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Take Charge and Reach Your Goals

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Page 1: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Take Charge and

Reach Your Goals

Page 2: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

The PICPAThe Pennsylvania Institute of Certified Public Accountants

The PICPA is a professional association of more than 12,000 CPAs working together to improve the profession and serve the public interest.

Page 3: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

TypesThere are many types of insurance. It’s important to understand each one and how they work

• Disability Insurance• Life Insurance• Long-Term Care

Insurance

• Health Insurance • Homeowners

Insurance• Auto Insurance

Page 4: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Disability InsuranceWhy do you need it?• The chances of being disabled for more than 3

months are greater than dying prematurely• Everyone who works should consider purchasing

disability insurance• If something happens, how will you pay the bills?

Page 5: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Disability InsuranceWhy do you need it (continued)?• Can your spouse carry the workload while you’re out?• Business owners should especially consider

purchasing this type of insurance. – Your income will be protected, it can allow you to

purchase your partner’s side of the business in case he or she becomes incapacitated.

Page 6: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Disability InsuranceWhen do you need it?• You can purchase disability insurance that

guarantees lifetime coverage, but those are typically really expensive.

• The common approach is to buy two to five-year policies up until age 65.

Page 7: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Disability InsuranceHow long will it take to receive benefits? • It typically takes time to receive the benefits after a

disability. – The waiting period for most private insurers is 90 days.

• If you are going through Social Security or a government disability program, it could take as long as five months.

Page 8: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Disability InsuranceHow long will it take to receive benefits (cont.)? • If you are on a group plan, you will typically have

to wait no more than 8 days for short-term policies to kick in and no more than 90 days for long-term policies.

Page 9: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Disability InsuranceWhere do you get it?• Usually two main places: Private insurer and

Social Security or governmental program

Page 10: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Disability InsuranceGenerally private insurers offer more comprehensive disability benefits to individuals. If you are not part of a group plan, you can get a list of accredited insurance companies in Pennsylvania at www.insurance.state.pa.us.

Page 11: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Disability Insurance• Generally government disability insurance

programs provide limited benefits under restrictive terms and should not be relied upon for your main source of income. These programs are usually available for civil service workers, military service members, or other federal, state, or local government employees.

Page 12: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Life InsurancesIt’s many uses:• Replace loss of income that would occur in the

event of your death • Can pay down debts that you may leave behind • Can pay final expenses and estate taxes • Can create an estate for heirs

Page 13: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Life InsuranceHow much do you need?• Depends on many things including whether you’re

married, size of your family, financial obligations, career stage and goals

• When you’re young, probably not a great need for life insurance.

• But if you have a family, the need for life insurance increases.

Page 14: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Life InsuranceHow much do you need?• Usually corresponds to questions such as: what immediate financial

expenses will need to be paid for upon my death?• How much of your current salary is devoted to current expenses and

future needs?• How long would your dependents need support after death?• How much money do you want to leave for special situations such as

paying for a child’s college tuition or inheritance or charitable gifts?• Re-evaluation of coverage is also essential

Page 15: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Life InsuranceTypes of polices: permanent and term

Page 16: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Life InsurancePermanent Life Insurance – Means you are protected for life, providing you make the payments• Whole• Universal• Variable• Universal variable

Page 17: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Life InsuranceWhole: means you make equal payments throughout your life. Cash value and death benefit are predetermined and guaranteed. The only action is that the policy owner must pay the fixed premium.

Page 18: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Life InsuranceUniversal: pay premiums at any time in any amount as long as policy and cost of coverage is met.

Amount of insurance coverage can change and the cash value, which grows at an interest rate, will vary over time

Page 19: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Life InsuranceVariable: premium is paid for life (just like Whole) HOWEVER, the cash value and death benefit are not predetermined or guaranteed. These fluctuate depending on investment performance in subaccounts. The policy owner selects the subaccounts in which the cash value will be invested.

Page 20: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Life InsuranceUniversal variable: as the name says, it’s a combination of both variable and universal. Pay premiums at an time in any amount as long as expenses and cost of coverage are met. The coverage can change as well as the cash value based on performance of investments.

