Life insurance is a financial shock absorber designed to recover financial loss resulting from the death of a family breadwinner or a key business partner. It can also be purchased to cover specific needs such as paying off a debt or to cover final expenses. Life insurance can be bought as permanent coverage or for a fixed term. Permanent life insurance is has a higher premium but is designed to never increase in cost, whereas term insurance is much cheaper but only for a fixed term. After the term is up the insurance generally becomes too expensive to keep. Some term policies offer a conversion privilege which allows the insured to convert to permanent coverage without proof of insurability.
Whole Life insurance is generally the most expensive. Whole life guarantees the premium will never increase. Whole life policies have non-forfeiture values like cash value, partial paid up death benefits, or full death benefit paid up for a fixed term.
Term Life insurance can be bought for any number of years. A 20 year term, for example, guarantees a level premium for 20 years. A 10 year term has a lower premium and guarantees a level premium for 10 years.
Universal life insurance is a kind of hybrid. It is a tax deferred account that has the cost of the life insurance deducted every month. Premiums and interest are paid into the account and mortality charges and other expenses are taken out. Interest is generally nontaxable. Interest can be paid at a fixed rate or tied to stock indexes like S&P and Dow Jones. There are also variable types that have investments as the underlying funding mechanisms. Variable types do carry investment risks while fixed and indexed do not.
When you are no longer able to take care of your custodial needs such as bathing, eating, cleaning, toileting, taking your medicine, transferring, etc., due to an accident, illness, or your cognitive ability is impaired, you will have to have help from a qualified caregiver. In some cases, you can get the assistance at home and sometimes it has to be at a long term care facility.
This can be extremely expensive. A nursing home in Mississippi currently costs around $70,000 per year. Health insurance or Medicare do not pay for custodial care. You must pay for it until you have exhausted your life’s savings. In some cases Medicaid, an assistance program for the poor, can pay for some basic nursing home care. But after you pass away, any assets including your home will be confiscated by the state and sold to recover the costs.
Long Term Care insurance is designed to pay these costs. State and federal governments encourage people to buy it and consider it a tax deductible expense. But it is not for everyone.
- The premiums are higher the older you are when you apply for long term care coverage.
- The ideal age to apply is 45 – 50 years of age.
- If assets and incomes are low it should not be considered.
- There is no magic number, but if you can comfortable afford a premium in the $300-$400 per month range you should consider it. The agent will do a suitability analysis with the client.
If you are injured or sick and cannot work, where will your paycheck come from? Employers will not pay you indefinitely for nothing in return. How will you pay your house payment, car payment, buy groceries, etc.? Disability income insurance replaces a portion of your paycheck, generally up to 60%, for a specified period up to age 67. You can buy short term coverage of a year or two or long term coverage to age 67. Medical underwriting guidelines apply, as do occupational guidelines. Your premium and eligibility is affected by your occupation.
We sell specified disease policies for diseases like cancer, heart attack and stroke. The purpose of this type of insurance is to offset non-medical expense that can be incurred when you have an illness such as cancer. Expenses for things like travel, home modification and non-covered prescription drugs can be quite high. Policy benefits may be scheduled – pays so much for this and so much for that, or just pay a lump sum. The policy benefits are not assigned to the provider. They are paid straight to you to do with as you please. Applicants must be medically underwritten to be approved.
(Centers for Medicare and Medicaid Services). There are very stringent rules and regulations that must be followed to sell Medicare Advantage and Part D prescription plans.
Insurance companies such as Humana and Unitedhealthcare contract with Medicare to provide benefits that are at least as good as Original Medicare and the standard baseline prescription drug plan. To be competitive, they are given flexibility to assign premiums and copays and in the case of Medicare Part A and B benefits, to add services not offered by Original Medicare. Some MA plans will pay your health club dues for you and they may provide more caregiver support. They must include an annual out of pocket limit for Part A and B expenses. Medicare Advantage plans may include Part D prescription coverage.
that comes from knowing they will never have any catastrophic medical expense. They usually pay their monthly premium and that’s all they have to pay for inpatient and outpatient expenses. Any doctor that takes Medicare will gladly take a patient with Medigap insurance.
Medigap policies will pay the 20% for drugs that are administered in an emergency room or doctors office but not maintenance prescription drugs which are covered under Medicare Part D.
Attained age polices will increase on your birthday, but all Medigap polices can be increased if claims experience increases. There are three types of Medigap polices: issue age, community rated or attained age.
