The Value of Insurance-Protecting Your Wallet Against the Cost of Disease or Injury
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No one wants to think about it. But any of us can become seriously sick or injured. The odds are much higher than you might assume -- and without insurance, the financial impact of disability can be devastating.
Surveys show that we think we only have a 1% to 2% risk of disability. The reality is actually more like 30% over the course of a career, says Barry Lundquist, president of the nonprofit Council for Disability Awareness. Conditions such as arthritis, heart disease, diabetes, and depression can compromise your ability to work. The costs of treatment, care, and lost income can be huge.
"People tend to think that they're much better protected against disability than they really are," says Richard Frank, PhD, deputy assistant secretary for disability, aging, and long-term care policy at the Department of Health and Human Services in Washington.
How can you shield yourself and your family from the crippling costs? Here's a guide to types of insurance: disability, life, long-term care, and supplemental health insurance.
Disability Insurance
What is it? Disability insurance replaces part of your income if an injury or disease makes it impossible to work.
Do you need it? Only 1/3 of Americans have disability insurance.According to the experts, most of us need it."If you depend on your income, you're taking a huge risk if you don't get disability insurance," says Carol Glazer, president of the National Organization on Disability in New York.
Why? Your biggest asset is probably not your car or house, but your ability to work. If you make $50,000 a year and work for 45 years, that adds up to more than $2 million. Protecting that money makes sense. Many disability policies will pay 40% to 60% of your salary.
Arguably, disability insurance is more important than life insurance for most people. Your odds of getting disabled are three times higher than your odds of dying at any age, says Matt Tassey, past chairman of the nonprofit Life and Health Insurance Foundation for Education (LIFE).
How much does it cost? While it depends on your situation, many people can get disability coverage for about 1% to 3% of their annual salary, Lundquist says.
What else do you need to know? Pay attention to the terms. How quickly after you stop working will it kick in? Try to get a policy that will cover you until at least age 65.
Know the difference between short-term and long-term disability. Short-term disability will start quickly but might only last three to six months. Long-term disability protects you from more serious financial effects.
See if you can buy disability insurance through your employer. It's more expensive if you have to get it on your own. Disability is also costlier and harder to get as you get older. If you already have a diagnosis when you apply, your policy might exclude disability caused by your health condition.
Life Insurance
What is it? Life insurance is a way of protecting your family if you die unexpectedly. Your beneficiary would generally get a tax-free payment from the insurance company. There are different types: term life insurance and permanent life insurance, like whole life insurance. Term life insurance will pay out for a specific term, usually between 10 and 30 years. Permanent life insurance will last your entire life. Another variant -- mortgage life insurance -- will pay off your mortgage if you die.
Do you need it? If you only support yourself, life insurance might be a low priority. If you have family members who depend on your income, it's a sound investment. Many people try to get enough insurance so that big expenses - such as a mortgage or college tuition for their kids -- could be paid off if they died.
How much does it cost? Life insurance is relatively inexpensive compared to other types of insurance. Whole life insurance is pricier than term life insurance.
What else should you consider? As with many other types of insurance, the younger you buy the policy, the cheaper your rate will be. Look for policies that have a guaranteed renewable premium. This means that your payments won't go up over the years.
Most experts recommend getting term life insurance, preferably the longest term possible. It's usually a better deal.
Supplemental Health insurance
What is it? Supplemental health insurance will help cover out-of-pocket costs and services that aren't paid for by your current insurance. It might help with copays, deductibles, or other expenses.
Do you need it? It depends on your situation. Many people on Medicare buy a type of supplemental health insurance called a Medigap policy. As the name suggests, Medigap polices are designed to fill the gaps in traditional Medicare coverage.
There are lots of other types of supplemental insurance. Some might cover expenses if you develop a specific illness, like cancer, or are hospitalized. Another type, accidental death and dismemberment insurance, will pay for specific injuries or death caused by an accident.
How much does it cost? Although the benefits of Medigap policies are set by the government, prices vary, depending on the insurer. Some other supplemental health policies can be so expensive or restrictive that they're not worth it, Glazer tells WebMD.
What else should you consider? Keep in mind that this would be a supplement to a regular healthcare policy, not a replacement for it. If you're considering a supplemental health care policy, make sure you understand your current health coverage. Some people wind up paying extra for unnecessary, duplicate coverage.
"You have to read through that booklet your insurance company sends you and understand what you're getting and what you're not," Glazer says. "Read the fine print."
Long-Term Care Insurance
What is it? Long-term care insurance covers a stay in a nursing facility or home healthcare.
