Disability and Serious Illness

So much in life depends upon your good health: the ability to support your family, keep your home, educate your children and live independently in retirement. A smart financial plan should make provisions for potential illness and accidents, so you can live fully and confidently, knowing that your family, lifestyle and financial assets are protected.

Health Insurance: Group or Individual

Comprehensive health insurance for you and your family is the first step on the path to maintaining health and wellness. You may be able to obtain health insurance through an employer or group to which you belong; if not, you may have the option of purchasing it as an individual consumer.

Group insurance, most commonly offered through employers, covers everyone in the group, regardless of age or physical condition. The premium is based on the characteristics of the group as a whole, such as average age and occupational hazard. This insurance is often subsidized to some degree by your employer.

Individual insurance, on the other hand, is purchased directly from an insurance company or agent. You are evaluated purely from a risk standpoint. You will be asked about your personal health history and possibly be asked to undergo a physical exam. Never hide a pre-existing condition – an insurer may access information from the Medical Information Bureau and discover that you withheld the truth. Your coverage could then be rescinded. Rather, you may try to negotiate an exclusion rider for that particular condition.

Individual coverage generally:

• Is more expensive than group
• Doesn’t provide as much coverage in the same price range, and
• May be hard to obtain if you have a history of health problems.

When shopping for an insurer, look for a policy with a guaranteed renewability provision. Then the insurer cannot cancel your coverage if you later become ill, as long as you pay your premiums.

Short-Term Health Insurance

A temporary lapse in your health insurance coverage – even one of short duration – is simply too risky. An accident or unforeseen illness while uninsured could dramatically affect your physical and financial health for years to come. Short-term health insurance policies can be appropriate for people who:

• Have changed jobs and whose new insurance isn’t effective immediately
• Would like an alternative to expensive COBRA benefits
• Are between jobs and don’t know when they will find their next one
• Just graduated from college and are no longer covered under their parents’ plan or student policy
• Lost coverage because of a divorce
• Are seasonal employees
• Are early retirees not yet eligible for Medicare
• Are planning a trip overseas, and whose current policy doesn’t cover expenses outside the U.S.

Short-term policies protect against the unexpected, and are not designed for permanent health insurance needs. Coverage periods range from 1 to 6 months, with some insurers allowing renewals for a total of 12 months.

For The Difficult To Insure

Few people are completely uninsurable, even if companies have labeled you as such. Fortunately, there are options for someone who is older and/or in poor health, and has met with refusal in the past. Most states have a when-all-else-fails insurer – like Blue Cross Blue Shield – that accept all applicants.

Again, never lie or withhold medical history information in order to get insured. It is illegal, and the insurer will terminate your policy when they find out.

Insurers examine your past medical history, but they also consider the state of your present health. Giving up smoking or drinking, exercising regularly, and implementing a healthful diet may strengthen your insurability. Finding a less hazardous occupation will also better your chances.

The government also can help, if you are eligible. Look into Medicare, Medicaid, and the Department of Veterans Affairs (the VA).

Disability Insurance

What would happen if you were severely injured or became seriously ill and couldn’t work for weeks, months – even years? Many families could manage for a while, but a long-standing medical condition could eventually deplete your financial cushion. Disability insurance can help protect your family and keep your plans for the future on track.

There are two ways to obtain disability insurance – privately, from individual or group policies, and through the government (Worker’s Compensation and Social Security). However, government disability insurance programs provide limited benefits under restrictive terms, so it’s best not to count on them as a main source of disability income.

Disability insurance is available in both short- and long-term options.

• Short-term disability policies will pay benefits sooner, for as much as two years, although many policies pay benefits for only three, six or twelve months.
• Long-term disability policies can pay benefits for several years, up to age 65, or even for a lifetime.

If you can’t afford both types of policies, it is generally wiser to purchase long-term disability, as a short-term financial burden is preferable to a long-term one.

Life Insurance And Terminal Illness

If you become incurably ill, your life insurance policy will be a valuable financial resource. Not only can your policy provide for your survivors, you may be able to receive a portion of the death proceeds before you pass away. This can help pay your expenses or even fulfill a cherished dream.

Naturally, the more life insurance you can buy, the more your survivors will be protected financially. There are a number of ways, even during terminal illness, that you can enhance your coverage:

• Guaranteed Insurability Rider. Selecting this option at the time of the policy’s purchase enables you to buy additional life insurance without proof of medical insurability.
• Changing Your Dividend Option. If your policy pays annual dividends, you may be able to buy more life insurance. Check the dividend option currently in effect. If the dividends are left to accumulate or used to reduce premiums, your policy may allow you switch to a paid-up additions option. This allows you to use the dividends to buy fully paid-up additional life insurance without evidence of medical insurability.
• Buying credit insurance. If you take out a loan to purchase a big-ticket item while you are still working, consider buying credit life insurance; it pays off the balance of the loan if you die prematurely.
• Your company’s group life insurance program. If you are still employed, it may be possible to purchase more life insurance through your company with no proof of medical insurability. This option may be available all year or only during annual open enrollment.
• Taking out a loan against the cash surrender value. If your policy has a cash value, it might be possible to borrow from the insurance company using the policy as collateral. However, this will reduce the death benefit and cash value of the policy.
• Applying for benefits from an accelerated death benefit rider. If your life insurance policy includes this rider, you may be eligible to receive part of the face amount of the policy in advance of your passing – in either a lump sum or installments. If your life expectancy is 24 months or less, the proceeds are not taxable. You may also choose to take less than the full amount, so that some of it will go to your survivors.

While there is no reason to dwell on negatives, you should always consider providing for the unexpected in your financial road-map. A financial professional can help you review your options and can lead you towards educated financial decisions for that may benefit you and loved ones for years to come.