Things To Consider

Main Types of Coverage

The three main types of health coverage are:

• Health Maintenance Organizations (HMOs)

• Preferred Provider Organizations (PPOs)

• Indemnity

HMOs and POS (Point of Source) plans are the category most people find fit their health care insurance needs. The difference between the two are that HMOs are more restrictive, meaning there is no out of network options for health care. In other words, there is only coverage if you go to health care providers within the health plan network. While POS plans do have an out of network option, HMOs and POS plans are considered managed care. The main benefit of these types of plans are generally a lower out-of-pocket cost for medical care. The network is accessed through your primary doctor incurring a much lower co-pay charge for common medical procedures.

PPO plans give a patient more autonomy in choosing healthcare in that a referral from a primary physician for specialist care is not required. The network of doctors available to choose from is also slightly larger. For this freedom of choice, you trade off the lower monthly cost, which can be offset with a higher deductible.

Indemnity plans or fee-for-service coverage was the norm for many years. Under this type of health coverage, you have complete autonomy when it comes to choosing doctors, hospitals and other health care providers. You can refer yourself to any specialist without getting permission, and the insurance company doesn't get to decide whether the visit was necessary. In most cases indemnity plans pay benefits directly to the insured.  Many variables exist today.

Health Savings

HSAs have two parts:

• A high deductible health plan, generally less expensive than comparable high deductible plans

• An HSA fund that functions similarly to an IRA account

Contributions to the fund are tax deductible to a set limit. The monies in the fund can be used 100% tax free to cover qualified medical expenses such as prescriptions, doctor visits, and dental and vision deductibles. More information can be found at the U.S. Department of the Treasury web site description on Health Savings Accounts.

Click here to read about various types of dental plans.

Catastrophic health insurance is a high deductible, low premium health insurance policy.  This type of plan usually does not pay for regular doctor visits (check ups, etc.) but covers major hospital and medical expenses.  People who choose this policy are generally healthy and do not require regular medical attention but want protection in case of emergency.

Most catastrophic health plans cover hospital stays, x-rays, and surgical expenses.  Mental health care and maternity care are usually not covered.    

The two main types of life insurance are term and permanent. Both are good policies that can address a variety of needs.

Term insurance is the most common type of life coverage. It can be compared to auto insurance; policies are purchased for a specific period of time. Common term policies span 10, 15, or 20 years. This type of policy provides the highest benefit at the lowest cost.

Permanent coverage comes in three types:

• Universal life

• Whole life

• Variable life

Universal life builds a cash value based on an interest rate with a fixed minimum. A universal policy is purchased as a lifetime policy.

Whole life policies are also lifetime policies. They build cash value as well, with a goal of fixed returns. Additionally, they can be structured as a tax benefit.

Variable life polices build cash value based on the stock market (for example, index funds and mutual funds). It is not recommended that a variable policy be the primary life insurance policy due to higher administrative fees and the potential volatility of the stock market.

Disability insurance is a type of insurance policy that pays monthly benefits when you become unable to work because of a disabling physical or mental reason. You may be able to buy it at work or you can purchase it on your own and pay monthly premiums.

There are numerous types of disability insurance, from bare-bones policies to those with options galore. Your individual coverage will determine when your benefits actually begin, how much you receive, the limitations on your coverage, and how long you can receive benefits.
 

Who Needs It?

You must decide how much financial risk you are willing to assume should you suddenly find yourself unable to work for an extended period. Disability insurance is not really intended to cover a short-term injury or illness.

If you rupture a disk in your back and are out of work for two months, it's not wise to draw on disability benefits because your future premiums may skyrocket. Instead, experts advise using your savings to live on for a couple months, even selling a mutual fund or stock or two if necessary, to cover a short-term illness. In some cases, your employer might pay sick-leave benefits.

Determining whether you need disability insurance is a personal choice. You must decide how much financial risk you are willing to assume should you suddenly find yourself unable to work for an extended period. How many months can you rely on your savings? How easy will it be for you to rebuild your nest egg for your retirement years? Can your spouse's income cover the lost salary?

Your income level also helps determine your need. In general, experts say, people who make less than $30,000 or $40,000 a year don't need it. Some insurance companies won't offer coverage for people with incomes below $20,000.

Of the roughly 4 million Americans who have disability insurance, most are white-collar professionals. Some insurance companies won't cover workers in certain dangerous professions no matter how high their income, such as pilots, miners, and police officers.

Types

• Long term disability

• Short term disability

Long Term Disability covers you until age 65. This is what most people think of when they think of disability insurance. It is the most important type of disability insurance. No one should be without it.

Short Term Disability covers you for up to a year. This covers you for a shorter period of time. Great for accidents and maternity. Accident coverage is also included and can even be bought separately.