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Don't Forget About Disability, Life Insurance During Open Enrollment

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Many employees think of health insurance when they hear the words "open enrollment". However, this limited period also allows you to select or update your disability and life insurance coverage for the next year.

Here are tips to make the most of open enrollment, understand your disability and life insurance options and find the best coverage to fit your ever-changing needs.

Pay special attention to disability insurance options.

50% of working Americans couldn't make it a month without their income before financial difficulties would kick in. Could you?

One in three women and one in four men will have a disability that keeps them out of work for at least 90 days during their working lifetime. However, only 40 percent of Americans have disability insurance, even though many can get it through their employer.

Disability insurance, which replaces a percentage of your income if you become injured or too sick to work, comes in both short-term and long-term options.

Short-term disability insurance is meant to replace a coverage of your gross income for anywhere from 60 to 180 days, depending on the policy. Long-term disability insurance kicks in after you have been out of work for an extended period time that typically exceeds 180 days.

If you do not have disability insurance, consider your employer-sponsored options carefully. If you are lucky, your employer may even cover the cost of the insurance.

While group disability insurance is less comprehensive than a privately purchased individual plan, some coverage is better than none. The risk of disability is simply too high to forgo disability insurance. Learn more about the difference between group and individual long-term disability insurance policies.

Reevaluate your life insurance needs.

One in three households would have immediate trouble paying living expenses if the primary wage earner died, according to the 2016 Insurance Barometer Study by Life Happens and LIMRA.

Thankfully, 54 percent of private industry workers had access to employer-sponsored life insurance benefits as of March 2016, according to the Bureau of Labor Statistics.

The need for life insurance is apparent, and while many employees have it, they do not reevaluate their coverage often enough. Determine the right amount of life insurance by considering the following questions:

  • Does your household have enough assets to cover expenses and meet your needs?
  • Have any major life events, such as a divorce, marriage, or new child, occurred in the last year?

If so, ensure your life insurance coverage reflects these changing needs. Coverage calculators from NerdWallet or Life Happens can help you determine how much insurance you need and compare the results to what your employer's policy offers.

Your employer can typically provide up to $50,000 of group term life insurance to you before it's considered taxable income. If this amount does not meet your calculated needs, you can purchase additional coverage through your employer and/or buy supplemental life insurance. Learn more about the different types of life insurance and how to cover your needs.

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