insurance is another option that some companies offer during open enrollment. Again, they may carry a minimum amount for you as a standard benefit, and then give you the option to buy more if you wish. Like life insurance, this is a personal decision that you have to evaluate whether it’s worth getting or not. Insurance is often described by people as a “necessary evil.” No one wants to buy it, but if something happens to you, then you are glad you have it. Each person has to do what he feels comfortable with. Obviously insurance companies make money off policyholders, and they use actuarial tables to figure out how much to charge based on the likelihood of something happening to you. In other words, the company is betting that something won’t happen to you, while the person is buying insurance is betting that something will. If you like to cover all bases, then the disability insurance might be something you want. If you feel you will be able to work no matter what happens, then don’t buy it. If you decide that you do want extra disability insurance, then again shop around before you buy through your company.

A company may also offer what is known as a FLEX plan, which is basically a plan that allows you to set aside money in advance to pay for most medical expenses or dependent coverage you incur throughout the upcoming year without paying taxes on it. The difficult thing to decide is how much you want to set aside for this plan. If you set aside too much, you lose what you don't use. If you set aside too little, then you are not taking full advantage of it. These are good plans, in general, to be a part of if you are not getting a tax break on these expenses elsewhere. And there is usually no cost to belong, other than the money you are setting aside in advance for these expenses.

In general, when open enrollment starts, make sure you study your choices carefully. Talk to others within your company to hear experiences they have had with some of the companies and types of benefits offered. Look at your budget and figure out what will and won’t fit into it. And finally, shop around outside your company. Just because your employer offers you something, doesn’t mean it will be the best deal. Whatever you do, don’t wait until the due date to decide what you want. Take time to select your options.


In Real Life (IRL) – As I mentioned many times before, my husband’s company got taken over in April. And at that time, we were presented with a whole bunch of benefits that they offered – most of them for a price. It was much more than what his old company offered, so it took a lot more work on our part to make our decisions. There were various levels of heath insurance – regular and expanded benefits, as well as optional dental benefits – regular and expanded. Ugh, how could we predict whether one of us will need a root canal in the next year? And if so, would our costs be greater than the monthly premiums?

Then we had the additional options of disability insurance and extra life insurance. After evaluating everything, and knowing our selections were only for three-fourths of the year, we declined both. On the other hand, it made us realize that we needed extra life insurance. But when we compared prices on our own to what the company offered, there wasn’t much of a difference. So we ended up getting some term policies with an outside company, And this way if my husband leaves or is let go of his job, we don’t have to worry about applying for life insurance again. And although we declined the disability insurance, we are going to reevaluate it again this open enrollment. My brother-in-law recently had to utilize his disability insurance when a car accident left him unable to do his job. While I am not one to buy insurance to cover every potential problem down the road, it is something we are going to seriously consider. We haven’t decided yet whether or not we will buy it.

We have taken advantage of the FLEX plan for medical expenses. It was hard to guess how much we would use for 9 months out of the year. But now that we've had some experience with it, we are hoping we can make a better estimate in this enrollment season. We are taking the next few weeks to do research on all of our open enrollment options so we can hopefully make the best decision for our family this season. I hope you will do the same. For other ideas on being smart with your money, check out Frugal Fridays.

Get Ready For Open Season - Part 1

Saving Money Tip #203 - Get Ready For Open Season – Part 1. For those people who work at a decent-sized company, open season is coming upon us. Open season is the one time per year that you are allowed to make changes to your health insurance, your 401(k) contributions, any life insurance or disability insurance that is offered, and any changes to your FLEX plan. You may be given several choices in each of these areas. And the decisions that you make in the next month regarding open season will affect your next year's budget and expenses. So choose them wisely. Look over all of your options and make informed, educated decisions. Not everyone has all of the choices mentioned above, but many companies offer at least some of these.

