A mistake during open enrollment could result in significant financial losses for you and your family, as advised by both a doctor and a CFP.

During the open enrollment period, employees often prioritize the initial, prominent choices, such as premiums, deductibles, and coverage options provided by various health, dental, and vision insurance plans.

Failing to pay attention to small details could result in financial loss and stress, according to Carolyn McClanahan, a physician, financial planner, and founder of Life Planning Partners.

It is advisable to take workplace life insurance policies during open enrollment by checking a box, but failing to designate the policy's payout recipient in the event of death is a significant mistake, according to McClanahan.

During open enrollment, a common error is not including beneficiaries or mistakenly listing minors as beneficiaries on workplace life insurance policies, according to her.

By updating your beneficiaries regularly, you can avoid costly mistakes that may occur in the upcoming year. However, choosing unnecessary expensive policies could still result in financial losses.

To avoid unforced errors when selecting your insurance coverage this month, follow these tips.

Be smart about beneficiaries

Many individuals overlook the importance of life insurance during open enrollment because they can easily obtain a low-cost policy from their employer with no premiums. As a result, they opt for the policy without fully understanding its benefits.

If you don't name beneficiaries on your account, your loved ones may have to go through a lengthy and expensive legal process to determine who should receive the payout on your policy.

McClanahan advises including not only a primary beneficiary, typically your spouse, but also secondary beneficiaries in case of both your deaths. However, neither your primary nor secondary beneficiary should be a minor child as they cannot legally take possession of the funds.

"If a child is named as a direct beneficiary, the court will appoint a guardian who must report on how the funds are used for the child, resulting in an expensive and frustrating situation."

An estate lawyer or financial expert can assist parents of small children in setting up a plan that involves naming their spouse as a primary beneficiary and leaving the money to a trust established for their children.

Be wary of extra insurance

If your workplace offers a no-premium life insurance policy, it's a no-brainer to sign up. However, if you have the option to add extra policies, it's important to approach them with more caution, advises McClanahan.

"Your work may offer an extra life insurance policy with limited underwriting, but for healthy individuals, it's usually more cost-effective to purchase additional insurance on your own."

Before purchasing additional life insurance from your employer, it's important to determine the premiums you'll need to pay and the amount the policy will pay out in the event of your death. After that, compare the value with what you can obtain from a term life insurance policy from other providers.

A term life insurance policy pays out if the policyholder dies within a specific time frame.

You may discover cheaper insurance options after shopping around, or you may struggle to obtain private coverage due to health issues, making workplace insurance more appealing, according to McClanahan.

"For those people, the workplace policy is a no-brainer."

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