Saturday, December 5, 2020

Health, Life and Disability Insurance - What Do You Need and Why Do You Need It?

There are so many types of insurance we can buy that it can be confusing and overwhelming.  Obviously, most of us cannot afford to have every type of possible insurance, but we can benefit by carefully weighing our choices and deciding which ones we are most likely to need.  In some cases, such as disability insurance during our working years, we may hope we never need it, but the knowledge that we have it can bring us peace of mind.

Recently, the writer of a website that helps businesses comply with disability insurance requirements, sent me a list of questions she is frequently asked.  She thought that my blog might be a better site for answering those questions, and she even sent me links to articles which she believed would help answer the questions.  After reading her list, I agreed these are important issues which people need to understand.  As a result, I thought I would briefly give my readers an overview of different types of insurance they want to consider, whether they are near retirement or not.

I also highly recommend that you discuss different types of policy with your insurance agent, get quotes, and decide which ones are within your budget and are important to you.

You may find it useful to read a little about the insurance you are considering, from an unbiased source, before you talk to your agent.  A good choice is "Insurance for Dummies."  (Ad) This inexpensive and easy-to-read book covers all kinds of insurance, including auto, homeowners and renter's insurance, as well as the policies listed below.  It could help you avoid costly mistakes and the purchase of unnecessary insurance.

Common questions about different type of insurance

What is the Difference Between Burial Insurance, Life Insurance, and Funeral 

If you are like many people in my retirement community, you are bombarded with ads for a variety of types of insurance, including small insurance policies to cover the cost of your burial, accidental death insurance (which only covers you if you die of an accident, not as a result of an illness), and regular life insurance, which covers you regardless of how you die and allows you to use the proceeds for whatever reason your heirs wish, including paying for your burial.  What you need depends on a variety of circumstances.  If you have no heirs, for example, you may just want burial or funeral insurance (or you may want to skip the insurance and pre-plan your funeral). 
If you want to make sure a spouse or your children are taken care of after you die, then a regular life insurance policy would be a better option. The amount of life insurance you need will depend on your current and anticipated future income, which you are trying to replace.  You should also consider your current debt, which you would not want to pass on to a widowed spouse. There are two types of life insurance ... term and whole life.  Term is more affordable, but has an expiration date. When you replace it, the cost is likely to be much higher. You should discuss with your insurance agent which type you should buy, how long you will need the policy, and what you can afford.  You can learn more about the differences between the types of policies in this article:

Why You Should Get Health Insurance

Some people, especially those who are young, single and on a tight budget, may believe they do not need to buy health insurance. They may assume that they are so healthy, they are unlikely to get sick.  They do not expect to be injured, either.  As a result, they may neglect to get health insurance.  However, there are many programs which can help low income people pay for their health insurance and, by having insurance, they could save a great deal of money in the future if they do become injured or get ill. None of us know when we may be unexpectedly hospitalized, and no one wants their credit ruined by enormous, unaffordable medical bills.  The two articles below will help you understand the advantages of having health insurance.

Will My Health Insurance Cover a Retirement Home or Assisted Living?

A lot of people assume that if they have health insurance or Medicare, they will be covered in the event they need to move to a retirement home or into an assisted living facility.  This is NOT true.  While some health insurance policies and Medicare will pay for a short stay in a medically necessary skilled nursing or rehab facility, none of them will pay for someone to live permanently in a retirement home, or assisted living facility.  You can learn more about this in the article below. In addition, be sure you read the answer to the next question.

Should I Get Long-Term Care Insurance?

The answer to whether or not you need Long-Term Care Insurance is, "It depends."  That is not a very specific answer, but everyone's situation is different.  Here are some of the things you need to consider:
If you are wealthy or have a high retirement income, and can afford to pay out-of-pocket for caregivers or an extended stay in a skilled nursing facility, there is probably no reason to buy this insurance, unless you want it to protect your assets.  
The middle class are the people who are most at risk of financial ruin from a long stay in a nursing home. This is especially true if they have savings, a business, or other assets which they want to protect. With a cost of $6000 or more a month to pay for a skilled nursing home, you can use up your assets very quickly.  Consequently, these are the people who are most likely to benefit from Long-Term Care Insurance.  It is also possible to solve two problems at once, by purchasing a life insurance policy which can be converted to long-term care insurance, if you need it.  Then, if you never need long-term care, your heirs will get the benefit of the insurance.  If you do need long-term care, you will not have to spend your assets down in order to cover the cost.
Ironically, if you have a very low income and have few assets other than your home,  Medicaid may cover the cost of medically necessary long-term care, after you or Medicare have paid for the first few months of care. The rules for getting Medicaid to cover your long-term care are complicated, so it is wise to learn all you can about long-term care, Medicaid, and nursing home care.  The article below will help you, but you will also want to learn as much as you can about Medicaid, how to qualify, and how to apply.  There is actually a book available on this specific topic with the very long name:  "How to get Medicaid to pay for ALL or some of Your Long-Term Care Expenses without having to wait 5 years, without having to sell your house, and without going broke first." (Ad)  As I said, a very long title, but the book contains some very important information for people who are trying to decide if Medicaid will cover the long-term care expenses of a loved one.
Requirements for Long Term Medicaid Disability:

Do You Need Disability Insurance?

A few years ago, one of our daughters, a school teacher who was in her 30s at the time, developed a health issue which required her to stay home from work for several months.  She quickly used up her vacation time and sick leave.  Fortunately, only the year before she had purchased disability insurance.  It enabled her to continue to get almost her full paycheck, while she recuperated.  She was so thankful she had purchased that policy.  Like many young adults, it never occurred to her that disability insurance was not already included in the deductions taken from her paycheck.  It also had not occurred to her that anything might happen which would require her to miss work for any length of time. She was glad she went ahead and added this insurance, despite not thinking she would ever use it.
It may be worth it for every working person to confirm whether or not they are covered by disability insurance and, if not, find out how they can obtain it.  The premiums are typically quite low, and it can bring real financial security to someone in the event of a serious accident or health issue.   You can learn more in the article below.

What types of insurance do you need?  As you probably already realize, virtually everyone should have auto, health and either renters or homeowners insurance.  But what about other types of policies?  The need varies from person to person.  Take a little time to explore your options, learn as much as you can about insurance, and take action to make sure you utilize insurance as part of your plan to meet the future needs of you and your family.

Don't forget that you may want to read a little about the insurance you are considering, from an unbiased source, before you talk to an agent.  I recommend "Insurance for Dummies."  (Ad) It is an inexpensive and easy-to-read book which covers all kinds of insurance, including auto, homeowners and renter's insurance, as well as the policies mentioned in this article.  The authors are not trying to sell you insurance, but they are trying to help you learn how to use it to avoid unnecessary expenses.

If you are interested in learning more about financial planning for retirement, where to retire, Social Security, Medicare, common medical issues as you age, and more, use the tabs or pull down menu at the top of the page to find links to hundreds of additional helpful articles.

Disclosure: This blog may contain affiliate links. If you decide to make a purchase from an Amazon ad, I'll make a small commission at no extra cost to you.

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Photo credit:  Pixabay

1 comment:

  1. This is an excellent post. You're right, it can be confusing trying to figure out which insurance we need.


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