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provided by Women's Financial Network at Siebert
Insurance --Part VII
Insurance is protection against the unforseen. Now that you have a family of your own, this kind of protection may be more important than ever. As parent of dependent children, it's key for you to reevaluate life and health insurance coverage in particular.
Life Insurance
Life insurance isn't necessarily something we want to think about -- but is in reality something that we simply can't afford to ignore. There are three basic types of life insurance with variations within each type, as well as annuities which may have a life insurance guarantee and accelerated death benefits on some cash value policies which allow for distribution during your lifetime under certain circumstances.
1. Term -- With term insurance, the beneficiaries only receive a payout,
or death benefit, if a death occurs within the specified "term"
of the policy. Term life insurance is ideal if you have a
large protection need for a specific period of time. For example,
you may want to carry an amount sufficient to raise and educate
children during their minority or pay off a business or personal
loan.
2. Cash Value -- In addition to offering protection against the costs associated with the death of the policyholder, cash-value life insurance policies have an additional tax-deferred savings feature. In other words, cash-value policies enable you to save money, tax-deferred, through your insurance plan.
Remember that cash values in certain life insurance policies, either on a parent or the child, may be another source of dollars when specific needs arise. While life insurance on a child may seem a bit eerie, it not only can serve the cash accumulation purpose (with no current taxation), it also locks in their insurability should an illness occur down the road. Guaranteed purchase options can be attached to the policy at inception which will allow increases no matter what the health conditions are. It can also be a strong foundation for their own retirement. This is a great gift for grandparents to give but review ownership and beneficiary to avoid unnecessary problems.
3. Survivorship or Second-to-die -- Second-to-die insurance, or survivorship life insurance, policies are based on the joint life expectancy of the husband and wife.
Annuities
In addition to all of the different life insurance policies out there, life insurance companies also sell annuities. Unlike life insurance policies, which pay beneficiaries a lump sum when you die, annuities pay a regular stream of income while you live, usually after you retire. This can be important for older parents or grandparents taking care of young children.
HerTip: Life insurance companies are the main source for disability insurance as well. While group insurance offered by an employer may be an economical way to cover the immediate risk of lost income due to a disabling illness or injury, it can lead to problems if you change jobs or if the benefit can be withdrawn by the employer or the insurer, so you and your spouse may want to investigate this independent of what your companies offer.
Health Insurance
Health insurance is more confusing than ever. But with today's rising health care costs, it's more important than ever that you have a basic understanding of your options and how they can protect your health as well as your family's health. It is essential to check AND verify with your insurance carrier by when they must be notified of a birth and to get all paperwork in advance of that date. It might also be a good idea to request a return receipt, signed and dated, if sent by mail or a fax or letter verification of receipt of an enrollment of the newborn. You don't want to risk not having coverage because of a technicality.
HerTip: Under the Health Insurance Portability and Accountability Act a woman can not be denied coverage for pregnancy-related care simply because she was pregnant at the time she enrolled in her health plan.
There are several types of heath care plans you should be familiar with.
1. Traditional fee-for-service indemnity plans -- Fee-for-service indemnity plan benefits (or eligible charges) are paid based on the usual, reasonable and/or customary rates for services provided in your geographic area. While sometimes negotiable with the individual provider, if charges exceed any or all of these parameters depending on your particular plan, you may be responsible for a portion or all of the balance.
2. Managed care - Managed care plans generally require that you use doctors or hospitals that are part of the provider network. You have no deductibles or co-insurance, but you may be charged a small co-payment fee for certain services. Under the typical plan, you will select a primary care physician who then coordinates your care, referring you to a specialist when necessary. The four plans you will most likely encounter are HMO, PPO, POS and PSO. There are literally hundreds of HMOs nationwide, so choosing the right one for you can be tough. For help in evaluating the different plans you're considering, you can contact the National Committee for Quality Assurance at 1-800-839-6787, or visit their web site at www.ncqa.org.
3. COBRA -- If you leave your job, you can keep your previous job's insurance for 18 months as long as you pay your premiums at your old corporation's rate. This right falls under the Congressional Omnibus Budget Reconciliation Act (COBRA).
Health insurance is almost always secured through an employer, but the caveat is that, if it is a small group, you may not have COBRA benefits available if you leave. Some states have guarantees when leaving a group and that information can be verified by the various state insurance commissioners. Group benefits provided by an employer may offer a base, but often require supplementation for the long-term financial security of you and your family. Find an advisor you trust through a referral or by meeting with several people. The one who has your best interest in mind is the one to choose.
4. Hospital Indemnity -- Hospital indemnity plans are designed to help you cover the costs of a hospital stay.
For more information about insurance, please visit our Insurance Center. As complicated as it may seem, insurance is peace of mind and can ensure that you and your family are safe, secure and covered.
Continue to: Part VIII: Maternity Leave
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