Care in a nursing home averages $69,000 to $78,000 each year. Home health care ranges from $40,000 to $70,000 annually. Contrary to what many people believe, Medicare won't cover either. Medicaid does, but it's a program designed to help the poor. You will only become eligible for Medicaid once you've exhausted all of your financial assets.
Do you need it? About 70% of people over age 65 will eventually need long-term care. It's not just a risk for older people -- 40% of those who need it are under 65. Still, long-term care insurance may not be worth it. It depends on your finances, experts say. If you have a modest income and assets, skipping it makes sense.
"The cost of the insurance will take such a big chunk out of your income that it's probably not worth it," says Frank. You might be better off paying for long-term care out of pocket -- if you need it -- and then going onto Medicaid.
People with greater assets will have a lot more money to lose before qualifying for Medicaid. Some choose to protect their finances with long-term care insurance.
How much does it cost? Long-term care is expensive. And as you get older, the price gets even higher. "Once you get to 65 or 70, the price of long-term care insurance really shoots up," Frank says.
What else should you consider? If you've decided to get long-term care insurance, when you buy a policy depends on your situation. But Frank says that people can start thinking about it in their 40s and 50s.
What About Government Programs?
Many people believe that the government will step in if illness ever makes it impossible to work. However, federal and state programs might offer less than you expect.
* Social security. Social security does provide disability payments, but there are stringent requirements. More than half of all people are turned down when they make a claim. Even if you do become eligible, the average monthly payment was $1,067.90 at the beginning of 2011. "Social security is a wonderful safety net, but it's just not enough for most people," Tassey says.
* Workers' compensation. Workers' comp will provide coverage for on-the-job injuries. However, at least 90% of disability cases are unrelated to work.
* Medicare and Medicaid. Medicare will cover many medical costs for people over 65. But it doesn't cover expenses for long-term care or home healthcare, unless the care is deemed medically necessary. Medicaid will cover custodial care, but only for low-income people.
Getting Protection from Medical Costs
Trying to decide on insurance is confusing. If you have health insurance through work, start by talking to the benefits manager. If you need to get insurance on your own, ask family and friends for recommendations about local insurance agents.
Lundquist says that too many people wait to get insurance. They feel like they can't afford it now, so they put it off for another year. That's a bad idea.
"The most important advice is to get some sort of coverage, even if it's not quite the plan you want," Lundquist tells WebMD. "The worst thing you could do is buy nothing and go without any protection."
http://www.katc.com/news/types-of-insurance-for-illness-or-injury/
No one wants to think about it. But any of us can become seriously sick or injured. The odds are much higher than you might assume -- and without insurance, the financial impact of disability can be devastating.
Surveys show that we think we only have a 1% to 2% risk of disability. The reality is actually more like 30% over the course of a career, says Barry Lundquist, president of the nonprofit Council for Disability Awareness. Conditions such as arthritis, heart disease, diabetes, and depression can compromise your ability to work. The costs of treatment, care, and lost income can be huge.
"People tend to think that they're much better protected against disability than they really are," says Richard Frank, PhD, deputy assistant secretary for disability, aging, and long-term care policy at the Department of Health and Human Services in Washington.
How can you shield yourself and your family from the crippling costs? Here's a guide to types of insurance: disability, life, long-term care, and supplemental health insurance.
Disability Insurance
What is it? Disability insurance replaces part of your income if an injury or disease makes it impossible to work.
Do you need it? Only 1/3 of Americans have disability insurance.According to the experts, most of us need it."If you depend on your income, you're taking a huge risk if you don't get disability insurance," says Carol Glazer, president of the National Organization on Disability in New York.
Why? Your biggest asset is probably not your car or house, but your ability to work. If you make $50,000 a year and work for 45 years, that adds up to more than $2 million. Protecting that money makes sense. Many disability policies will pay 40% to 60% of your salary.
Arguably, disability insurance is more important than life insurance for most people. Your odds of getting disabled are three times higher than your odds of dying at any age, says Matt Tassey, past chairman of the nonprofit Life and Health Insurance Foundation for Education (LIFE).
How much does it cost? While it depends on your situation, many people can get disability coverage for about 1% to 3% of their annual salary, Lundquist says.
What else do you need to know? Pay attention to the terms. How quickly after you stop working will it kick in? Try to get a policy that will cover you until at least age 65.
Know the difference between short-term and long-term disability. Short-term disability will start quickly but might only last three to six months. Long-term disability protects you from more serious financial effects.
See if you can buy disability insurance through your employer. It's more expensive if you have to get it on your own. Disability is also costlier and harder to get as you get older. If you already have a diagnosis when you apply, your policy might exclude disability caused by your health condition.
