Introduction
Making Sense of
Health Insurance
Managed Care
Self-Insured Plans
Appropriate Care
What Is Not Covered?
What
Happens to My Insurance if I Lose My Job?
Frequently Asked Questions
Comparing Plans
Other Forms of
Health Insurance
A Final Word
Introduction(California
Health insurance)
If you have ever been sick or injured, you know how important
it is to have health coverage. But if you’re confused about
what kind is best for you, you’re not alone.
What types of health coverage are available? If your employer
offers you a choice of health plans, what should you know
before making a decision? In addition to coverage for medical
expenses, do you need some other kind of insurance? What if
you are too ill to work? Or, if you are over 65,will Medicare
pay for all your medical expenses?
These are questions that today’s consumers are asking; and
these questions aren’t necessarily easy to answer.
This booklet should help. It discusses the basic forms of
health coverage and includes a checklist to help you compare
plans. It answers some commonly asked questions and also includes
thumbnail descriptions of other forms of health insurance,
including hospital-surgical policies, specified disease policies,
catastrophic coverage, hospital indemnity insurance, and disability,
long-term care, and Medicare supplement insurance.
While we know that our guide can’t answer all your questions,
we think it will help you make the right decisions for yourself,
your family, and even your business.
Making
Sense Of California Health Insurance
The term health insurance refers to a wide variety of insurance
policies. These range from policies that cover the costs of
doctors and hospitals to those that meet a specific need,
such as paying for long-term care. Even disability insurance—which
replaces lost income if you can’t work because of illness
or accident—is considered health insurance, even though it’s
not specifically for medical expenses.
But when people talk about health insurance, they usually
mean the kind of insurance offered by employers to employees,
the kind that covers medical bills, surgery, and hospital
expenses. You may have heard this kind of health insurance
referred to as comprehensive or major medical policies, alluding
to the broad protection they offer. But the fact is, neither
of these terms is particularly helpful to the consumer.
Today, when people talk about broad health care coverage,
instead of using the term "major medical," they
are more likely to refer to fee-for-service or managed care.
These terms apply to different kinds of coverage or health
plans. Moreover, you’ll also hear about specific kinds of
managed care plans: health maintenance organizations or HMOs,
preferred provider organizations or PPOs, and point-of-service
or POS plans.
While fee-for-service and managed care plans differ in important
ways, in some ways they are similar. Both cover an array of
medical, surgical, and hospital expenses. Most offer some
coverage for prescription drugs, and some include coverage
for dentists and other providers. But there are many important
differences that will make one or the other form of coverage
the right one for you.
The section below is designed to acquaint you with the basics
of fee-for-service and managed care plans. But remember: The
detailed differences between one plan and another can only
be understood by careful reading of the materials provided
by insurers, your employee benefits specialist, or your agent
or broker.
Fee-for-Service
This type of coverage generally assumes that the medical
provider (usually a doctor or hospital) will be paid a fee
for each service rendered to the patient—you or a family member
covered under your policy. With fee-for-service insurance,
you go to the doctor of your choice and you or your doctor
or hospital submits a claim to your insurance company for
reimbursement. You will only receive reimbursement for "covered"
medical expenses, the ones listed in your benefits summary.
When a service is covered under your policy, you can expect
to be reimbursed for some, but generally not all, of the cost.
How much you will receive depends on the provisions of the
policy on coinsurance and deductibles. Here’s how it works:
The portion of the covered medical expenses you pay is called
"coinsurance." Although there are variations, fee-for-service
policies often reimburse doctor bills at 80 percent of the
"reasonable and customary charge." (This is the
prevailing cost of a medical service in a given geographic
area.) You pay the other 20 percent—your coinsurance. However,
if a medical provider charges more than the reasonable and
customary fee, you will have to pay the difference. For example,
if the reasonable and customary fee for a medical service
is $100, the insurer will pay $80. If your doctor charged
$100, you will pay $20. But if the doctor charged $105, you
will pay $25. Note that many fee-for-service plans pay hospital
expenses in full; some reimburse at the 80/20 level as described
above.
