Income. Ask Yourself Some Questions

Ask Yourself Some Questions

Now that you know the ins and outs of the various plans, here are some questions to ask before choosing a plan for you and your family:

Do you currently have doctors you want to continue visiting, and do you want the freedom of choosing other doctors if additional care is required? If so, avoid HMOs altogether. PPO and POS plans can work, but traditional care plans are best because they allow maximum flexibility.
Are you aware of any upcoming medical events, like surgery or starting a family? If you’re thinking of switching plans, make sure preexisting problems or maternity costs are covered. Find out whether there’s a waiting period before coverage begins.
Do you have children entering college? Again, HMOs may not be your best option. Check your PPO and POS plans to see whether any physicians and hospitals in the college area are acceptable to the network. Out-of-network expenses can be prohibitive.
Do you plan on having periodic wellness checkups? HMOs are your best bet financially because wellness checkups are usually encouraged with no additional co-pays. Traditional care plans often don’t cover regular checkups, so all costs must come out-of-pocket until you reach the full deductible. PPO and POS plans usually require a co-payment for regular checkups, flu shots, and blood tests.
Do you hate filling out claims and keeping receipts? A managed care plan is probably best for you, assuming that you’re willing to stay innetwork. Traditional care plans are often reimbursable plans in which you pay costs upfront and then submit paperwork for reimbursement.

Assess Your Disability Insurance

Disability insurance (DI) can help alleviate the financial burden by replacing a portion of your income if you become disabled. Be prepared for the uncertain economic times that could result from a disability by taking time to assess your DI coverage.

Disability insurance protects your ability to earn a living. Especially in uncertain economic times, don’t underestimate the importance of insuring your paycheck.

The Nuts and Bolts of Disability Insurance

Following is a rundown of what you need to know about disability insurance:

What’s covered: Most DI policies cover disabilities that result from accidents, though some also cover disabilities resulting from illness. Because younger people are more likely to become disabled from an accident and older people are more likely to become disabled from an illness, you need to know what kind of coverage your policy provides.
How much coverage: Benefits are usually between 40 and 70 percent of your income. Why don’t insurance companies cover a higher percentage of your income? Well, how much incentive would you have to recover and return to work if you could earn the same amount watching TV?
Qualifying for payments: Before you can collect benefits from your DI policy, you have to satisfy the elimination period, or waiting period. This is the insurance company’s way of making sure you’re really disabled before they go through the trouble of sending you money. The elimination period varies with each policy. It also works like a deductible, keeping premiums lower.
How long payments last: DI policies can have either a short- or longterm benefit period. Short-term policies usually pay benefits for three to six months, although some provide benefits for up to two years. The elimination period for short-term policies generally ranges from 1 to 14 days.

The benefit period for long-term policies can range from a few years to the rest of your life. The most popular benefit period for long-term policies is to age 65. The elimination period for long-term policies ranges from 30 to 365 days.

Look Under the Hood of a DI Policy

Here are some details to pay attention to — you can find them in the policy itself or as riders (optional amendments added to the policy).

Defining disability

So who decides whether you’re disabled? The insurance company, of course, so it’s important to know the definition of disability that’s in your policy:

Own occupation: By this definition, you’re disabled if you can’t perform the duties of your usual job, even if you could do some other kind of work.
Any occupation: You’re considered disabled only if you can’t work at any job that you’re qualified for by education, training, and experience.
Total disability: You’re disabled only if you’re unable to work at any job at all. Yikes! You may be able to operate the timer on a deep fryer at a fast food restaurant, but would you want to? Try to get another definition of disability in your DI policy.

Tacking on riders

You may want to consider putting some of these additional provisions on your policy:

Cost of living adjustment (COLA): This rider increases your benefit of your policy with inflation up to a maximum that you elect, generally from 4 to 10 percent. The benefit continues to increase every year that you remain disabled. This rider is extremely important, especially when you’re younger.
Automatic increase: This rider usually allows for a total benefit increase of 20 to 25 percent over the first three to five years of the policy. Your premiums go up with the benefit.
Future increase option (FIO): If you qualify for only a small amount of disability coverage now but expect to be making big bucks later in your career, you can guarantee that you can increase your coverage later, regardless of your health, by selecting the future increase option. This rider allows benefit increases — usually up to age 55 — by providing proof of higher income. You won’t have to prove insurability to get the increase!
Social Security offset: This rider supplements your disability benefit if Social Security doesn’t pay the Maximum Family Benefit and if no benefits are payable under a State Disability Insurance program. It also supplements your disability benefit if Social Security pays no benefits and benefits are payable under a State Disability Insurance program.
Waiver of premium: This rider waives any premiums while you’re disabled. There’s a three-month elimination period, but premiums that were paid during the elimination period are generally refunded.
Residual benefit (partial disability): This benefit allows you to return to work part-time while continuing to receive a portion of your benefits. Most policies require a minimum loss in earnings (such as a 20-percent reduction) to qualify for residual benefits.

Choosing renewability provisions

All DI policies contain renewability provisions that explain how your coverage will continue. Most policies are one of the following:

Guaranteed renewable: The insurance company will continue to renew the policy, but the premiums can be increased for an entire group of policyholders (for instance it may be increased by state or occupational class).
Non-cancelable and guaranteed renewable: The insurance company can’t cancel or raise the premiums.
Conditionally renewable: Policies can be renewed at the insurer’s discretion. Unless you believe your insurance company has a big heart and loves you, you should stay away from these policies!