Frequently Asked Questions

Health Insurance

Individual and family health insurance policies are best suited for people whose employer does not offer any or adequate small group insurance or group insurance coverage. We offer health insurance quotes for these situations.

If your employer does not offer group insurance, or if the insurance offered is very limited, you can buy an individual or family health insurance policy. Typically available are fee-for-service, HMO, PPO, or POS protection. As individual plans may not offer benefits as broad as those in group plans, it is wise to consider available options carefully and fully understand the policy being presented.

The information presented here will help you choose a plan that is right for you. You may be buying health insurance for the first time, or you may already have health insurance but want to consider changing plans. Married or single, children or no children, this information will help you to find out how to choose a health insurance plan that best meets your needs and your pocketbook.

Why Do I Need Health Insurance?
Today, health care costs are high, and getting higher. Who will pay your bills if you have a serious accident or a major illness? You buy health insurance for the same reason you buy other kinds of insurance, to protect yourself financially. With health insurance, you protect yourself and your family in case you need medical care that could be very expensive. You can't predict what your medical bills will be. In a good year, your costs may be low. But if you become ill, your bills could be very high. If you have insurance, many of your costs are covered by a third-party payer, not by you. A third-party payer can be an insurance company or, in some cases, it can be your employer.

Where Do People Get Health Insurance Coverage?

Group Insurance
Most people get health insurance through their jobs or are covered because a family member has insurance at work. This is called group insurance. Group insurance is generally the least expensive kind. In many cases, the employer pays part or all of the cost. Some employers offer only one health insurance plan. Some offer a choice of plans: a fee-for-service plan, a health maintenance organization (HMO), or a preferred provider organization (PPO), for example.

What happens if you or your family member leaves the job? You will lose your employer-supported group coverage. It may be possible to keep the same policy, but you will have to pay for it yourself. This will certainly cost you more than group coverage for the same, or less, protection. A Federal law makes it possible for most people to continue their group health coverage for a period of time. Called COBRA (for the Consolidated Omnibus Budget Reconciliation Act of 1985), the law requires that if you work for a business of 20 or more employees and leave your job or are laid off, you can continue to get health coverage for at least 18 months. You will be charged a higher premium than when you were working. You also will be able to get insurance under COBRA if your spouse was covered but now you are widowed or divorced. If you were covered under your parents' group plan while you were in school, you also can continue in the plan for up to 18 months under COBRA until you find a job that offers you your own health insurance.

Not all employers offer health insurance. You might find this to be the case with your job, especially if you work for a small business or work part-time. If your employer does not offer health insurance, you might be able to get group insurance through membership in a labor union, professional association, club, or other organization. Many organizations offer health insurance plans to members.

Individual Insurance
If your employer does not offer group insurance, or if the insurance offered is very limited, you can buy an individual policy. You can get fee-for-service, HMO, or PPO protection. But you should compare your options and shop carefully because coverage and costs vary from company to company.

Individual plans may not offer benefits as broad as those in group plans. If you get a noncancelable policy (also called a guaranteed renewable policy), then you will receive individual insurance under that policy as long as you keep paying the monthly premium. The insurance company can raise the cost, but cannot cancel your coverage. Many companies now offer a conditionally renewable policy. This means that the insurance company can cancel all policies like yours, not just yours. This protects you from being singled out. But it doesn't protect you from losing coverage.

Before you buy any health insurance policy, make sure you know what it will pay for...and what it won't. To find out about individual health insurance plans, you can call insurance companies, HMOs, and PPOs in your community, or speak to the agent who handles your car or house insurance.

What is the best health plan for me?
Choosing between health plans is not as easy as it once was. Although there is no one "best" plan, there are some plans that will be better than others for you and your family's health needs. Plans differ in how much you have to pay and how easy it is to get the services you need. Although no plan will pay for all the costs associated with your medical care, some plans will cover more than others. With any health plan you will pay a basic premium, usually monthly, to buy the health insurance coverage. In addition, there are often other payments you must make. These payments will vary by plan but essentially are deductibles and copayments.

