Open enrollment is fast approaching for many of Houston’s corporate professionals and executives.
Employee benefits are an often overlooked piece of a corporate professional’s total compensation. However, if optimized properly, the benefits one elects can make a drastic difference in their cash flow and help mitigate their potential financial risks. Employees at many major energy companies can make elections on a wide range of coverage such as life insurance for themselves and their spouse, short and long-term disability, and more. Many of our clients work for companies like BMC, Shell, Chevron, and Chevron Phillips and will be required to make the benefit elections during the open enrollment periods listed below:
• Chevron and Chevron Phillips: October 15 through October 26, 2018
• Shell: October 10 through October 24, 2018
• BMC Software: October 30 through November 10, 2018
Optimizing Your Employee Benefits Election: What You Should Consider Before Your Open Enrollment Term
Our firm seeks to help employees optimize their coverage by assessing their actual needs based on a number of factors. Too often, we see corporate professionals and executives rely on a basic rule of thumb to determine how much coverage they should purchase. They inevitably find themselves either under or over-insured. We find that a majority of the clients we begin working with are over-insured and are unknowingly spending money on unnecessary coverage.
What do we assess to determine the right amount of coverage for each client?
• Income
• Asset base
• Current health status
• Family health history
• And more depending on their unique situation
It’s necessary to take an in-depth look at these factors of an employee’s life to determine an appropriate level of coverage for their dynamic financial journey. A proactive financial advisor will use this assessment to build out a comprehensive cash flow analysis that models various disability and premature death scenarios. These models closely reflect the proper level of coverage needed to ensure an individual is not paying excess premiums while continuing to protect their loved ones in the case of an unforeseen incident.
An employee’s benefits elections occur once annually, and the coverage they choose will determine their respective premium payments. Once an employee makes the election, they are locked into their benefits plan until the next year’s election period.
Analyzing the coverage you need is not something that should be put off until the last minute as it’s a decision that will affect your net and gross pay for the year ahead.
Short-Term and Long-Term Disability Insurance: The Cost of Employee Benefits and How to Determine the Value of Your Options
Short and Long-Term Disability Insurance
Some premiums, such as short-term disability insurance are relatively cheap. However, we often find that the corporate professionals and executives we begin working with have a large enough asset base to support their financial needs in the event they cannot work for a brief period of time.
Although long-term disability insurance is accompanied by more expensive premium payments, it’s something we strongly recommend purchasing for our clients that have a longer period of time before retirement.
Life Insurance
Many of Houston’s corporate professionals and executives are provided with life insurance coverage that covers one to three times their base salary for free by their employer. We often see clients purchase additional insurance through their employer for themselves, their spouse, and even their children. We always tell clients to bear in mind that life insurance should be used as income replacement in the event they pass early, not an investment. In other words, it should be viewed in terms of maintaining your household’s standard of living when you’re no longer around to provide the income to do so.
Ask yourself what level of financial support your family will need to cover your household’s expenses without your contributed income. Such expenses may include your mortgage, a child’s college costs, your spouse’s current and future retirement needs, and more.
Again, it’s important to note that by being over-insured, you are giving up after-tax money that could otherwise be invested, used to buy a new car, put children through college, make home improvements, set aside for a rainy day fund, etc.
These are only a few examples of the common coverage missteps we have observed among corporate professionals and executives who complete their benefits elections without seeking a second opinion. If you have questions about your coverage options and needs, please reach out to our firm to schedule a free cash flow consultation before your company’s election season begins.
