#ProTip: Keep your beneficiaries up to date!

TL,DR: Make sure your beneficiary form is always current; if you get divorced and your ex is still listed as the beneficiary, s/he will get the proceeds, despite what your will says or if the divorce was disastrous, etc. 

Your life insurance contract is just that – a contract. It’s a legally binding document which is designed to be paid out exactly as it is written. The beneficiary of the life insurance policy is the person who will get the proceeds of the policy. You will name your beneficiary on your application, and confirm it when you receive your policy. To change your beneficiary, in most instances, you need only complete a short form which is usually available online. Sounds easy, right?

Except, sometimes devastatingly, it does not always work out that way. Many times, people either forget to update their beneficiary when a life change occurs, or simply assume their will will control. Both do nothing to alter the listed beneficiary. So, if you take out a life insurance policy when you are married to your first spouse, and then go through the most horrible divorce in the history of all time, but you forget to take his name off as the beneficiary of your life insurance policy, when you pass away, the insurance company will send him a check and not your beloved second spouse. Forget that since the divorce you’ve gotten re-married, and have two children, and God bless them! three grandchildren who are just delicious! You lived a full and excellent life! But that money isn’t going to them. Roll over in your grave because you neglected to update a form. Totally avoidable heartache!

  • If you get divorced, update your beneficiary forms.
  • If you get remarried, update your beneficiary forms.
  • If you have or adopt a child, update your beneficiary forms.
  • If you have an insurance policy with beneficiary forms, just look them over once a year and make sure they’re updated, because why risk it? A minute a year.

Every year, you should speak with your insurance expert about your policies and just have a quick conversation and check in. My clients appreciate that chat immensely. Most of the time there’s nothing major to update, but now and again we’ll be talking and a detail will pop up and suddenly a forgotten need will be uncovered. Once a year, review your policies and give that beneficiary form a once-over to be sure it’s up to date, and if it has to change, we can take care of it together, quickly and painlessly. Yes, really. 

If you want to know more about this, reach out and it will be my pleasure to discuss. 

#ProTip: Pay your group disability premiums with post-tax dollars.

TL, DR: If you are enrolled in group long-term disability insurance through your job, make sure you are paying your premiums with post-tax dollars.

In today’s constantly evolving and increasingly competitive workplace, employers often offer benefits as part of a total compensation package to lure potential employees and retain their current staff. Sometimes these benefits are employer-paid, meaning the employee receives them free; there can be benefits to the employer, such as tax incentives, not to mention the impact on employee morale! Other times these benefits are employee-paid, meaning the employee receives access to the benefit which s/he otherwise would not have had through the employer. Hybrid arrangements also exist, in which both employer and employee contribute, such as matching programs.

It is important for every employee to know what benefits s/he is receiving, and whether the benefits are being funded from his / her own salary or by the employer. It is also important for every employee to know whether the benefits are being funded with pre-tax or post-tax dollars. This is especially crucial for group disability premiums.

When you’re dealing with group disability, tax is only paid ONCE: either you pay the premium with post-tax dollars, or you are taxed on the benefit, should you need to collect a benefit.

Frankly this breaks my brain a bit! Let’s say you’re paying $9 monthly for your group long-term disability coverage. It is unlikely that you will even notice that $9 coming from the post-tax side as opposed to the pre-tax side. But if you need to file a disability claim, however, and your group policy is like 99% of the ones I’ve ever dealt with and pays around 60% of your salary, if you pay your premiums with post-tax dollars, you’ll receive 60% of your salary TAX FREE. If you pay your premiums with pre-tax dollars, you’ll still need to pay tax on the benefit – which means 60% of your salary will then have regular income tax taken out, and your total take home pay will be even less than 60% of what it was pre-disability. In the cases of the clients I’ve worked with, this is literally the difference of hundreds of thousands of dollars in benefits! 

A simple call or email to your HR department coupled with a review of your last few pay stubs should make this possible.

I could write volumes about the necessity of disability insurance. I spent a large portion of my professional life at a boutique law firm solely handling disability law. I’ve seen the havoc disabilities of all types can wreak on even the most seemingly financially stable families and businesses, and the incredible lifesaving benefits of a proper insurance program. If you’re interested in learning more about individual disability insurance or disability insurance for your business, please reach out.