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If your dependents will not require the proceeds from a life insurance policy for these types of expenses, you may wish to name a favorite charity as the beneficiary of your policy. Whole life insurance can also be used as a source of cash in the event that you need to access the funds during your lifetime. Many types of permanent life insurance build cash value that can be borrowed from or withdrawn at the policyowner’s request. Of course, withdrawals or loans that are not repaid will reduce the policy’s cash value and death benefit. When considering what type of insurance to purchase and how much you need, ask yourself what would happen to your family without you and what type of legacy you would like to leave behind. Do you want to ensure that your children’s college expenses will be taken care of in your absence? Would you like to leave a sizable donation to your favorite charity? Do you want to ensure that the funds will be sufficient to pay off the mortgage as well as achieve other goals? Life insurance may be able to help you meet these objectives and give you the peace of mind that your family will be taken care of financially. The cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance purchased. As with most financial decisions, there are expenses associated with the purchase of life insurance. Policies commonly have mortality and expense charges. In addition, if a policy is surrendered prematurely, there may be surrender charges and income tax implications. Any guarantees are contingent on the claims-paying ability of the issuing insurance company. If you are considering the purchase of life insurance, consult a professional to explore your options.  Although most of us are aware of the need for health insurance coverage when determining our risk-management needs, many of us fail to consider the possibility that we could become disabled. A disability income insurance policy can help replace income lost because of an injury or illness. Few people would have an adequate “war chest” for an extended battle with a loss of income.Unfortunately, many of us will need disability income protection before we retire. Without the appropriate coverage, a disability could spell financial disaster.
Disability at any age can disrupt income while medical expenses mount. Unless you have a battle plan, the effects of even a short-term disability could be financially debilitating and emotionally devastating.
Disability Protection
In the event that you become disabled and are unable to work, the benefits provided by disability insurance can help replace a portion of your earned income.
The appropriate amount of disability coverage will depend on your particular situation. However, there are a few issues you may want to consider.
First, consider carrying enough coverage to replace at least 60 percent of your earnings. Many companies limit benefits to between 50 percent and 80 percentfrom all sources of disability income prior to the disability. This would mean, for example, that the amount of any Social Security disability payments you receive could be deducted from your benefit amount.
If you are concerned about the cost of a private disability insurance policy, consider extending the waiting period, which is the time between when the disability occurs and when you start receiving benefits. Choosing a 90-day or 180-day waiting period (instead of 30 days) may help lower your premium.
Be sure to compare and review policy benefits carefully. Disability insurance can be an affordable way to help protect your assets in the event of a disability.
The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor.
 Rising health-care costs have driven the demand for, and the price of, medical insurance sky-high. The availability of group coverage through employment has helped many Americans face such costs. However, people who are not currently covered by their employers have few affordable sources for group coverage. If you are not covered at work, inquire about coverage through your religious affiliation, professional organizations, or alumni association.Individuals seeking medical coverage on their own can explore purchasing an individual health insurance policy. And those aged 65 and older may qualify for Medicare coverage.
There are three general classifications of medical insurance plans: fee-for-service (indemnity), managed care (e.g., HMOs and PPOs), and high-deductible health plan (HDHP). Older persons may be eligible for Medicare coverage.
Fee for Service
With a basic fee-for-service (indemnity) insurance plan, doctors and hospitals are paid a fee for each service provided to insured patients.
Indemnity plans normally cover hospitalization, outpatient care, and physician services in or out of the hospital. You select the service provider (physician) for consultation or treatment. You are then billed for the service and reimbursed by the insurance company, or you can “assign” direct payment to the provider from the insurance company. Indemnity plans typically require the payment of premiums, deductibles, and coinsurance. Limits on certain coverage or exclusions may apply. Because many policies have lifetime limits on benefits that the insurance company will pay, you should look for a policy with a lifetime limit of at least $1 million.
Managed Care
Managed-care plans became popular in the 1990s as a way to help rein in rising medical costs. In managed-care plans, insurance companies contract with a network of doctors and hospitals to provide cost-effective health care. Managed-care plans include health maintenance organizations (HMOs), preferred provider organizations (PPOs), and point-of-service (POS) plans.
