health care planning. how can you reduce your personal health care costs? stay well - focus on...
TRANSCRIPT
Health Care Planning
How Can You Reduce Your Personal Health Care Costs? Stay well - focus on prevention
eat a balanced diet and keep your weight under control
avoid smoking and don’t drink to excess
get enough rest, relaxation, and exercise
drive carefully and look for accident and fire hazards in your home
Health Insurance and Financial Planning
Protection against financialloss due to illness or injury.
Part of your overall risk management plan to safeguard your family’s economic securitymedical expense insurancedisability income insurance to protect
your most valuable asset - your ability to earn an income
Health Care Planning
Direct medical care Recuperative care Rehabilitation Replacement of income
FOUR LOSS TYPES:
Health Care Providers
Individual
Group
Lower rates Employee fringe Coverage for existing health problems
Health Insurance and Financial Planning
Group plans comprise more than 85% of all health insurance issued
Most group plans are sponsored by employers, with the employer paying most or all of the cost
Group plans can be supplemented with individual plans
Following divorce, a former spouse can remain covered for three years, but the premiums can be as high as $4,000 a year
(continued)
Private insurance companies
Managed care plans
Preferred provider Health maintenance
Health Care Providers
Government plans
Medicare Medicaid
Health Care Providers
Health Care Coverages
Hospital
Surgical
Medical expense
Major medical expense
Comprehensive health
Dental expense and vision care
A Good Health Insurance Plan Should..
Provide quality care at a reasonable cost Offer basic coverage for doctor and hospital bills Cover 120 days’ hospital room and board Provide at least $1,000,000 lifetime maximum
per person Pay 80% of out-of-hospital expenses after the
deductible is met Have no unreasonable exclusions Limit out-of-pocket expenses
Types of Health Care Coverages Hospital
hospital room, operating room, lab tests, X-rays, medicine
Hospital indemnity pays a fixed amount for each day in
hospital. Best for people in high risk groups Surgical
surgeon's fee Physician
office visits, lab tests and X-rays
Types of Health Care Coverages
Major medical covers expenses for a
long term injury or illness Comprehensive major medical
low deductible offered without a separate, basic plan
Dread disease focuses on unrealistic fears, and only pays
out for very specific conditions. Often sold by people working on commission.
(continued)
Types of Health Care Coverages
Dentalgroup coverage for exams, cleaning,
x-rays, fillings, oral surgeryVision care
some group plans include exams and glasses
Long term care fastest growing coverage, especially
for women
(continued)
Medicare supplement (Medigap)
Long-term care
Accident and dread disease
Health Care Coverages
1996, Teacher's Insurance and Annuity Association
Why Do People Buy Long-Term Care Insurance?
To avoid dependence25.0%
To avoid losing assets23.0%
Other reasons25.0%
Guarantee services12.0%
Protect standard of living
15.0%
Definitions
Who is covered
Time period
Making Sense of Health Benefits
GENERAL TERMS AND PROVISIONS:
Policy Limits
Deductibles and copayments
Coinsurance
Coordination of benefits
Making Sense of Health Benefits
PAYMENT LIMITATIONS:
Based on timing of loss
General exclusions
Maternity benefits
Making Sense of Health Benefits
COVERAGE LIMITATIONS:
Disability Income Insurance
Disability income insurance replaces a portion of the income lost when you cannot work because of illness or injury. The chances of becoming disabled for at least three months are seven times greater than the chances of death!
Disability Income Insurance
Level of need
Important policy provisions
Elimination period Benefit period Degree of disability
Disability Income Insurance
Important policy provisions (continued)
Residual clause
Social Security rider
Cost-of-living adjustments
How Long YourMoney Will Last
Trade-Offs in Choosing a Policy
Reimbursement versus indemnity Inside limits versus aggregate limitsDeductibles and coinsuranceOut-of-pocket limit, or stop-lossBenefits based on reasonable and
customary charges
How to Choose an HMO
Consider the following factorsaccessibilityconvenient office hoursalternative physicianssecond opinions type of coverageappeal proceduresprice
Life Insurance Planning
What is the Purpose ofLife Insurance?
To protect people who depend on you from financial loss related to your death 78% of all American households have it
To make charitable bequests upon your deathTo save money for retirement or children’s
educationTo leave as part of your estateTo pay off a mortgage or other debts at the
time of death
The Principle of Life Insurance
Mortality tables provide odds on your dying, based on your age and sex
Your premium is based on the projections for the payouts for persons who die
Determining Your Life Insurance Needs - Ask Yourself...