Life Insurance
What is it? Life insurance is a way of protecting your family if you die unexpectedly. Your beneficiary would generally get a tax-free payment from the insurance company. There are different types: term life insurance and permanent life insurance, like whole life insurance. Term life insurance will pay out for a specific term, usually between 10 and 30 years. Permanent life insurance will last your entire life. Another variant -- mortgage life insurance -- will pay off your mortgage if you die.
Do you need it? If you only support yourself, life insurance might be a low priority. If you have family members who depend on your income, it's a sound investment. Many people try to get enough insurance so that big expenses - such as a mortgage or college tuition for their kids -- could be paid off if they died.
How much does it cost? Life insurance is relatively inexpensive compared to other types of insurance. Whole life insurance is pricier than term life insurance.
What else should you consider? As with many other types of insurance, the younger you buy the policy, the cheaper your rate will be. Look for policies that have a guaranteed renewable premium. This means that your payments won't go up over the years.
Most experts recommend getting term life insurance, preferably the longest term possible. It's usually a better deal.
Supplemental Health insurance
What is it? Supplemental health insurance will help cover out-of-pocket costs and services that aren't paid for by your current insurance. It might help with copays, deductibles, or other expenses.
Do you need it? It depends on your situation. Many people on Medicare buy a type of supplemental health insurance called a Medigap policy. As the name suggests, Medigap polices are designed to fill the gaps in traditional Medicare coverage.
There are lots of other types of supplemental insurance. Some might cover expenses if you develop a specific illness, like cancer, or are hospitalized. Another type, accidental death and dismemberment insurance, will pay for specific injuries or death caused by an accident.
How much does it cost? Although the benefits of Medigap policies are set by the government, prices vary, depending on the insurer. Some other supplemental health policies can be so expensive or restrictive that they're not worth it, Glazer tells WebMD.
What else should you consider? Keep in mind that this would be a supplement to a regular healthcare policy, not a replacement for it. If you're considering a supplemental health care policy, make sure you understand your current health coverage. Some people wind up paying extra for unnecessary, duplicate coverage.
"You have to read through that booklet your insurance company sends you and understand what you're getting and what you're not," Glazer says. "Read the fine print."
Long-Term Care Insurance
What is it? Long-term care insurance covers a stay in a nursing facility or home healthcare.
Care in a nursing home averages $69,000 to $78,000 each year. Home health care ranges from $40,000 to $70,000 annually. Contrary to what many people believe, Medicare won't cover either. Medicaid does, but it's a program designed to help the poor. You will only become eligible for Medicaid once you've exhausted all of your financial assets.
Do you need it? About 70% of people over age 65 will eventually need long-term care. It's not just a risk for older people -- 40% of those who need it are under 65. Still, long-term care insurance may not be worth it. It depends on your finances, experts say. If you have a modest income and assets, skipping it makes sense.
"The cost of the insurance will take such a big chunk out of your income that it's probably not worth it," says Frank. You might be better off paying for long-term care out of pocket -- if you need it -- and then going onto Medicaid.
People with greater assets will have a lot more money to lose before qualifying for Medicaid. Some choose to protect their finances with long-term care insurance.
How much does it cost? Long-term care is expensive. And as you get older, the price gets even higher. "Once you get to 65 or 70, the price of long-term care insurance really shoots up," Frank says.
What else should you consider? If you've decided to get long-term care insurance, when you buy a policy depends on your situation. But Frank says that people can start thinking about it in their 40s and 50s.
What About Government Programs?
Many people believe that the government will step in if illness ever makes it impossible to work. However, federal and state programs might offer less than you expect.
* Social security. Social security does provide disability payments, but there are stringent requirements. More than half of all people are turned down when they make a claim. Even if you do become eligible, the average monthly payment was $1,067.90 at the beginning of 2011. "Social security is a wonderful safety net, but it's just not enough for most people," Tassey says.
* Workers' compensation. Workers' comp will provide coverage for on-the-job injuries. However, at least 90% of disability cases are unrelated to work.
* Medicare and Medicaid. Medicare will cover many medical costs for people over 65. But it doesn't cover expenses for long-term care or home healthcare, unless the care is deemed medically necessary. Medicaid will cover custodial care, but only for low-income people.
Getting Protection from Medical Costs
Trying to decide on insurance is confusing. If you have health insurance through work, start by talking to the benefits manager. If you need to get insurance on your own, ask family and friends for recommendations about local insurance agents.
Lundquist says that too many people wait to get insurance. They feel like they can't afford it now, so they put it off for another year. That's a bad idea.
"The most important advice is to get some sort of coverage, even if it's not quite the plan you want," Lundquist tells WebMD. "The worst thing you could do is buy nothing and go without any protection."
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