- Business Insider's Money Council recently had a roundtable to talk about topics related to financial planning, including the importance of health and disability insurance.
- Many employers offer disability insurance, and it's important to know the gap between what it covers and your income in case you get hurt.
- Health savings accounts offer benefits that might not be immediately apparent and should be considered if you have a high-deductible insurance plan.
- Visit Business Insider's homepage for more stories.
Even in ordinary times, planning for healthcare shouldn't be ignored. Just one health setback can create major upheaval.
"You can make the most beautiful plan in the world," said Eric Roberge, a certified financial planner and founder of Beyond Your Hammock, "and then the 'what if' scenario happens that you weren't expecting and blows the whole thing up."
In the middle of a global pandemic, that "what if" scenario is clearer than ever.
Roberge said a "protection plan" is just as important as the financial plan itself — and a cornerstone of that plan is insurance. Often when people start their careers they are not thinking about their employer's benefits packages in terms of personal risk and investment, but it can't afford to be overlooked.
Calculate whether your disability insurance from work is enough
"I know my personal experience, when I started working way back in the day, I didn't know anything about signing up for disability coverage or the health insurance options," said Joseph Edmondson, a CFP and financial professional at Equitable Advisors. "I was just looking for the cheapest option that was available."
Edmondson coaches his clients to dig into what benefits are available from through work. Disability coverage is one employee benefit he says many younger people don't take advantage of or take the time to fully understand.
It's important to calculate what disability benefits actually cover compared with the income you're earning that might be curtailed if you get hurt. Many employers offer disability insurance, but experts say it's generally not enough coverage in a worst-case scenario. If there's a gap between your income — and the amount you need to live on — and how much your work-provided insurance would cover, you might consider supplementing your employer coverage with private disability insurance.
Don't ignore an HSA with a high-deductible healthcare plan
When deciding among employer-based health plans, younger employees may be tempted to go for high-deductible plans that cost less out of pocket.
That decision can make sense, but if you're not taking advantage of a health savings account that goes with those types of plans, you may be risking financial difficulties if you get sick or injured and have no additional resources to tap into.
Beyond helping to cover unexpected medical bills, HSAs have other benefits that employees should understand thoroughly as they make decisions about financial planning.
As Money Council member Carrie Schwab-Pomerantz previously explained in Business Insider, many employers offer HSAs as an option for anyone with a high-deductible healthcare plan above a certain threshold. HSAs are "triple tax-advantaged," because money going into the HSA is taken pre-tax and some HSAs allow you to invest and earn tax-free interest.
Plus, HSA savings roll over annually, so you don't have to use up the balance at the end of the year. And HSAs received a boost in the coronavirus-related stimulus packages — they can now be used to pay for telehealth visits, over-the-counter medications, and menstrual-care products.
Understand your options
For younger employees to take full advantage of financial opportunities, they need to take the time to understand the details of healthcare, life insurance, and other benefit plans offered by employers — or private insurance providers, if necessary — and their implications.
"We're not taught about benefits and things like that when it comes to schooling and education," Edmondson said. "It's so important to not only look at things when it comes to investing and building your network, but also to think about those 'what ifs' in life."
And don't hesitate to ask for help. "It's not smart to ignore that stuff if you don't understand it," Roberge said. "It's very smart to go out and get expert advice to understand what you're doing so that your family is protected."