Do I need health insurance?
While you may think that you don't get sick very often, one illness or accident can generate thousands of dollars in medical bills. Health insurance protects you from carrying the financial strains of medical care by yourself and allows you to pick preferred providers. Without insurance, you alone are responsible for your health care bills, and if you die, these bills can be deducted from your overall estate. While every hospital must accept emergency patients despite insurance, some hospitals can refuse ongoing care or recovery care if you do not have health insurance.
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What are the main types of medical insurance?
There are four basic types of insurance:
Fee-for-Service Plans. Health Maintenance Organizations (HMOs). Preferred Provider Organizations (PPOs). Point-of-Service Plans (POSs).
Fee-for-Service Plans involve paying a monthly premium for health insurance. Medical providers send you bills, which you submit to the health insurance company. Fee-for-service coverage is usually the most expensive and includes deductibles and out-of-pocket expenses. It usually has an 80/20 split, in which the insurance company pays 80% and you pay 20%. With this plan you can choose any doctor.
Health Maintenance Organizations (HMOs) have no deductibles and no claim forms. HMOs are generally less expensive than fee-for-service plans. If you are enrolled in an HMO, you are able to choose from a network of physicians. However, if you want to see a doctor or specialist other than your primary care physician (PCP), your PCP must refer you.
Preferred Provider Organizations (PPOs) are networks of doctors and hospitals that provide medical services to members at reduced rates. Use of a PPO provider will usually maximize your benefits. Care outside the PPO network is often covered at a lower benefit level. For example services at a PPO provider may be paid at 90% while those at a provider outside the PPO network may be paid at 70%. PPO plans usually include deductibles.
Point-of-Service Plans (POSs) are a combination of HMOs and PPOs. They act like an HMO when you visit doctors within the network, but when you go outside the network, they work like a PPO.
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What is a pre-existing condition?
A pre-existing condition is an injury or illness that began before your health insurance became effective. Sometimes this includes a medical condition of which you were aware but did not seek treatment for. Coverage for pre-existing conditions varies for check your plan carefully.
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What is COBRA insurance?
COBRA (The Consolidated Omnibus Budget Reconciliation Act of 1985) is a federal law that requires most employers to offer covered employees and their dependents the opportunity for a temporary extension of group health coverage in certain instances where coverage under the plan would otherwise end. Depending on the circumstances, coverage can be continued up to a total of 18 to 36 months.
This type of coverage can be very expensive, but it lets you continue your health insurance until coverage with your new employer begins. Should you wish to elect COBRA, you must do so within 60 days of your qualifying event or the date you are sent a COBRA notice by your employer or insurance company.
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What does Medicare cover?
Medicare is broken down into two parts: Part A and Part B.
Part A (Hospital Insurance Plan) helps pay for:
- Hospital stays: Semi-private room, meals, general nursing and other hospital services and supplies (but not private-duty nursing, a television or telephone in your room, or a private room unless medically necessary).
- Home health care: Intermittent skilled nursing care, physical therapy, occupational therapy, speech language pathology services, home health aide services, durable medical equipment (such as wheelchairs, hospital beds, oxygen and walkers), supplies and other services.
- Hospice care: Pain and symptom relief and supportive services for the care of a terminal illness. Home care is provided. Also covers necessary inpatient care and a variety of services usually not covered by Medicare.
- Skilled nursing facility care: Semi-private room, meals, skilled nursing, rehabilitation services and other services and supplies.
- Blood: From a hospital or skilled nursing facility during a covered stay.
Part B (Medical Insurance Plan) helps pay for:
- Medical expenses: Doctors’ services, inpatient and outpatient medical and surgical services and supplies, physical, occupational and speech therapy, diagnostic tests and durable medical equipment.
- Clinical laboratory service: Blood test, urinalysis and more.
- Home health care: (under certain conditions) Intermittent skilled care, home health aide services, durable medical equipment and supplies and other services.
- Outpatient hospital services: Services to find or treat an illness or injury.
