Independent Thinking®
Insurance Primer
April 17, 2015
Health Insurance
Working/Wealth Accumulation Years
Everyone needs medical insurance. Group coverage is afforded to most individuals working for companies with more than 20 employees. Where group coverage is not an option, individuals can purchase individual coverage. The Affordable Care Act (“ACA”) allows individuals and families to purchase insurance, regardless of pre-existing conditions. Supplemental insurance is available to augment medical insurance for catastrophic risks. Dependents, including adult children, also should be insured.
Transitions
Early retirement, job loss, divorce, or the death of a spouse may cause an individual to lose access to group coverage. COBRA is a federal law that provides for the temporary extension of group coverage at the individual’s own expense. Once temporary benefits are exhausted, individuals can purchase individual coverage through federal or state exchanges, regardless of pre-existing conditions and outside the normal enrollment period. Retirement at or after age 65 qualifies most individuals for Medicare. Those receiving Social Security at age 65 are automatically enrolled in Medicare Parts A (hospital insurance) and B (medical insurance). Parts A & B exclude prescription drugs, so supplemental coverages should be obtained. Medicare enrollment rules are complex, and it is important to understand the associated enrollment periods and coverage options. Retirees with access to continued coverage and those opting to remain in the workplace beyond Medicare qualification age should take special precaution in both the enrollment process and the coordination of benefits.
Disability Insurance
Working/Wealth Accumulation Years
Most individuals in their earning years consider life insurance to be a critical component of their financial plan. The odds are greater, however, that they will instead suffer from a long-term disability. Many employers provide disability insurance when an insured is unable to work. This product usually replaces anywhere from 45% to 65% of gross income. Supplemental plans are available and should be considered.
Long-term Care Insurance
Working/Wealth Accumulation Years
Approximately 70% of individuals 65 or older will need some type of long-term care, according to the U.S. Department of Health and Human Services. Health insurance and Medicare do not cover long-term care expenses, including skilled nursing and help with daily living. Unfortunately, long-term care policies have become more expensive, and many affluent individuals now choose to self-insure. Relatively new and interesting products that combine hybrid life insurance and long-term care policies are interesting, however. These policies allow the insured to essentially receive advance payment of death benefit if needed for long-term care expenses. There are many factors to consider before purchasing coverage, including daily benefit, inflation riders, spousal discounts, lifetime limits, and waiting periods.
Kate Mulvany is a Managing Director and Wealth Advisor at Evercore Wealth Management. She can be contacted at [email protected].