- Issue age Medigap policy premiums do not go up because you have a birthday, but they are much more expensive when they are buy them. A 65 year old with an issue age policy will pay a much higher premium than a 65 year old would pay for an attained age policy. Issue age premiums will not go up on the birthday, but they can still go up if the insurer has a general rate increase that affects everyone in the state. Physicians Mutual is an example of an insurance company that offers issue age policies.
- Community Rated Medigap policies will have the same premium for everyone in a geographical area. There may be a discount given for people who apply during their open enrollment period, but the discount will be reduced each year until the premium reaches the community rate. AARP is an example of a company with a community rated plan.
- Attained age Medigap policies are the most common type in Mississippi. The premiums are generally lower when the policies are issued, and increase on each birthday. When an attained age policy is issued, there will be a schedule of premiums included in the policy that is based on the rates at the time the policy is issued. This schedule is not set in stone. If the insurer experiences an increase in claims, they may apply to the insurance commissioner to have an general increase in premiums. For example, if there was a 5% increase, this increase would effect the entire schedule of premiums for that policy.
You can keep the coverage as long as you pay the premiums.
For example, a dermatologist in Tupelo MS may have little competition wants to be paid as much as possible, but still take Medicare patients. They may still see Medicare patients if they limit their charges to no more than 15% above what Medicare approves. This is called a Part B excess charge. You must pay the doctor at the point of service and then get reimbursed by Medicare and your Medigap policy. However, some Medigap policies, such as Plan N, do not include the Part B excess Benefit.
Example: Mrs. Jones has Medicare and a Plan F Medigap policy. She has met her Part B deductible for the year. She goes to see a dermatologist who does not accept Medicare assignment. He does, however, take Medicare patients. Medicare approves $100 for the visit. Dr. XXX charges $115 – the maximum he can charge for this service and still see Medicare patients.
Total Charge paid by Mrs. Jones: $115
Medicare pays: -80
Plan F pays the 20%: -20
Plan F pays the excess: -15
Cost to Mrs. Jones: 0
If Mrs. Jones had had a Plan N, this is what would have happened:
Total Charge paid by Mrs. Jones: $115
Medicare pays: -80
Plan N deducts the $20 copay 0
Plan N does not pay the excess: 0
Cost to Mrs. Jones: 35
If Mrs. Jones had had a Plan G the results would have been the same as plan F because she had already met her deductible.
Medigap insurance pays automatically after Medicare processes a claim. Benefits are generally assigned to the medical provider. This assignment of benefits is contingent on the provider accepting the amounts Medicare approved. All medical services are assigned to a diagnostic-related group or DRG so each procedure has a predetermined allowable cost. If the provider accepts Medicare patients and accepts assignment, they must accept Medicare approved amounts as full payments. Balance billing is not allowed.
First, when you become eligible for Medicare Part B, you have six months to apply without having to answer the health questions. Second, you have a guaranteed issue period of 63 days if you lose qualifying coverage such as group coverage or a Medicare Advantage plan that has been canceled by the plan. Rules vary by state, but in Mississippi insurers are only required to accept applicants under 65 is during the open enrollment or guaranteed issue period.
The healthcare law that eliminated medical underwriting for primary coverage but does not apply to voluntary supplemental coverage. To be eligible, you generally must be 65 years of age or older, and be able to pass the medical underwriting requirements of the plan, or be eligible for guaranteed issue rights.
- The F plan pays 100% of the Medicare Part A & B deductibles, copays and the 20%. It also pays the Part B excess and foreign travel emergency.
- The G plan pays just like Plan F after you pay the $147 part B deductible.
- The N plan pays the Part A deductible, but requires payment of the Part B deductible. It also requires payment of copay of up to $20 for office visits and copay of up to $50 for the ER. The ER copay is waived if you are admitted. Plan N does not pay the Part B excess charges but it does pay the foreign travel emergency.
The National Association of Insurance Commissioners, NAIC, regulates Medigap insurance products. In order to simplify the comparison of Medigap insurance, the NAIC approved 11 standardized options for insurance companies to sell. These plan options are designated by the letters A, B, C, D, F, High Deductible F, G, K, L, M, & N.
The benefits range from Plan A which only covers basic benefits like the 20%, to Plan F which provides full coverage for all Medicare Part A and B deductibles, copays, the 20%, Part B excess charges and a $50,000 foreign travel emergency benefit. You can compare prices from companies A, B & C on a Plan F and know they benefits are exactly the same.
Medigap coverage, also called Medicare Supplement Insurance, is a voluntary secondary insurance designed to pay
some of the out of pocket costs for Original Medicare.