Blood: As an outpatient, or as a part of a Part B covered service.
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How can I lower my health insurance costs?
While it seems the cost of health care is always rising, there are steps you can take to lower your costs:
- Purchase generic drugs when available.
- Examine hospital bills carefully.
- Use doctors within your PPO, POS, or HMO network
- Use emergency room care only for bonafide emergencies.
- Stay healthy (eat right, don’t smoke, etc.
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What is long-term care (LTC) insurance?
Planning for long-term care is not just a good idea – it’s essential for everyone so that families may retain financial independence and choice when care is needed. Long-term care insurance can either pay for some or all long-term care needs.
Things to consider:
- The average annual cost of nursing-facility care or full-time home care today is $50,000, according to HIAA Consumer’s Guide to Long-Term Care, 1998.
- The average nursing-home stay is two-and-a-half-years, according to Consumer Reports, 1997.
Long-term care is different from traditional medical care. Long-term care helps one live as he or she is now; it may not help improve or correct medical problems. Long-term care services may include help with:
- Activities of daily living.
- Home health care.
- Respite care.
- Adult day care.
- Care in a nursing home.
- Care in an assisted living facility.
- Care management services.
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Do I need LTC insurance?
Your age, health status, overall retirement goals, income and assets will determine if you should buy a long-term care insurance policy.
You should CONSIDER buying LTC insurance if:
- You have significant assets and income you want to protect.
- You want to pay for your own care.
- You want to stay independent of the support of others.
You should NOT buy LTC insurance if:
- You can’t afford the premiums.
- You have limited assets.
- Your only source of income is Social Security benefits or Supplemental Security Income (SSI).
- You often have trouble paying for utilities, food, medicine or other important needs.
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What types of care are covered with LTC insurance?
Every long-term care insurance policy covers different types and levels of care. Below are some types of care covered by policies that you should consider while choosing a plan:
Skilled nursing home care is ordered by a physician, usually needed 24 hours a day and follows a plan or schedule. Medical personnel such as registered nurses or professional therapists usually administer care.
Intermediate care is care on a skilled level, but in limited or occasional amounts.
Custodial care (personal care) helps individuals meet personal needs such as bathing, dressing and eating. Someone without professional training may provide care.
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How do Medicare and Medicaid fit into LTC insurance?
Medicare
- Medicare's skilled nursing facility (SNF) benefit does not cover most nursing home care. The SNF benefit covers you only if a medical professional says you need daily skilled care after you have been in the hospital for at least three days. You should not rely on Medicare for your long-term care needs.
- Medicare does not cover home care services. Medicare does not pay for home health aides who give personal care unless you are homebound and are also getting skilled nursing or therapy.
Medicaid
- Medicaid pays for nearly half of all nursing home care. Medicaid also pays for some home and community-based services. In order to qualify, you must have depleted assets.
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Do I need disability insurance?
Disability insurance fills the financial gap after an illness or accident keeps you from working. You may need disability insurance if you have no additional source of revenue to pay your bills once you are unable to work. Single people may want to consider the importance of disability insurance as an additional source of support, if they have no other financial resources to rely on.
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What about Social Security disability benefits?
Social Security disability payments are not intended for temporary disabilities or partial disabilities. The government requirements for this coverage are very strict.
In order to receive benefits, you must:
- Have paid through payroll deductions into the Social Security fund.
- Have worked a certain number of quarters within a year, while contributing to the Social Security fund.
- Be unable to do any "substantial" work – defined as earning $500 or more a month – for at least a year.
- Have a disability that is expected to last at least one year or result in death.
- Wait five months before becoming eligible for disability payments.
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What’s the difference between short-term disability (STD) and long-term disability (LTD)?
Short-Term Disability (STD) provides a paycheck to replace lost income as a result of a disability. STD policies are designed to provide supplemental payments for a few weeks or months. Different policies have different waiting periods before an individual can start collecting money after a disability occurs.