Deductibles are the amount of the covered expenses you must
pay each year before the insurer starts to reimburse you.
These might range from$100 to $300 per year per individual,
or $500 or more per family. Generally, the higher the deductible,
the lower the premiums, which are the monthly, quarterly,
or annual payments for the insurance.
Policies typically have an out-of-pocket maximum. This means
that once your expenses reach a certain amount in a given
calendar year, the reasonable and customary fee for covered
benefits will be paid in full by the insurer. (If your doctor
bills you more than the reasonable and customary charge, you
may still have to pay a portion of the bill.) Note that Medicare
limits how much a physician may charge you above the usual
amount.
There also may be lifetime limits on benefits paid under
the policy. Most experts recommend that you look for a policy
whose lifetime limit is at least $1 million. Anything less
may prove to be inadequate.
Managed Care
The three major types of managed care plans are health maintenance
organizations (HMOs), preferred provider organizations (PPOs),
and point-of-service (POS) plans.
Managed care plans generally provide comprehensive health
services to their members, and offer financial incentives
for patients to use the providers who belong to the plan.
In managed care plans, instead of paying separately for each
service that you receive, your coverage is paid in advance.
This is called prepaid care.
For example, you may decide to join a local HMO where you
pay a monthly or quarterly premium. That premium is the same
whether you use the plan’s services or not. The plan may charge
a copayment for certain services—for example, $10 for an office
visit, or $5 for every prescription. So, if you join this
HMO, you may find that you have few out-of-pocket expenses
for medical care—as long as you use doctors or hospitals that
participate in or are part of the HMO. Your share may be only
the small copayments; generally, you will not have deductibles
or coinsurance.
One of the interesting things about HMOs is that they deliver
care directly to patients. Patients sometimes go to a medical
facility to see the nurses and doctors or to a specific doctor’s
office. Another common model is a network of individual practitioners.
In these individual practice associations (IPAs), you will
get your care in a physician’s office.
If you belong to an HMO, typically you must receive your
medical care through the plan. Generally, you will select
a primary care physician who coordinates your care. Primary
care physicians may be family practice doctors, internists,
pediatricians, or other types of doctors. The primary care
physician is responsible for referring you to specialists
when needed. While most of these specialists will be "participating
providers" in the HMO, there are circumstances in which
patients enrolled in an HMO may be referred to providers outside
the HMO network and still receive coverage.
PPOs and POS plans are categorized as managed care plans.
(Indeed, many people call POS plans "an HMO with a point-of-service
option.") From the consumer’s point of view, these plans
combine features of fee-for-service and HMOs. They offer more
flexibility than HMOs, but premiums are likely to be somewhat
higher.
With a PPO or a POS plan, unlike most HMOs, you will get
some reimbursement if you receive a covered service from a
provider who is not in the plan. Of course, choosing a provider
outside the plan’s network will cost you more than choosing
a provider in the network. These plans will act like fee-for-service
plans and charge you coinsurance when you go outside the network.
What is the difference between a PPO and a POS plan? A POS
plan has primary care physicians who coordinate patient care;
and in most cases, PPO plans do not. But there are exceptions!
HMOs and PPOs have contracts with doctors, hospitals, and
other providers. They have negotiated certain fees with these
providers—and, as long as you get your care from these providers,
they should not ask you for additional payment. (Of course,
if your plan requires a copayment at the time you receive
care, you will have to pay that.)
Always look carefully at the description of the plans you
are considering for the conditions of payment. Check with
your employer, your benefits manager, or your state department
of insurance to find out about laws that may regulate who
is responsible for payment.
Self-insured Plans
Your employer may have set up a financial arrangement that
helps cover employees’ health care expenses. Sometimes employers
do this and have the "health plan" administered
by an insurance company; but sometimes there is no outside
administrator. With self-insured health plans, certain federal
laws may apply. Thus, if you have problems with a plan that
isn’t state regulated, it’s probably a good idea to talk to
an attorney who specializes in health law.