Page 21: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Life InsuranceTerm Life Insurance• Specific amount of time• Ranges from 1-30+ years• Will get nothing if you live past coverage

period• Death beneficiary receives face of policy

upon death during term

Page 22: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Life InsuranceTerm Life Insurance• If you die during the coverage period, the death beneficiary

gets the face amount of the policy• If you outlive the term, you get NO money back. The premiums

you pay go toward administrative expenses, company profit, and a reserve account in case you pass during the term

• Most term insurance policies have a conversion feature, allowing you to switch to something permanent without answering health questions.

Page 23: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Life InsuranceWhere can you buy it?• Your employer – through the group plan• A broker or directly from an insurance company• Check ratings services of insurer’s financial

strength at places like A.M. Best, Moody’s and Standard & Poor’s to understand their financial strength.

Page 24: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Long-Term Care InsuranceWho needs it?• Millions of senior citizens, according to a survey by

the Health Insurance Association of America• Due to increasing life expectancies and uncertainty

surrounding Medicare and government • Cost of living in a nursing home for one year are

estimated at about $70,000

Page 25: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Long-Term Care InsuranceTypes of policies:• Skilled care– Continuous, round-clock– Medicare coverage– Medigap’s coverage– Long-Term Care’s coverage

Page 26: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Long-Term Care InsuranceTypes of policies:• Medigap’s coverage– supplemental health insurance sold by

private insurers– Usually covers Medicare co-payment from

21st to 100th day of skilled care

Page 27: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Long-Term Care InsuranceTypes of policies:• Long-Term Care– pays a specified dollar amount for a

certain time period. You’ll need this if you want coverage after 100 days

Page 28: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Long-Term Care InsuranceIntermediate• Needed occasionally• Medicare’s coverage• Medigap’s coverage• Long-Term Care’s coverage

Page 29: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Long-Term Care InsuranceIntermediate• Less specialized than skilled care. Trained medical workers

under supervision of doctor• Medicare may cover intermediate but only under certain

conditions• Medigap policies provide additional money per at-home

visits for intermediate care, but only if a doctor orders services as a follow-up to injury or illness

• Long-Term Care: provides coverage for home or facility

Page 30: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Long-Term Care InsuranceCustodial• Assist in performing activities of daily living• Prof. medical skills not necessary• Only Long-Term Care coverage

Page 31: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Long-Term Care InsuranceCustodial• Examples of custodial care include bathing, eating, and

dressing.• Doctors orders not needed and the type of care can be

provided at home or in a facility• Medicare and Medigap do not provide coverage since

these are non-medical services• Long-Term Care: provides coverage for custodial. In fact

many policies include custodial care anyway.

Page 32: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Long-Term Care InsuranceWhere do you get it?• Many private insurers have this• Also good idea to check out

www.longtermcareinsurance.org for a list of quotes and answers to frequently asked questions.

Page 33: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Health InsuranceUnderstanding your policy:• You need to purchase your own plan, you should

know what’s out there.• Be sure to read the contract to know what your

policy covers. • Policies should mention pre-existing conditions,

deductible, co-payment, family coverage, out-of-pocket maximum, and more.

Page 34: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Health InsuranceSeveral types of organizations: • HMO• PPO• POS• EPO

Page 35: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Health InsuranceHealth Maintenance Organizations (HMO): • cover medical treatment provided by doctors and facilities

within a network. You must choose a primary care physician who will either approve or deny requests to see a specialist. A fixed monthly fee is usually included along with small co-payments at visits.

Page 36: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Health InsurancePreferred Provider Organizations (PPO): • does not require members to seek care from PPO doctors and

hospitals, though it’s usually recommended. A fixed monthly fee is usually included along with small co-payments at visits.

Page 37: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Health InsurancePoint of Service (POS): • combine traits from HMOs and PPOs. Must choose a primary

care to be responsible for referrals within a POS network. You can choose to go outside the network, but the health care will be covered at a lower level.

Page 38: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Health InsuranceExclusive Provider Organizations (EPO): • are essentially PPOs, however they WILL NOT provide

coverage to non-network care.

Page 39: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Health InsuranceSaving for expenses:• Flexible Spending• Health Care Reimbursement• Health Care Savings

Page 40: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Health InsuranceFlexible Spending Accounts:• you can set aside pre-tax dollars for health expenses and they

can be used with any type of plan. Either you or your employer funds it AND the employer sets the minimum and maximum annual contribution. The entire amount is available at the beginning of the year, even if YOU haven’t funded it yet. The items these are spent on are approved by employer and any unused contributions are lost!