Health maintenance organization. An HMO operates as a prepaid health-care plan. You normally pay a monthly premium in addition to a small copayment for a visit to a physician, who may be on staff or contracted by the HMO. Copayments for visits to specialists may be higher. The insurance company typically covers the amount over the patient copayment amount.
Each covered member chooses or is assigned a primary-care physician from doctors in the plan. This person acts as a gatekeeper for his or her patients and, if deemed necessary, can refer patients to specialists who are on the HMO’s list of providers. Because HMOs contract with doctors and physicians, costs are typically lower than in indemnity plans.
 Preferred provider organization. A PPO is a managed-care organization of physicians, hospitals, clinics, and other health-care providers who contract with an insurance company to provide health care at reduced rates to individuals insured in the plan. The insurance company uses actuarial tables to determine “reasonable and customary” fees for each type of service, and health-care providers accept the PPO’s fee schedule and guidelines.The insured can see any doctor or hospital within a preferred network of providers and pays a copayment for each visit. Insured individuals have to meet an annual deductible before the insurance company will start covering health-care services. Typically, the insurance company will pay a high percentage (often 80%) of the costs to the plan’s health-care providers after the deductible has been met, and patients pay the balance.
Although insured individuals can choose physicians or providers outside the plan without permission, patient out-of-pocket costs will be higher; for example, the initial deductible for each visit is higher and the percentage of covered costs by the insurance company will be lower. Because PPOs provide more patient flexibility than HMOs, they may cost a little more.
Point-of-service plan. A POS health-care plan mixes aspects of an HMO and a PPO to allow greater patient autonomy. POS plans also use a network of preferred providers whom patients must turn to first and from whom patients receive referrals to other providers if deemed necessary. POS plans recommend that patients choose a personal physician from inside the network. The personal physician can refer patients to other physicians and specialists who are inside or outside the network. Insurance companies have a national network of approved providers, so insured individuals can receive services throughout the United States. Copays tend to be lower for a POS plan than for a PPO plan.
High-Deductible Health Plan
An HDHP provides comprehensive coverage for high-cost medical bills and is usually combined with a health-reimbursement arrangement that enables participants to build savings to pay for future medical expenses. HDHP plans generally cover preventive care in full with a small (or no) deductible or copayment. However, these plans have higher annual deductibles and out-of-pocket limits than other insurance plans.
Participants enrolled in an HDHP can open a health savings account (HSA) to save money that can be used for current and future medical expenses. There are annual limits on how much can be invested in an HSA. The funds can be invested as you choose, and any interest and earnings accumulate tax deferred. HSA funds can be withdrawn free of income tax and penalties provided the money is spent on qualified health-care expenses for the participant and his or her spouse and dependent children.
Remember that the cost and availability of an individual health insurance policy can depend on factors such as age, health (pre-existing conditions), and the type of insurance purchased. In addition, a physical examination may be required.
Medicare
Medicare is the U.S. government’s health-care insurance program for the elderly. It is available to eligible people aged 65 and older as well as certain disabled persons. Part A provides basic coverage for hospital care as well as limited skilled nursing care, home health care, and hospice care. Part B covers physicians’ services, inpatient and outpatient medical services, and diagnostic tests. Part D prescription drug coverage is also available.
Medicare Advantage is a type of privately run insurance plan that includes Medicare-approved HMOs, PPOs, fee-for-service plans, and special needs plans. Some plans offer prescription drug coverage. To join a Medicare Advantage plan, you must have Medicare Part A and Part B and you have to pay the monthly Medicare Part B premium to Medicare, as well as the Medicare Advantage premium.
 Medicare Supplement Insurance, or Medigap, is sold by private insurance companies and is designed to cover the deductibles and copayments that Medicare doesn’t cover. There are 10 standard packages of coverage, designated by the letters A through J, plus two newer policies (K and L) that offer different benefits and lower premiums. Only Medigap insurers are able to offer these plans, but not all plans are available in every state. |
We’ve all heard about the importance of having life insurance, but is it really necessary? Usually, the answer is “yes,” but it depends on your specific situation. If you have a family who relies on your income, then it is imperative to have life insurance protection. If you’re single and have no major assets to protect, then you may not need coverage.