Appropriate Care
HMOs,
PPOs, and fee-for-service plans often share certain features,
including pre authorization, utilization review, and discharge
planning.
For
example, you may be asked to get authorization from your plan
or insurer before admission to a hospital for certain types
of surgery. Utilization review is the process by which a plan
determines whether a specific medical or surgical service
is appropriate and/or medically necessary. Discharge planning
is an approach that facilitates the transfer of a patient
to amore cost-effective facility if the patient no longer
needs to stay in the hospital. For example, if, following
surgery, you no longer need hospitalization but cannot be
cared for at home, you may be transferred to a skilled nursing
facility.
Almost all fee-for-service plans apply managed care techniques
to contain costs and guarantee appropriate care; and an
increasing number of managed care plans contain fee-for-service
elements. While the distinctions among plans are growing
increasingly blurred, the number of options available to
consumers increases every day.
How Do
I Get Health Coverage?
Health
insurance is generally available through groups and to individuals.
Premiums—the regular fees that you pay for health insurance
coverage—are generally lower for group coverage. When you
receive group insurance at work, the premium usually is paid
through your employer.
Group
insurance is typically offered through employers, although
unions, professional associations, and other organizations
also offer it. As an employee benefit, group health insurance
has many advantages. Much—although not all—of the cost may
be borne by the employer. Premium costs are frequently lower
because economies of scale in large groups make administration
less expensive. With group insurance, if you enroll when you
first become eligible for coverage, you generally will not
be asked for evidence that you are insurable. (Enrollment
usually occurs when you first take a job, and/or during a
specified period each year, which is called open enrollment.)
Some employers offer employees a choice of fee-for-service
and managed care plans. In addition, some group plans offer
dental insurance as well as medical.
Individual
insurance is a good option if you work for a small company
that does not offer health insurance or if you are self-employed.
Buying individual insurance allows you to tailor a plan to
fit your needs from the insurance company of your choice.
It requires careful shopping, because coverage and costs vary
from company to company. In evaluating policies, consider
what medical services are covered, what benefits are paid,
and how much you must pay in deductibles and coinsurance.
You may keep premiums down by accepting a higher deductible.
Pre-Existing
Conditions
Many
people worry about coverage for preexisting conditions, especially
when they change jobs. The Health Insurance Portability and
Accountability Act (HIPAA) helps assure continued health insurance
coverage for employees and their dependents. Starting July
1, 1997, insurers could impose only one 12-month waiting period
for any preexisting condition treated or diagnosed in the
previous six months. Your prior health insurance coverage
will be credited toward the preexisting condition exclusion
period as long as you have maintained continuous coverage
without a break of more than 62 days. Pregnancy is not considered
a preexisting condition, and newborns and adopted children
who are covered within 30 days are not subject to the 12-monthwaiting
period.
If
you have had group health coverage for two years, and you
switch jobs and go to another plan, that new health plan cannot
impose another preexisting condition exclusion period. If,
for example, you have had prior coverage of only eight months,
you may be subject to a four-month, preexisting condition
exclusion period when you switch jobs. If you’ve never been
covered by an employer’s group plan, and you get a job that
offers such coverage, you may be subject to a 12-month, preexisting
condition waiting period.
Federal
law also makes it easier for you to get individual insurance
under certain situations, including if you have left a job
where you had group health insurance, or had another plan
for more than 18 months without a break of more than 62 days.
If
you have not been covered under a group plan and have found
it difficult to get insurance on your own, check with your
state insurance department to see if your state has a risk
pool. Similar to risk pools for automobile insurance, these
can provide health insurance for people who cannot get it
elsewhere.
What Is Not Covered?
While
HMO benefits are generally more comprehensive than those of
traditional fee-for-service plans, no health plan will cover
every medical expense.
