By Marc S Schliefer, CFP®️RICP®️
There are many types of insurance that you can purchase. In this issue, we look at several types and explore the reasons that you may or may not need a specific type as well as some of the options that you should consider.
The most important type of insurance that everyone needs is some form of health insurance. A serious illness can impact your wealth and your income. Having a good health insurance policy that covers major medical is extremely important. If you are under the age of 65, you usually obtain medical insurance through your employer. Group insurance is the way most people get their health insurance. It is important to have high limits for catastrophic conditions that include coverage of expensive tests and treatments. You want a solid group plan. It may be an HMO, PPO, High Deductible Health Plan (that is HSA eligible), or any other major medical plan. These are the most common types of plans available. You want access to a plan like the ones above to ensure that you have most of your expenses covered. You should review your plans with a health insurance expert or broker to be assured that you have what is needed in the event of a catastrophic illness or injury.
If you are over age 65, you need to make sure that you have signed up for Medicare Part A and possibly Part B if you do not have coverage considered credible (as good as) coverage by Medicare. There are also substantial and lifelong penalties for signing up late for Medicare Parts B and D.
In addition to having Medicare Parts A and B, you should purchase a Medicare supplement and a Part D supplement to cover prescriptions. It’s recommended to meet with a Medicare insurance specialist to review the many options for coverage and to help choose a plan that best suits your situation. You should start this search about a year before turning age 65 to avoid substantial lifetime penalties if a deadline is missed. There are several exceptions that allow you to avoid the penalties, but you need to make sure that you are eligible to be able to do this.
If you are still working and under the age of 65, you should also make sure that you have enough disability insurance to cover your living expenses in case you become disabled. It’s bad enough to be sick or injured and recovering, you don’t need the additional financial stress. Most employers have group disability insurance that covers 60% of your income from work. Most are maxed out at $10,000 to $15,000 per month of benefits. Group disability insurance is usually paid for by the employer and would be taxable to you if you are on a disability claim. A way to avoid the tax is to ask your employer if they will tax you on the disability premium. If you are taxed, or pay the disability premium yourself post-tax, the benefit that you collect will be tax-free. If your salary and your expenses are high, you can supplement your group disability benefits with an individual disability plan. Those policies usually allow you to insure up to 70% of your salary minus what you have from work. You usually pay for the policy with after-tax dollars and the benefit becomes tax-free.
The last type of insurance to consider is Long Term Care insurance. In general, this covers you for home health care and nursing home care. Two daily living activities must be impacted to trigger a policy. Medicare covers part of the first 100 days of nursing home care in most cases, but there are deductibles and co-pays that you will need to cover. Beyond the first 100 days, there is no further Medicare coverage, so this is where the long-term care policy becomes important, especially if this is a long-lasting illness. There are several carriers that offer long-term care coverage, but the market keeps changing. You should talk to an agent that specializes in long-term care. If you are interested in exploring long-term care insurance, I can refer you to a specialist. Please email me at marcs@equityplanning.com. I hope this helps with some of the basic medical coverage issues.
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This piece is not intended to provide specific legal, tax, or other professional advice. For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice.
