Guide to Health Insurance

Bringing an aide into your home just three times a week—to help with dressing, bathing, preparing meals, and similar chores—easily can cost$1,000 a month, or $12,000 a year. Add in the cost of skilled help, such as physical therapy, and the costs can be much greater.

Most long-term care policies pay a fixed dollar amount, typically from$40 to more than $200 a day, for each day you receive covered care in a nursing home. The daily benefit for at-home care is usually half the benefit for nursing home care. Because the per-day benefit you buy today may be inadequate to cover higher costs in the future, most policies also offer an inflation adjustment feature.

Keep in mind that unless you have a long-term care policy, you are not covered for long-term care expenses under Medicare and most other types of insurance. Recent changes in federal law may allow you to take certain income tax deductions for some long-term care expenses and insurance premiums.

Disability insurance provides you with an income if illness or injury prevents you from being able to work for an extended period of time. It is an important but often overlooked form of insurance.

There are other possible sources of income if you are disabled. Social Security provides protection, but only to those who are severely disabled and unable to work at all; workers’ compensation provides benefits if the illness or injury is work-related; civil service disability covers federal or state government workers; and automobile insurance may pay benefits if the disability results from an automobile accident. But these sources are limited.

Some employers offer short- and long-term disability coverage. If you are self-employed, you can buy individual disability income insurance policies. Generally:

• Monthly benefits are usually 60 percent of your income at the time of purchase, although cost-of-living adjustments may be available.
   
• If you pay the premiums for an individual disability policy, payments you receive under the policy are not subject to income tax. If your employer has paid some or all of the premiums under a group disability policy, some or all of the benefits may be taxable.

Whether you are an employer shopping for a group disability policy or someone thinking of purchasing disability income insurance, you will need to evaluate different policies. Here are some things to look for:

• Some policies pay benefits only if someone is unable to perform the duties of their customary occupation, while others pay only if the person can engage in no gainful employment at all. Make sure that you know the insurer’s definition of disability.
   
• Some policies pay only for accidents, but it’s important to be insured for illness, too. Be sure, as you evaluate policies, that both accident and illness are covered.
   
• Benefits may begin anywhere from one month to six months or more after the onset of disability. A later starting date can keep your premiums down. But remember, if your policy only starts to pay (for example) three months after the disability begins, you may lose a considerable amount of income.
   
• Benefits may be payable for a period ranging anywhere from one year to a lifetime. Since disability benefits replace income, most people do not need benefits beyond their working years. But it’s generally wise to insure at least until age 65 since a lengthy disability threatens financial security much more than a short disability.

A Final Word

If you get health care coverage at work, or through a trade or professional association or a union, you are almost certainly enrolled under a group contract. Generally, the contract is between the group and the insurer, and your employer has done comparison shopping before offering the plan to the employees. Nevertheless, while some employers only offer one plan, some offer more than one. Compare plans carefully!

If you are buying individual insurance, or any form of insurance that you purchase directly, read and compare the policies you are considering before you buy one, and make sure you understand all of the provisions. Marketing or sales literature is no substitute for the actual policy. Read the policy itself before you buy.

Ask for a summary of each policy’s benefits or an outline of coverage. Good agents and good insurance companies want you to know what you are buying. Don’t be afraid to ask your benefits manager or insurance agent to explain anything that is unclear.

It is also a good idea to ask for the insurance company’s rating. The A.M. Best Company, Standard & Poor’s Corporation, and Moody’s all rate insurance companies after analyzing their financial records. These publications that list ratings usually can be found in the business section of libraries.

And bear in mind: In some cases, even after you buy a policy, if you find that it doesn’t meet your needs, you may have 30 days to return the policy and get your money back. This is called the "free look."