Very
few plans cover eyeglasses and hearing aids because these
are considered budgetable expenses. Very few cover elective
cosmetic surgery, except to correct damage caused by a covered
accidental injury. Some fee-for-service plans do not cover
checkups. Procedures that are considered experimental may
not be covered either. And some plans cover complications
arising from pregnancy, but do not cover normal pregnancy
or childbirth.
Health
insurance policies frequently exclude coverage for preexisting
conditions, but, as explained, federal law now limits exclusions
based on such conditions.
You
should also remember that insurers will not pay duplicate
benefits. You and your spouse may each be covered under a
health insurance plan at work but, under what is called a
"coordination of benefits" provision, the total
you can receive under both plans for a covered medical expense
cannot exceed 100 percent of the allowable cost. Also note
that if neither of your plans covers 100 percent of your expenses,
you will only be covered for the percentage of coverage (for
example, 80 percent) that your primary plan covers. This provision
benefits everyone in the long run because it helps to keep
costs down.
What
Happens To My Insurance If I Lose My Job?
If
you have had health coverage as an employee benefit and you
leave your job, voluntarily or otherwise, one of your first
concerns will be maintaining protection against the costs
of health care. You can do this in one of several ways:
First, you should know that under a federal law (the Consolidated
Omnibus Budget Reconciliation Act of 1985, commonly known
as COBRA), group health plans sponsored by employers with
20 or more employees are required to offer continued coverage
for you and your dependents for 18 months after you leave
your job. (Under the same law, following an employee’s death
or divorce, the worker’s family has the right to continue
coverage for up to three years.) If you wish to continue
your group coverage under this option, you must notify your
employer within 60 days. You must also pay the entire premium,
up to 102 percent of the cost of the coverage.
If COBRA does not apply in your case—perhaps because you work for
an employer with fewer than 20 employees—you may be able
to convert your group policy to individual coverage. The
advantage of that option is that you may not have to pass
a medical exam, although an exclusion based on a preexisting
condition may apply, depending on your medical history and
your insurance history.
If COBRA doesn’t apply and converting your group coverage is not for
you, then, if you are healthy, not yet eligible for Medicare,
and expect to take another job, you might consider an interim
or short-term policy. These policies provide medical insurance
for people with a short-term need, such as those temporarily
between jobs or those making the transition between college
and a job. These policies, typically written for two to
six months and renewable once, cover hospitalization, intensive
care, and surgical and doctors’ care provided in the hospital,
as well as expenses for related services performed outside
the hospital, such as X-rays or laboratory tests.
Another possibility is obtaining coverage through an association.
Many trade and professional associations offer their members
health coverage—often HMOs—as well as basic hospital-surgical
policies and disability and long-term care insurance. If
you are self-employed, you may find association membership
an attractive route.
Frequently
Asked Questions
Q.What is the first thing I should know about
buying health coverage?
A.Your aim should be to insure yourself
and your family against the most serious and financially
disastrous losses that can result from an illness or accident.
If you are offered health benefits at work, carefully review
the plans’ literature to make sure the one you select fits
your needs. If you purchase individual coverage, buy a policy
that will cover major expenses and pay them to the highest
maximum level. Save money on premiums, if necessary, by
taking large deductibles and paying smaller costs out-of-pocket.
Q.Can I buy a single health insurance policy
that will provide all the benefits I’m likely to need?
A.No. Although you can select a plan or
buy a policy that should cover most medical, hospital, surgical,
and pharmaceutical bills, no single policy covers everything.
Moreover, you may want to consider additional single-purpose
policies like long-term care or disability income insurance.
If you are over 65, you may want a Medicare supplement policy
to fill in the gaps in Medicare coverage.
Q.I’m planning to keep working after age 65.
Will I be covered by Medicare or by my company’s health
insurance?
A.If you work for a company with 20 or
more employees, your employer must offer you (through age
69) the same health insurance coverage offered to younger
employees. After you reach age 65, you may choose between
Medicare and your company’s plan as your primary insurer.