Long-Term Disability (LTD) provides insurance coverage for disabilities that last many years or a lifetime. The waiting time for LTD policies is lengthier than for STD policies, but LTD insurance generally offers greater compensation over a longer period of time. This type of coverage is designed to protect against huge losses from which you can not easily recover.
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What types of disabilities are generally excluded from coverage?
- Self-inflicted injuries.
- Pre-existing conditions.
- Disabilities that occurred during active military duty.
Companies define disability in different ways. Understanding a company’s definition is crucial to finding a policy that meets your needs.
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What factors affect disability insurance costs?
- Elimination Period. The longer the waiting period before collecting money from the policy, the lower your premium. Common elimination periods are 30, 60 or 90 days.
- Occupation. Jobs that have higher risks associated with them draw a larger premium.
- Age. The younger you are when you purchase the policy, the lower the premiums will be throughout the term of a policy.
- Health. Pre-existing conditions can increase premium or cause an insurance company to deny a claim or coverage.
- Smoking. Quitting smoking will decrease the amount of premium you will pay.
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Do I need life insurance?
Do you have dependents? Are you married? Many factors such as children and marital status determine your need for life insurance.
If you’re married or single with children, you have the greatest need for life insurance. Life insurance can make up for:
- Lost income.
- Future expenses, such as college education.
- Mortgage payments.
- Auto loans.
- Living expenses.
- Additional care-giving for children.
If you are married with no children, life insurance can help the surviving spouse meet the financial stresses of returning to a single-income household. Life insurance can help pay utility bills, mortgage payments, auto loans and outstanding debts.
If you are single with no children, life insurance will help pay for funeral expenses and outstanding debts. Single people should consider life insurance based on the comparison of debt against their assets. If their assets outweigh their debt, life insurance may not be needed.
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What’s the difference between term insurance and cash value insurance?
Term insurance insures your life for a specific term and then pays a specific death benefit. It does not build cash value. For example, let’s say you purchase a $200,000 term policy for 15 years. If you die within that 15-year period, your beneficiaries will receive $200,000. If you do not die within that 15-year period, you would need to take out another policy if you want to provide for your beneficiaries.
Cash value insurance provides living benefits, as well as death benefits. This type of insurance puts part of your premium into an investment-type account. The money put into this account can be accessed throughout the life of the policy; however, withdrawals will reduce the death benefit. Types of cash value policies include:
Whole Life Insurance.
Universal Life Insurance.
Variable Life Insurance.
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What’s the difference between Whole Life, Universal Life and Variable Life policies?
Whole Life Insurance covers you for your whole life. The premium is guaranteed never to change, and the younger you are when you purchase the policy, the lower the premiums.
Universal Life Insurance is like a combination of term insurance and cash value insurance. Part of your premium is applied to a term policy, and the remainder is applied to an investment-type account. This account earns a variable interest rate (with a guaranteed limit) from a fund, which the insurance company uses to make investments.
Variable Life Insurance acts similarly to an investment fund. It is a combination of term insurance and cash value insurance. Part of your premium is applied to a term policy, and the remainder is applied to an investment-type account. However, you have control over how it is invested instead of the insurance company.
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What are annuities?
Annuities are mainly an investment-type account. They are insured through the state and are tax-deferred. They can be purchased with a lump sum of money, or payments can be spread over time. There are two basic types of annuities:
A fixed annuity guarantees a fixed interest rate on your money. The insurance company invests the money in an account, and despite the success or failure of it, you will receive a fixed amount.
A variable annuity lets you tell the insurance company how you want your money invested. This type of annuity is not guaranteed.
With both types of annuities there is a fixed amount of time you must wait before collecting payments, unless it is an immediate annuity.
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Should I insure my children?
While in some cases this type of insurance may be needed, never use this to supplement the death benefit or policy of a primary breadwinner. The primary income-generating parent should be fully protected before purchasing insurance for children or a non-wage-earning spouse. It is recommended that a non-wage-earning spouse be insured for household services before considering insurance for children.
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