Here's a list of key questions to consider in selecting the plan that best meets your needs:

How much will it cost me on a monthly basis?
Are there deductibles I must pay before the insurance begins to help cover my costs?
After I have met the deductible, what part of my costs are paid by the plan?
What doctors, hospitals, and other medical providers are part of the plan?
Are there enough of the kinds of doctors I want to see?
Where will I go for care? Are these places near where I work or live?
If I use doctors outside a plan's network, how much more will I pay to get care?
Are there any limits to how much I must pay in case of major illness?
What about limits and deductibles for certain types of care such as surgery or maternity?

The above content was used with permission from the Agency for Health Care Policy and Research and Health Insurance Association of America.

What types of health plans are available to me?
Health insurance plans usually are described as either indemnity (fee-for-service) or managed care. Indemnity and managed care plans differ in their basic approach. Put broadly, the major differences concern choice of providers, out-of-pocket costs for covered services, and how bills are paid. Usually, indemnity plans offer more choice of doctors (including specialists, such as cardiologists and surgeons), hospitals, and other health care providers than managed care plans. Indemnity plans pay their share of the costs of a service only after they receive a bill. Managed care plans have agreements with certain doctors, hospitals, and health care providers to give a range of services to plan members at reduced cost. In general, you will have less paperwork and lower out-of-pocket costs if you select a managed care-type plan and a broader choice of health care providers if you select an indemnity-type plan. Besides indemnity plans, there are three basic types of managed care plans: PPOs, HMOs, and POS plans.

What is Fee-for-Service (Indemnity) Health Insurance?
This is the traditional kind of health care policy. Insurance companies pay fees for the services provided to the insured. This type of health insurance offers the freedom to choose doctors and hospitals. One can choose any doctor they wish and change doctors at any time. These plans also allow the insured to use any hospital in any part of the country. Generally a yearly deductible is charged and a percentage of costs above the deductible are covered. An example might include a $250.00 deductible and 80% coverage once the deductible is reached.

What is HMO (Health Maintenance Organization) Coverage?
These are essentially prepaid health plans. In exchange for a monthly premium, the HMO provides comprehensive care for the insured, including doctors' visits, hospital stays, emergency care, surgery, lab tests, x-rays, and therapy. Care is provided either directly in its own group practice or through doctors and other health care professionals under contract. Generally, the choice of doctors and hospitals is limited to those that have agreements with the HMO. Although, exceptions can be made in emergencies or when medically necessary.

What is PPO (Preferred Provider Organization) Coverage?
A cross between traditional fee-for-service and an HMO. Like an HMO, there are a specific doctors and hospitals to choose from. In a PPO, though, it is possible to use doctors who are not part of the plan and still receive some coverage. This type of plan is well suited for individuals who want an HMO style prepaid plan, but want to use a doctor that is not part of the network. As with HMO's, these plans are geared towards preventative care and include a broad range of services.

What is POS (Point-of-Service) Coverage?
A Point-of-Service medical plan is basically a combination of a PPO and an HMO. Like the other types of managed care, POS plans are established to provide lower cost medical care to those that remain in the network. Assume for a moment that POS's are structured identically to PPO medical plans. The major difference between a POS and PPO plan is that the Point-of-Service plan makes use of a Primary Care Physician. With the POS plans, if you seek medical care outside of the network, you will be responsible for full payment. On the other hand, if your Primary Care Physician gives a referral for you to see a specialist outside of the network, the insurer will pick up most of the cost. As with HMO plans, POS plans typically include preventive care and health improvement programs.

What is an MSA (Medical Savings Account) Coverage?
An MSA is a Medical Savings Account. It is a tax-advantaged personal savings account used in conjunction with a high deductible health policy. Individuals can contribute money to this account on a pre-tax basis to set aside money for qualified medical care and expenses, including annual deductibles and copayments.

What is a provider?
A provider is a hospital, health care facility, physician or other medical professional that provides health care services.

What is a Primary Care Physician (PCP)?
A physician or other medical professional who serves as a group member's first contact with a plan's health care system. Also known as a primary care provider, personal care physician, or personal care provider.