If you elect to remain in the company plan, it will pay
first—for all benefits covered under the plan—before Medicare
is billed. In most instances, it is to your advantage to
accept continued employer coverage.
But
be sure to enroll in Medicare Part A, which covers hospitalization
and can supplement your group coverage at no additional cost
to you. You can save on Medicare premiums by not enrolling
in Medicare Part B until you finally retire. Bear in mind,
though, that delayed enrollment is more expensive and entails
a waiting period for coverage.
Q.I’ve had a serious health condition that appears
to be stabilized. Can I buy individual health coverage?
A.Depending on what your condition is
and when it was diagnosed and treated, you can probably
buy health coverage. However, the insurer may do one of
three things:
• provide full protection
but with a higher premium, as might be the case with a chronic
disease, such as diabetes;
• modify the benefits to
increase the deductible;
• exclude the specific
medical problem from coverage, if it is a clearly defined
condition, as long as the insurer abides by state and federal
laws on exclusions.
Q.One of my medical bills was turned down by
the insurance company (or health plan). Is there anything
I can do?
A.Ask the insurance company why the claim
was rejected. If the answer is that the service isn’t covered
under your policy, and you’re sure that it is covered, check
to see that the provider entered the correct diagnosis or
procedure code on the insurance claim form. Also check that
your deductible was correctly calculated.
Make
sure that you didn’t skip an essential step under your plan,
such as pre admission certification. If everything is in order,
ask the insurer to review the claim.
Comparing Plans
Whether
you end up choosing a fee-for-service plan or a form of managed
care, you must examine a benefits summary or an outline of
coverage—the description of policy benefits, exclusions, and
provisions that makes it easier to understand a particular
policy and compare it with others.
Look
at this information closely. Think about your personal situation.
After all, you may not mind that pregnancy is not covered,
but you may want coverage for psychological counseling. Do
you want coverage for your whole family or just yourself?
Are you concerned with preventive care and checkups? Or would
you be comfortable in a managed care setting that might restrict
your choice somewhat but give you broad coverage and convenience?
These are questions that only you can answer.
Here
are some of the things to look at when choosing and comparing
health insurance plans.
•Health Insurance Checklist
•Covered medical services
•Inpatient hospital services
•Outpatient surgery
•Physician visits (in the hospital)
•Office visits
•Skilled nursing care
•Medical tests and X-rays
•Prescription drugs
•Mental health care
•Drug and alcohol abuse treatment
•Home health care visits
•Rehabilitation facility care
•Physical therapy
•Speech therapy
•Hospice care
•Maternity care
•Chiropractic treatment
•Preventive care and checkups
•Well-baby care
•Dental care
•Other covered services
Are
there any medical service limits, exclusions, or preexisting
conditions that will affect you or your family?
What
types of utilization review, pre authorization, or certification
procedures are included?
Costs
How
much is the premium?
$_____________________________________________
Are
there any discounts available for good health or healthy behaviors
(e.g., non-smoker)?
__________________________________________________________________
How
much is the annual deductible?
$_________________________________
per person
$_________________________________
per family
What coinsurance or co-payments apply?
_________________________________%
after I meet my deductible
$_________________________________copay
or % coinsurance per office visit
$_________________________________copay
or % coinsurance for "wellness" care (includes well-baby
care, annual eye exam, physical, etc.)
$_________________________________%
copay or coinsurance for inpatient hospital care
Other
Forms Of California Health Insurance
In addition to broad coverage for medical, surgical, and hospital
expenses, there are many other kinds of health insurance.
Hospital-surgical
policies, sometimes called basic health insurance, provide
benefits when you have a covered condition that requires hospitalization.
These benefits typically include room and board and other
hospital services, surgery, physicians’ non surgical services
that are performed in a hospital, expenses for diagnostic
X-rays and laboratory tests, and room and board in an extended
care facility.
