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A health insurance overview

News Leader - 6/7/2017

There are two basic types of health losses that you should include as part of your financial planning process: disability income losses and medical expenses. Either type can result in financial disaster without adequate protection.

Health insurance coverage is insurance against loss by sickness or injury. It can allow coverage for disability income and medical expenses caused by accident or sickness.

Many of us are aware of social insurance such as Medicare (hospital insurance, supplementary medical insurance and prescription drug coverage) via the federal Social Security system. There are also state and federal workers' compensation laws as well as a disability portion of the federal Social Security system.

Group insurance is the predominant way of providing health insurance and is the primary insurance for most people. As with group life insurance, group health insurance is a contract made with an employer, or entity, that provides protection to a group of people.

Individual health insurance policies are contracts made with an individual to cover the individual and possibly a specified member of the family. This can be referred to as a "family health insurance policy." Family policies are used for medical expense benefits.

Association group insurance is typically issued to members of professional or trade

association groups. A covered individual usually pays premiums directly to the insurer and may receive a certificate of insurance rather than individual policies. The premium rate may be less than individual insurance but more than regular group insurance.

It is a wise investor who becomes familiar with disability terms and income coverage.

Maximum benefit period: The maximum period of time disability benefits will be paid to a disabled person. This is the maximum limit expressed in weeks, months or specified age.

Perils insured against: Perils are usually accident alone or accident and sickness. Coverage of disability caused by accident only is limited in scope. Try to get coverage for both accident and sickness.

Waiting (elimination) period: The period of time that must lapse after a covered disability starts before disability income benefits begin. A plan with a 30-day elimination period requires the insured to wait 30 days before disability benefits can begin.

Disability: This important definition describes when a person is considered to be disabled for the purpose of collecting benefits. Please read your policy carefully for clarity of disability.

Group health insurance disability income provides two basic types: (1) short term and (2) long term group disability plans. Short-term disability plans written on a group basis are scheduled by weekly benefits based on earnings. They usually provide modest benefits for a short period of time. Longterm group disability income plans are designed to pay during more serious, long term disabilities.

Individual health insurance may be needed for several reasons:

1. An individual is not part of a group.

2. An individual is not eligible or not yet eligible for the group.

3. Group disability benefits are not adequate in amount or duration.

4. Some individuals may feel it necessary to provide short-term disability income protection during the elimination period.

5. Some may not want to rely entirely on their employer's group insurance or other employee benefit.

Individual policies are increasingly used in situations where business health insurance is preferred, such as buy-sell agreements or key employee situations.

Please look for part two in my next column.

Carolyn Pozzi is a retired certified financial planner who lives on Amelia Island. She has worked as a wealth management adviser for private individuals and businesses and with major international investment firms. She welcomes your questions about business and individual finances and money management. If you have a financial question you would like to see answered, email it to pozzi.enterprises@gmail.com.

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