Page 41: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Health InsuranceHealth Care Reimbursement Accounts:• employer-funded and it can be used for current and retired

employees. Employers usually provide when using a PPO plan with high deductible AND only employer can fund it. Entire amount is available at the beginning of the year and eligible items are approved by employer. The employer determines whether unused funds can be carried over from year to year, BUT you cannot take them with you to another employer.

Page 42: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Health InsuranceHealth Care Savings Accounts:• Tax-free, interest bearing account for health care now and

future years.• Can be used by employers, employees, and retirees with high

deductible plans AND you must have a high-deductible plan to contribute.

• Anyone can contribute, which includes you, your employer, and others.

Page 43: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Health InsuranceHealth Care Savings Accounts:There is a maximum contribution limit: for 2010 it’s $3,050 for individuals and $6,150 for family plans. People over age 55 can fund additional money. You can only spend money contributed to the plan and you can reimburse yourself for prior year expenses incurred. Eligible items are on IRS list of approved expenses. Unspent funds STAY in account and can be transferred if you change employers. Can make withdraws on HSAs, without penalty and for non-medical purposes, when you turn 65.

Page 44: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Health InsuranceSave on expenses:• Use network• Generic drugs• Use ER only for emergencies• Ask about home testing

Page 45: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Health InsuranceUse network:• By using providers in your network, you should be getting

lower rates

Page 46: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Health InsuranceGeneric drugs:• Don’t believe hype about brand-name drugs. Generics

equivalents often work just as well and are cheaper. Ask your doctor when he writes out a prescription if generic equivalents exist for the particular drug.

Page 47: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Health InsuranceUse ER only for emergencies:• Don’t just instinctively go to the ER. If you have a condition,

consider going to an urgent care center or your regular doctor. Sometimes it can be a tough call, but if it’s not an emergency, going to your doctor is cheaper than going to the ER.

Page 48: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Health InsuranceAsk about home testing:• Home tests for blood pressure, diabetes are cheaper than

going to the office for testing. Be sure to check with your doctor on the process and report anything that is irregular.

Page 49: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Homeowners InsuranceHomeowners insurance is often required by mortgage lender, but even if it’s not, you will still need some protection against the items you can’t afford to lose.

Page 50: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Homeowners InsuranceWhat’s commonly covered:• Coverage pertains to the cost of damage and

often your living expenses while you wait for your home to be repaired

• Most homeowners policies cover your personal property both on and off premises and they set specific dollar limits to certain items

Page 51: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Homeowners InsuranceWhat’s commonly covered:• Coverage pertains to the cost of damage and

often your living expenses while you wait for your home to be repaired

• Most homeowners policies cover your personal property both on and off premises and they set specific dollar limits to certain items

Page 52: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Homeowners InsuranceWhat’s commonly covered:• Most policies cover fire and lightning

damage, windstorm and hail, explosions, theft or vandalism, vehicles, smoke, falling objects, weight of snow, ice, and sleet, freezing of plumbing, heating, or ac systems, riots

Page 53: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Homeowners InsuranceWhat’s commonly covered:• They will often NOT cover damage from

floods or earthquakes. An additional policy may be needed to have coverage for those

• Liability coverage is also available, though separate from your homeowners, that covers damages caused by your negligence

Page 54: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Homeowners InsuranceWays to reduce cost:• Depends on the amount of coverage you

want• Shop around for the best price

Page 55: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Auto InsurancePennsylvania requires insurance, but it is a low minimum compared to many other states

Page 56: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Auto InsurancePa. is also one of the largest no-fault states, which means that in the event of an accident, each individual insurance company pays for the damage, regardless of who’s at fault. There are exceptions – if a serious injury results with high medical cost, the seriously-injured motorist can seek recompense from the person at fault for the accident.

Page 57: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Auto InsuranceIt’s not required that drivers purchase more than the minimum liability, it is strongly encouraged to do so.

Page 58: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Auto InsuranceUnderstanding you policy:• Collision covers your auto when it strikes an object• Comprehensive covers your car against physical

damage not caused by a collision such as fire and theft

• Exclusions – be sure you read this section so you understand what is not covered

Page 59: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Auto InsuranceWays to reduce cost:• Insure your car with the same company that

insures your home• Insure ALL your family’s vehicles through one

company• Select highest deductible you can afford

Page 60: Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association

Insurance

Questions?