Key takeaways
- Voluntary benefits can help you personalize your financial protection.
- Everyone’s needs are deeply personal—and can change at any time.
- Making the time to use your employer or association’s educational resources is important to making confident decisions.
Today's benefits packages can reach far beyond traditional health insurance; you could be faced with an extensive buffet of benefits to address your individual needs. Voluntary benefits can help you deal when the unexpected—medical and nonmedical—happens. Having choices is great, but it's also overwhelming.
Before you sign up, review the different types.
What are voluntary benefits?
A rising number of employers and associations consider voluntary benefits to be essential to remaining competitive in today's labor market. According to a 2021 survey by consultancy Willis Towers Watson, 94% of employers said voluntary benefits will be important to their company value proposition in the next three to five years. In other words, if you don't already have access to these benefits, it's likely you will see them in the near future.
Should you enroll in your company's voluntary benefits? Well, that depends on your life circumstances and the areas that you feel need a little "extra." Here's a look at the most popular types.
Benefits to protect your health
Vision and dental — Unfortunately, most health insurance plans don't cover vision or dental care, with some exceptions. For example, if you suffer an eye injury and need surgery, that could be covered. But routine exams and corrective care typically are not.
Supplemental plans can step in to fill the gaps.
If you don't require corrective eyewear, a vision plan might not be a high priority for you. However, even though these policies come at some expense, regular vision checkups and preventative dental care could help you save money in the long term by catching problems early and helping you avoid emergency treatments. When evaluating these benefits, consider your lifestyle, your family history, and whether you have emergency funds to pay out of pocket for services when needed.
Benefits to protect your savings
While health insurance covers the medical care associated with an illness or accident, it doesn't cover everything. Even if you have comprehensive health insurance, you could encounter serious financial burdens at a time when you might not be able to work.
Hospital indemnity insurance — The costs associated with a hospital stay can go far beyond medical care; this is where hospital indemnity insurance can help. When a policyholder checks into a hospital for a planned—or unplanned—stay, the policy will pay out a certain amount of money directly to the policyholder. The money can be used to offset lost wages, child care costs, healthcare deductibles or other out-of-pocket expenses. Benefits and costs for these policies run the gamut, so research plans before deciding whether this type of policy makes sense for you and your family.
Critical illness and accident insurance — Critical illness and accident insurance can provide even broader coverage. The money you receive from these policies can help you pay out-of-pocket expenses such as deductibles, coinsurance, copays and premiums. Many disability insurance policies only cover 40% to 60% of your salary; critical illness and accident policies can help make up the difference and protect your savings. What's more, you can get a plan that covers your entire family.
Benefits to protect your family
Disability insurance — If you're in good health and haven't experienced medical problems, it might be easy to downplay the risk of disability. Yet, according to the Social Security Administration, a 20-year-old has a one-in-four chance of suffering a disability before retirement age. Could you pay your bills if you were unable to work?
Disability insurance purchased through your employer or association is likely to be much more affordable than coverage you buy on your own due to group pricing. However, the coverage would likely only cover a portion of your income. If that's the case, consider purchasing additional coverage on your own.
Note that private and federal disability programs are different, and the latter can take up to two years to pay out on a claim.
Life insurance — Life insurance is critical for parents and caregivers. Rates generally increase with age and health status, so even if you're single, this might be a good time to consider it. Life insurance payouts can provide for your kids' college education, pay off your house, shore up retirement for your spouse, or simply meet day-to-day expenses. Buying life insurance through your employer or association is a convenient way to get this important coverage—and it can be cost effective.
How does it work? You choose the amount of the death benefit, up to a limit. Naturally, the more coverage you elect, the more you'll pay. Your premium is deducted at each pay period. An added benefit: There's no physical exam needed if you obtain life insurance through your employer or association, unlike policies you buy independently. There may be a health questionnaire, though.
Your employer or association's limit may not be enough for you and your family. Find out how much life insurance you need. And if you choose to leave your job, there's a good chance you can take your life insurance with you. Ask your benefits provider for more information.
What you can do next
Way before open enrollment season (if possible), investigate all the voluntary benefits your company offers. Make sure you understand the different types of benefits offered and how much they cost—and go over the fine print about exemptions and exclusions.
Ilana Polyak is a freelance writer who specializes in personal finance and the financial advisory industry. Her work has appeared in The New York Times, Barron's, Kiplinger's Personal Finance, Bloomberg BusinessWeek and CNBC.com.
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