Benefits for hospital room and board may be a per-day dollar amount
or all or part of the hospital’s daily rate for a semi-private
room. Benefits for surgery typically are listed, showing the
maximum benefit for each type of surgical procedure.
Hospital-surgical policies may provide "first-dollar" coverage. That
means that there is no deductible, or amount that you have
to pay, for a covered medical expense. Other policies may
contain a small deductible.
Keep
in mind that hospital-surgical policies usually do not cover
lengthy hospitalizations and costly medical care. In the event
that you need these types of services, you may incur large
expenses that are difficult to meet unless you have other
insurance.
Catastrophic
coverage pays hospital and medical expenses above a certain
deductible; this can provide additional protection if you
hold either a hospital-surgical policy or a major medical
policy with a lower-than-adequate lifetime limit. These policies
typically contain a very high deductible ($15,000 or more)
and a maximum lifetime limit high enough to cover the costs
of catastrophic illness.
Specified
or dread disease policies provide benefits only if you get
the specific disease or group of diseases named in the policy.
For example, a policy might cover only medical care for cancer.
Because benefits are limited in amount, these policies are
not a substitute for broad medical coverage. Nor are specified
disease policies available in every state.
Hospital indemnity insurance pays you a specified amount of cash benefits
for each day that you are hospitalized, generally up to a
designated number of days. These cash benefits are paid directly
to you, can be used for any purpose, and may be useful in
meeting out-of-pocket expenses not covered by other insurance.
Hospital
indemnity policies frequently are available directly from
insurance companies by mail as well as through insurance agents.
You will find that these policies offer many choices, so be
sure to ask questions and find the right plan to meet your
needs.
Some
policies contain limitations on preexisting medical conditions
that you may have before your insurance takes effect. Others
contain an elimination period, which means that benefits will
not be paid until after you have been hospitalized for a specified
number of days. When you apply for the policy, you may be
allowed to choose among two or three elimination periods,
with different premiums for each. Although you can reduce
your premiums by choosing a longer elimination period, you
should bear in mind that most patients are hospitalized for
relatively brief periods of time.
If
you purchase a hospital indemnity policy, periodically review
it to see if you need to increase your daily benefits to keep
pace with rising health care costs.
Medicare
supplement insurance, sometimes called Medigap or MedSup,
is private insurance that helps cover some of the gaps in
Medicare coverage.
Medicare
is the federal program of hospital and medical insurance primarily
for people age 65 and over who are not covered by an employer’s
plan. But Medicare doesn’t cover all medical expenses. That’s
where MedSup comes in.
All
Medicare supplement policies must cover certain expenses,
such as the daily coinsurance amount for hospitalization and
90 percent of the hospital charges that otherwise would have
been paid by Medicare, after Medicare is exhausted. Some policies
may offer additional benefits, such as coverage for preventive
medical care, prescription drugs, or at-home recovery.
There
are 10 standard Medicare supplement policies, designated by
the letters A through J. With these standardized policies,
it is much easier to compare the costs of policies issued
by different insurers. While all10 standard policies may not
be available to you, Plan A must be made available to Medicare
recipients everywhere.
Insurers
are not permitted to sell policies that duplicate benefits
you already receive under Medicare or other policies. If you
decide to replace an existing Medicare supplement policy—and
you should do so only after careful evaluation—you must sign
a statement that you intend to replace your current policy
and that you will not keep both policies in force.
People
who are 65 or older can buy Medicare supplement insurance
without having to worry about being rejected for existing
medical problems, so long as they apply within six months
after enrolling in Medicare.
Long-term
care policies cover the medical care, nursing care, and other
assistance you might need if you ever have a chronic illness
or disability that leaves you unable to care for yourself
for an extended period of time. These services generally are
not covered by other health insurance. You may receive long-term
care in a nursing home or in your own home.
Long-term
care can be very expensive. On average, a year in a nursing
home costs about $40,000. In some regions, it may cost much
more. Home care is less expensive, but it still adds up. (Home
care can include part-time skilled nursing care, speech therapy,
physical or occupational therapy, home health aides, and homemakers.)