Let’s start by talking about health insurance. If you have health insurance choices at your company, take the time to study each one. The most popular plans you often can choose between are an HMO (Health Maintenance Organization) and a Preferred Provider Organization (PPO). The plan you choose can make a big impact on which doctors you can visit and how much you spend.

First let’s discuss HMOs. Usually the HMO involves smaller out-of-pocket costs than a PPO. These lower costs come in the form of the monthly fee that you pay to your company to be part of this insurance plan. In addition, co-pays at the doctors’ offices are usually cheaper. However, the disadvantage of the HMO plan is that you are locked in to a smaller number of doctors who are part of your HMO plan. Also, you must select a primary care physician to act as a gatekeeper for any specialists you may need to see. For example, if you have a bad rash on your face and want to go to see a dermatologist, you first need to see your primary care physician who needs to provide a referral to you for you to see the dermatologist. If you don’t see your primary care physician first, you may find yourself responsible for all of the dermatologist’s fees – not just the co-pay. There are variations to each HMO, though, so make sure you understand exactly how yours works.

The PPO is usually more expensive than an HMO. The monthly fee deducted from your paycheck is usually higher. In addition, co-pays at the doctors’ offices are sometimes higher. The advantage is that you usually have a wider variety of doctors to choose from than in an HMO plan. A second advantage is that you do not need to see your primary care physician first in order to see a specialist. However, the PPO plan does consider only certain doctors and practices to be “in network.” And while you may see doctors that are “out of network,” you will pay higher co-pays and a certain percentage of their fees to see them. Overall, the advantage of the PPO is that you generally have more doctors to choose from and you don’t need approval from your primary care physician. The overall disadvantage is that it's more expensive than an HMO.

Overall, PPOs often have a better reputation than HMOs, but it doesn’t mean that it would be the better choice for you. If you are relatively healthy and visit the doctor once per year for a physical, then an HMO might be appropriate. On the other hand, if you have several children – some of whom might have special medical needs – then a PPO will give you more flexibility and possibly better doctor choices. And in this case, the extra expense will often be worth it.

When you get your information about your health insurance plans this month, study them carefully. Ask questions of the benefits manager. She might have good insight on the various plans offered. Then talk to some of your co-workers who were in the different plans in the previous years. You will probably get the best information from people who have already been in the plans. Gauge their satisfaction, and use that, along with your family’s needs, to help make a wise, informed decision about your health care.

In Real Life (IRL) – My husband just got his information for the Open Enrollment Season at his company. We are going to go over each of our options and choose what we think will work best for our family. In addition to health care options, we are going to be making decisions about his 401(k), extra life and disability insurance, and the company’s FLEX plan. Because his company got taken over part-way through the year last year, we need to make changes, based on looking at the whole year ahead of us rather than the part-year we did this past year.

Regarding health care options, I am of the mindset that healthcare is not an area that I want to save money on. I will look to other parts of my budget for that. I have always found the extra expense of a PPO to be worth it. But then again, I have never belonged to an HMO. I do have a friend who belonged to one and was satisfied with her level of care there. Although, she did have to travel far to see some of the doctors in her plan. Either way, it can be a difficult decision to make, because none of us knows what is in store for us in the upcoming year, health-wise. Also, what worked well in the past might not work well in the future. We can only give our best, informed guess based on what we think our needs are. With three young children, I like the option of having more doctors to choose from, making the extra expense of a PPO worth it. However, in my husband's plans, they actually have a regular PPO and an expanded PPO which makes the decision even more challenging.

Fortunately, we are only locked in to our decisions for one year, and can always make changes during the next open enrollment season. Another event that may trigger a change open enrollment options is marriage, or birth or adoption of a child. Although, your choices may be limited at that time. So again, make your decisions wisely regarding your choices; they will be with you for the whole year.

In the next post, we will discuss 401(k) options in this open enrollment season.