Do you need life insurance?do you have people you need
to protect financially?does your partner work?
What are your objectives for life insurance? to accumulate money for retirement? to provide funds when you die?how much can you afford?
Estimating the Amount ofLife Insurance You NeedThe Easy Method
typically, you will need to have enough insurance to cover 70% of your income for seven years
The DINK (dual income, no kids) MethodThe “Nonworking” Spouse MethodThe “Family Need” Method looks at
employer provided insuranceSocial Security benefits income and assets
Multiple-of-Earnings Approach
Determining Life Insurance Needs
CALCULATING DOLLAR LOSS:
Types of Life Insurance Policies
Term life insuranceprotection for a specified period of time if you don’t pay premiums, coverage
stops renewability option
at the end of the term you can renew the policy without having a physical
Types of Life Insurance Policies
Term life insurance (continued)
conversion optioncan change your policy from term to a whole
life policy without a physical decreasing term insurance
your premium stays the same, but the amount of coverage decreases as you age
12-8
Types of Life Insurance Policies
Whole life insurance you pay a premium as long as you live amount of premium depends on your age when
you start the policy provides death benefits and accumulates a cash
value you can borrow against the cash value or draw it
out at retirement look carefully at the rate of return your money
earns
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Whole Life Policy OptionsNonforfeiture clause
if you stop paying premiums you can use the cash value in a variety of ways.
Limited payment policypay higher premiums during your earning
years only, keeping lifetime coverageVariable life policy
minimum death benefit guaranteed, but can be more depending on how your premium dollars are invested
Whole Life Policy Options
Adjustableyou can change your premium amount
and thus your coverageUniversal life
lets you pay premiums in almost any amount
combines term insurance and investment elements
(continued)
Decreasing Term Insurance
Comparison of Term vs. Cash Value
Types of Policies Issued in 1994*
10%*1997 Insurance Fact Book
8%
Term22%
Whole Life45%
Other Variable Universal
Universal
11%
Variable2%
Decreasing2.0%
12-12
Other Types of Life Insurance Policies
Group life insuranceoften through an employerno physical requiredusually term insurance
Credit life insurancedebt is paid off if you die
mortgage, car, furniturealso protects lendersexpensive protection
Life Insurance Contract Provisions
Naming your beneficiary (one or more)Length of grace period for late paymentsReinstatement of a lapsed policy if it has not
been turned in for cashSuicide clause during first two yearsAutomatic premium loans
uses the accumulated cash valueto pay the premium if you do not
Life Insurance Contract Provisions Misstatement of age provision Policy loan provision
can borrow against your cash value Rider to add or alter benefits
cost of living protection Waiver of premium disability benefit Accidental death benefit
pays twice the policy face amount Guaranteed insurability option Accelerated benefits
(continued)
Buying Your Life Insurance
Look at your income, savings, group life insurance, and Social Security benefits
Compare policy costs which are affected bycost of doing business return on its investmentsmortality rate among policyholders features of the policycompetition from other companies
Buying Your Life Insurance
Use the interest-adjusted index to compare policies takes into account the time value of moneyhelps you make cost comparisons among
insurance companiesDetermine from whom to buy your policy
examine both private and public sources look up the company’s rating
(continued)
Choosing Your Insurance Agent
Ask friends, parents and neighbors for recommendations
Find out if the agent belongs to professional groups or is a CLU
Is the person willing to take the time to answer your questions and find a policy that is right for you?
Do they ask about your financial plan? Do you feel pressured? Are they available when needed?
Obtaining and Examining a Policy
Apply and provide medical history
Read all of the contract
After you buy it you have ten days to change your mind
Give your beneficiaries and lawyer a copy
Choosing Settlement Options
Options are the choices for how you want the money paid out One lump-sum is most common Limited installment plan
in equal installments for a specific number of years after your death
Income for lifepayments to the beneficiary for life
Proceeds left with the companypays interest to the beneficiary
Should You Switch Policies?
If benefits exceed costs of getting another physical and paying policy set up costs.
Are you still insurable?Can you get all the provisions
you want?
Financial Planning with Annuities
What is an annuity? a contract where you pay money in, and at
a certain date get regular payments back during your lifetime
Why do people buy annuities? to supplement retirement income and to
shelter income from taxes How are annuities taxed?
income deducted and interest earned is not taxed until you draw the money out