Looking at extra insurance
Your employer may offer other benefits in addition to health insurance and retirement. Life insurance and disability insurance may be part of your benefits package. The importance of this extra insurance depends on your personal situation.
Life insurance pays a lump sum cash payout in the event of your death. When you sign up for the policy, you designate who you would like to receive the payout. The person who receives the payout is the beneficiary of your policy. Life insurance can be especially valuable if others are dependent on your salary. If you have a spouse or children, the life insurance benefit could be important coverage for them. If you are single with no children, life insurance will probably be less important for you.
Disability insurance is coverage that replaces your income if you are sick or disabled. Disability benefits usually replace from 45 to 60% of your total income. If you pay for your own disability insurance out of your own pocket, the benefits will be tax free; if your employer pays for your disability insurance, your benefits will be taxable. The benefits normally stop if you return to work or earn income through another type of job.
If you have a medical condition or a high-risk job, disability insurance may be very valuable to you. In hazardous occupations, such as logging and roofing, you are more likely to be injured on the job. Disability insurance may cover costs not covered by worker's compensation. On the other hand, if you are healthy with a low-risk job, disability may be a less important benefit.
Consider policy costs
When weighing the value of life and disability insurance, it may help to consider what it would cost to pay for the coverage yourself. Life insurance costs for young and healthy individuals are fairly low. As you age and develop health conditions, life insurance costs more to obtain.
Disability coverage tends to be more expensive than life insurance across the board. You can expect to pay two to six times more per month for disability than for life insurance. A disability policy through your employer may therefore mean significant savings for you.