Buy An Umbrella

Tip #73- Buy An Umbrella. An umbrella insurance policy, that is. If you have any significant amount of assets or sometimes even if you don't, make sure you also have an umbrella insurance policy. Insurance is one of those products that is often described as a “necessary evil” – something you don’t want to buy but feel that you have to. In addition to health insurance, some of you have life insurance, car insurance, and renters or homeowners insurance. But how many of you have an umbrella policy? An umbrella policy does what it sounds like it does, it covers you over and above your other policies, like an umbrella. In this recession, the last thing I like to write about is how to spend more money. However, just like the famous saying that it takes money to make money, it also takes money to protect your money. And that’s what an umbrella policy does. It protects your money.

For example, you may have car insurance with coverage of $100,000/$300000, which means the car insurance policy will cover $100,000 per person for liability up to $300,000 if you cause a car accident. But what if the accident you cause sends someone to the hospital with life threatening injuries? Will $100,000 cover their hospital stay? Probably not. And even if it does, the person will likely sue you for compensatory damages, in other words, pain and suffering. And that could go into the hundreds of thousands or even millions of dollars.

Or suppose someone slips on the ice on your walkway while coming over to visit you? He breaks his back and can no longer work. He can sue you for loss of wages for his lifetime. That will surely go into the hundreds of thousands of dollars. Your homeowner’s policy may only cover $100,000 of that and they could go after your other assets.

If someone causes an accident and you are hospitalized for a long time with extensive injuries, then if the other driver doesn't have enough insurance or assets, your umbrella policy will cover you after you have utilized the maximum amounts on your other insurance policies.

For either of the first two cases, if you have an umbrella policy, the person who sues you will probably try to get the maximum out of your policy. And he/she will most likely be happy with that. If you have no umbrella policy, the person will go after your homeowners or car insurance policy and if that isn’t enough, he/she could go after your assets – such as the money you have saved in a bank account or even your home. Unfortunately, lawsuits are increasing in this country. And that is pretty scary. It’s so scary that I think it’s worth the $150 per year to have an umbrella insurance policy covering you for up to $1 million dollars. It’s money that you wish you didn’t have to spend, but will be happy you did if you need it. ***

In Real Life (IRL) – I want to relay a sad and scary story that happened to some friends of ours last week – a husband and wife with three young children. They called us up a few days ago and told us they had just been on vacation. While they were on vacation, they rented a car. The husband was driving and he turned his head for a moment and he crashed into the car in front of him, which hit the car in front of him, which hit the car in front of him. All told, I believe four cars were involved in this accident that my friend caused.

Now here is the sad and scary part. Four people had to go to the hospital as a result of this accident. And one of them was a child. And the child needed a plate put into his skull. It is sad beyond belief that this child’s life is changed forever. And it is scary for this family that we’re friends with because he only has coverage on his automobile insurance for $100,000 per person up to $300,000 total. And I’m pretty sure a hospital stay for a person getting a plate put into his head is going to run more than $100,000. And I can pretty much guarantee that this child’s family will be suing someone for pain and suffering that this child will endure for the rest of his life. This does not even take into account the other people who were also injured in the crash and the cars that were damaged.

My husband works in property/casualty insurance so our friend was calling for some advice. The first thing my husband asked was whether our friend has umbrella insurance that will cover him once his automobile insurance is maxed out. The answer was, “No.” After giving him some advice, my husband hung up the phone and said, it’s possible that one or all of these people might go after our friends’ assets, including their house. Depending on whose name is on the house, a lien could be put on it (which means it wouldn’t be taken away until this couple sells the house or they die) or it could be taken away. Of course there are other scenarios, too. The people injured could go after the car rental place or any of the other cars that hit them. Or as my dad says, they will probably go after whoever has the deepest pockets. Who knows how it will play out? What I do know is that if our friend had an umbrella policy, he would have fewer worries.

***As is true with all of my posts, what I write here is my opinion only. I am not a financial advisor or an insurance agent. Speak with your insurance agent and/or financial advisor to see if an umbrella policy is right for you