What is an office visit copayment?
An office visit copayment is a fixed dollar amount or a percentage that you pay for each doctor visit. For example, with some plans you may pay a fixed amount such as $5 or $10 per visit. Other plans will charge you a percentage of the total fee for the visit. So if your copayment is 10% and the doctor visit was $200, you would pay 10% which, in this case, would be $20.

What is a deductible?
A deductible is the amount of annual medical expenses that a health plan member must pay before the plan will begin to cover expenses. For example, if your plan has a $500 deductible, you will pay the first $500 of your medical expenses before your health plan begins paying the expenses. Only expenses for covered services apply towards the deductible. For example, if you paid $100 for a visit to a chiropractor but the plan does not consider chiropractic care a covered expense, then the $100 will not apply toward your annual deductible.

What is the difference between an in-network and an out-of-network medical provider?
An in-network medical provider is within the approved network of providers for a particular health plan. Out-of-network providers are not on the list. If you visit a doctor within the network, the amount you will be responsible for paying will be less than if you go to an out-of-network doctor. In many cases, the insurance company will not pay anything for services your receive from outside their network; however, there are exception to this. As a general rule, HMOs tend to have smaller provider networks than PPOs. In HMO and PPO plans, referrals to specialists will be to doctors within the network. Indemnity plans typically do not have networks; you go to whatever doctor you want.

Life Insurance

What is Life Insurance?
Life insurance is a unique asset which is a valuable addition to your overall estate due to its potentially high yield and tax-favored benefits. Life insurance can be used for any number of reasons. Some of the most common uses are:

Creating an estate where time or other circumstances have kept the estate owner from accumulating sufficient assets to care for his or her loved ones. Life insurance can create an instant estate.

Paying estate taxes and other estate settlement costs. These costs can vary from a low percentage of three to four percent to over 50% of the estate. Federal Estate Taxes are due nine months after death.

Funding a business transfer. Business owners often agree to buy a deceased owner's share from his or her estate after death. Life insurance provides the ready cash to finance the transaction.

Funding college for children or grandchildren. Cash value increases, in a policy on a minor's life or the parent's life, can be used to accumulate funds for college.

Paying off the home mortgage. Many people would like to pass the family residence to their spouse or children free of any mortgage. Often a decreasing term policy is used, which decreases in face amount as the mortgage balance is paid down.

Protecting a business from the loss of a key employee. Key employees are difficult to attract and retain. Their untimely death may case a severe financial strain on the business.

Creating a retirement fund. Current insurance products provide competitive returns and are a prudent way of accumulating necessary funds for retirement years.

Replacing a charitable gift. Charitable Remainder Trusts provide tax benefits and life insurance can replace the value of the donated asset. Policies can also be paid directly to a charity.

Guaranteeing loans. Personal or business loans can be paid off with insurance proceeds.

Equalizing inheritances. When the family business passes to children who are active in it, life insurance can give an equal amount to the other children.

How much life insurance should an individual own?
Rough "rules of thumb" suggest an amount of life insurance equal to 6 to 8 times annual earnings. However, many factors should be taken into account in determining a more precise estimate of the amount of life insurance needed. Important factors include income sources (and amounts) other than salary/earnings, whether or not the individual is married and, if so, what is the spouse's earning capacity, the number of individuals who are financially dependent on the insured, the amount of death benefits payable from Social Security and from an employer-sponsored life insurance plan, whether any special life insurance needs exist (e.g., mortgage repayment, education fund, estate planning need), etc. It is recommended that a person's insurance advisor be contacted for a precise calculation of how much life insurance is needed.

How much will it cost?
The cost for life insurance varies widely depending on the health and age of the person to be insured and the coverage amount of the policy. Individuals are rated by their age, health history and in some cases, by their careers. All other things being equal, younger people will generally have lower premiums that older people. The best way to find out how much life insurance will cost is to get a quote!