Bringing
an aide into your home just three times a week—to help with
dressing, bathing, preparing meals, and similar chores—easily
can cost$1,000 a month, or $12,000 a year. Add in the cost
of skilled help, such as physical therapy, and the costs can
be much greater.
Most
long-term care policies pay a fixed dollar amount, typically
from$40 to more than $200 a day, for each day you receive
covered care in a nursing home. The daily benefit for at-home
care is usually half the benefit for nursing home care. Because
the per-day benefit you buy today may be inadequate to cover
higher costs in the future, most policies also offer an inflation
adjustment feature.
Keep
in mind that unless you have a long-term care policy, you
are not covered for long-term care expenses under Medicare
and most other types of insurance. Recent changes in federal
law may allow you to take certain income tax deductions for
some long-term care expenses and insurance premiums.
Disability
insurance provides you with an income if illness or injury
prevents you from being able to work for an extended period
of time. It is an important but often overlooked form of insurance.
There
are other possible sources of income if you are disabled.
Social Security provides protection, but only to those who
are severely disabled and unable to work at all; workers’
compensation provides benefits if the illness or injury is
work-related; civil service disability covers federal or state
government workers; and automobile insurance may pay benefits
if the disability results from an automobile accident. But
these sources are limited.
Some
employers offer short- and long-term disability coverage.
If you are self-employed, you can buy individual disability
income insurance policies. Generally:
Monthly benefits are usually 60 percent of your income at the time
of purchase, although cost-of-living adjustments may be
available.
If you pay the premiums for an individual disability policy, payments
you receive under the policy are not subject to income tax.
If your employer has paid some or all of the premiums under
a group disability policy, some or all of the benefits may
be taxable.
Whether
you are an employer shopping for a group disability policy
or someone thinking of purchasing disability income insurance,
you will need to evaluate different policies. Here are some
things to look for:
Some policies pay benefits only if someone is unable to perform the
duties of their customary occupation, while others pay only
if the person can engage in no gainful employment at all.
Make sure that you know the insurer’s definition of disability.
Some policies pay only for accidents, but it’s important to be insured
for illness, too. Be sure, as you evaluate policies, that
both accident and illness are covered.
Benefits may begin anywhere from one month to six months or more after
the onset of disability. A later starting date can keep
your premiums down. But remember, if your policy only starts
to pay (for example) three months after the disability begins,
you may lose a considerable amount of income.
Benefits may be payable for a period ranging anywhere from one year
to a lifetime. Since disability benefits replace income,
most people do not need benefits beyond their working years.
But it’s generally wise to insure at least until age 65
since a lengthy disability threatens financial security
much more than a short disability.
A Final Word
If
you get health care coverage at work, or through a trade or
professional association or a union, you are almost certainly
enrolled under a group contract. Generally, the contract is
between the group and the insurer, and your employer has done
comparison shopping before offering the plan to the employees.
Nevertheless, while some employers only offer one plan, some
offer more than one. Compare plans carefully!
If
you are buying individual insurance, or any form of insurance
that you purchase directly, read and compare the policies
you are considering before you buy one, and make sure you
understand all of the provisions. Marketing or sales literature
is no substitute for the actual policy. Read the policy itself
before you buy.
Ask
for a summary of each policy’s benefits or an outline of coverage.
Good agents and good insurance companies want you to know
what you are buying. Don’t be afraid to ask your benefits
manager or insurance agent to explain anything that is unclear.
It is also a good idea to ask for the insurance company’s
rating. The A.M. Best Company, Standard & Poor’s Corporation,
and Moody’s all rate insurance companies after analyzing
their financial records. These publications that list ratings
usually can be found in the business section of libraries.
And bear in mind: In some cases, even after you buy a policy,
if you find that it doesn’t meet your needs, you may have
30 days to return the policy and get your money back. This
is called the "free look".