What about life insurance for a spouse or children?
In certain circumstances, it may be advisable to purchase life insurance on children; generally, however, such purchases should not be made in lieu of purchasing appropriate amounts of life insurance on the family breadwinner(s). It is of utmost importance that the income earning capacity of the primary breadwinner be fully protected, if possible, through the purchase of the required amount of life insurance before contemplating the purchase of life insurance on children or on a non-wage earning spouse. In a dual-earning household, it is important to protect the income earning capacity of both spouses. Life insurance on a non-wage earning spouse is often recommended for the purpose of paying for household services lost at this individual's death.

What's the difference between term and cash value life insurance?
Although a difficult question--one whose answer will vary depending on circumstances--several principles should be followed in addressing this issue. It must first be recognized that in any life insurance purchasing decision, there are at least two basic questions that must be answered:

1) "How much life insurance should I buy?"
2) "What type of life insurance policy should I buy?"
The question contained in (a) involves an "insurance" decision and the question contained in (b) requires a "financial" decision. The "insurance" question should always be resolved first. For example, the amount of life insurance that you need may be so large that the only way in which this needed amount of insurance can be afforded is through the purchase of term insurance with its lower premium. If your ability (and willingness) to pay life insurance premiums is such that you can afford the desired amount of life insurance under either type of policy, it is then appropriate to consider the "financial" decision--which type of policy to buy. Important factors affecting the "financial" decision include your income tax bracket, whether the need for life insurance is short-term or long-term (e.g., 20 years or longer), and the rate of return on alternative investments possessing similar risk.

What is mortgage protection term insurance?
The face amount under mortgage protection term insurance decreases over time, consistent with the projected annual decreases in the outstanding balance of a mortgage loan. Mortgage protection policies are generally available to cover a range of mortgage repayment periods, e.g., 15, 20, 25 or 30 years. Although the face amount decreases over time, the premium is usually level in amount. Further, the premium payment period often is shorter than the maximum period of insurance coverage--for example, a 20-year mortgage protection policy might require that level premiums be paid over the first 17 years.

Can a life insurance policy provide payment for an outstanding mortgage loan?
Yes, an existing term or cash-value life insurance policy, can be used for many purposes, including paying off an outstanding mortgage loan balance in the event of the insured's death.

What are the taxes on life insurance cash values, dividends and death benefits?
The "interest buildup" portion of the annual increase in the policy's cash value is not taxed currently to the policy owner. Dividends generally are considered to be a "return of premium" and are also not taxable to the policy owner. Although in the typical case, life insurance death proceeds will not be subject to income taxation, these proceeds may be subject to federal estate taxation. If the insured has any elements of ownership in the policy at the time of his/her death, the proceeds are includable in the insured's gross estate for federal estate tax purposes. State inheritance taxes and federal gift taxes may also apply to life insurance policies/proceeds under specific circumstances. You should contact your tax advisor regarding questions concerning the possible income, estate and gift tax consequences surrounding any life insurance that you currently own or are contemplating purchasing.

What is participating whole life insurance?
Participating (par) whole life insurance has been marketed for many years in the US The participating feature allows for the payment of dividends to policy owners when actual experience justifies such payment. Substantial amounts of participating whole life insurance is still sold today, principally by the large mutuals.

Which type of cash value life insurance policy is a "better buy"?
There is no simple answer to this question. The best performing product (from a financial perspective), whether universal life, whole life or some other type of cash value life insurance, will likely be the one offered by the insurer that enjoys the best future experience as it relates to interest earnings, actual expenses and mortality costs. Insurers earning the highest investment income, and who also incur the lowest expenses and the lowest mortality costs, are in the best position to offer life insurance at the lowest cost. This is true whether the cash value life insurance product being offered is universal or whole life. Thus, it will be necessary for prospective insurers and their advisors to carefully examine the financial aspects of each product under consideration, irrespective of what type the product is.

Is credit life insurance a good buy?
Credit life insurance is frequently more expensive than traditional term life insurance. Further, if you already own a sufficient amount of life insurance to cover your financial needs, including debt repayment, the purchase of credit life insurance is normally not advisable due to its relatively high cost.