Buyer’s Guide

Guide for Buying Health Insurance

Introduction
Making Sense of Health Insurance
Managed Care
Self-Insured Plans
Appropriate Care
How Do I Get Health Coverage?
Pre-existing Conditions
What Is Not Covered?
What Happens to My Insurance if I Lose My Job?
Frequently Asked Questions
Comparing Plans
Other Forms of Health Insurance
A Final Word


Introduction
If you have ever been sick or injured, you know how important it
is to have health coverage. But if you’re confused about what kind is
best for you, you’re not alone.

What types of health coverage are available? If your employer offers
you a choice of health plans, what should you know before making a decision?
In addition to coverage for medical expenses, do you need some other
kind of insurance? What if you are too ill to work? Or, if you are over
65, will Medicare pay for all your medical expenses?

These are questions that today’s consumers are asking; and these
questions aren’t necessarily easy to answer.

This booklet should help. It discusses the basic forms of health
coverage and includes a checklist to help you compare plans. It answers
some commonly asked questions and also includes thumbnail descriptions
of other forms of health insurance, including hospital-surgical policies,
specified disease policies, catastrophic coverage, hospital indemnity
insurance, and disability, long-term care, and Medicare supplement insurance.

While we know that our guide can’t answer all your questions, we
think it will help you make the right decisions for yourself, your family,
and even your business.


Making Sense of Health Insurance

The term health insurance refers to a wide variety of insurance policies.
These range from policies that cover the costs of doctors and hospitals
to those that meet a specific need, such as paying for long-term care.
Even disability insurance – which replaces lost income if you can’t
work because of illness or accident – is considered health insurance,
even though it’s not specifically for medical expenses.

But when people talk about health insurance, they usually mean the
kind of insurance offered by employers to employees, the kind that covers
medical bills, surgery, and hospital expenses. You may have heard this
kind of health insurance referred to as comprehensive or major medical
policies, alluding to the broad protection they offer. But the fact
is, neither of these terms is particularly helpful to the consumer.

Today, when people talk about broad health care coverage, instead
of using the term “major medical,” they are more likely to refer to
fee-for-service or managed care. These terms apply to different kinds
of coverage or health plans. Moreover, you’ll also hear about specific
kinds of managed care plans: health maintenance organizations or HMOs,
preferred provider organizations or PPOs, and point-of-service or POS
plans.

While fee-for-service and managed care plans differ in important
ways, in some ways they are similar. Both cover an array of medical,
surgical, and hospital expenses. Most offer some coverage for prescription
drugs, and some include coverage for dentists and other providers. But
there are many important differences that will make one or the other
form of coverage the right one for you.

The section below is designed to acquaint you with the basics of
fee-for-service and managed care plans. But remember: The detailed differences
between one plan and another can only be understood by careful reading
of the materials provided by insurers, your employee benefits specialist,
or your agent or broker.


Fee-for-Service

This type of coverage generally assumes that the medical provider
(usually a doctor or hospital) will be paid a fee for each service rendered
to the patient – you or a family member covered under your policy. With
fee-for-service insurance, you go to the doctor of your choice and you
or your doctor or hospital submits a claim to your insurance company
for reimbursement. You will only receive reimbursement for “covered”
medical expenses, the ones listed in your benefits summary.

When a service is covered under your policy, you can expect to be
reimbursed for some, but generally not all, of the cost. How much you
will receive depends on the provisions of the policy on coinsurance
and deductibles. Here’s how it works:

  • The portion of the covered medical expenses you pay is called
    “coinsurance.”

    Although there are variations, fee-for-service policies often reimburse
    doctor bills at 80 percent of the “reasonable and customary charge.”
    (This is the prevailing cost of a medical service in a given geographic
    area.) You pay the other 20 percent – your coinsurance.

    However, if a medical provider charges more than the reasonable
    and customary fee, you will have to pay the difference. For example,
    if the reasonable and customary fee for a medical service is $100,
    the insurer will pay $80. If your doctor charged $100, you will
    pay $20. But if the doctor charged $105, you will pay $25.

    Note that many fee-for-service plans pay hospital expenses in full;
    some reimburse at the 80/20 level as described above.

  • Deductibles are the amount of the covered expenses you must
    pay each year before the insurer starts to reimburse you. These
    might range from$100 to $300 per year per individual, or $500 or
    more per family. Generally, the higher the deductible, the lower
    the premiums, which are the monthly, quarterly, or annual payments
    for the insurance.
  • Policies typically have an out-of-pocket maximum. This means
    that once your expenses reach a certain amount in a given calendar
    year, the reasonable and customary fee for covered benefits will
    be paid in full by the insurer. (If your doctor bills you more than
    the reasonable and customary charge, you may still have to pay a
    portion of the bill.) Note that Medicare limits how much a physician
    may charge you above the usual amount.
  • There also may be lifetime limits on benefits paid under the
    policy. Most experts recommend that you look for a policy whose
    lifetime limit is at least $1 million. Anything less may prove to
    be inadequate.

Managed Care

The three major types of managed care plans are health maintenance
organizations (HMOs), preferred provider organizations (PPOs), and point-of-service
(POS) plans.

Managed care plans generally provide comprehensive health services
to their members, and offer financial incentives for patients to use
the providers who belong to the plan. In managed care plans, instead
of paying separately for each service that you receive, your coverage
is paid in advance. This is called prepaid care.

For example, you may decide to join a local HMO where you pay a monthly
or quarterly premium. That premium is the same whether you use the plan’s
services or not. The plan may charge a copayment for certain services
– for example, $10 for an office visit, or $5 for every prescription.
So, if you join this HMO, you may find that you have few out-of-pocket
expenses for medical care – as long as you use doctors or hospitals
that participate in or are part of the HMO. Your share may be only the
small copayments; generally, you will not have deductibles or coinsurance.

One of the interesting things about HMOs is that they deliver care
directly to patients. Patients sometimes go to a medical facility to
see the nurses and doctors or to a specific doctor’s office. Another
common model is a network of individual practitioners. In these individual
practice associations (IPAs), you will get your care in a physician’s
office.

If you belong to an HMO, typically you must receive your medical
care through the plan. Generally, you will select a primary care physician
who coordinates your care. Primary care physicians may be family practice
doctors, internists, pediatricians, or other types of doctors. The primary
care physician is responsible for referring you to specialists when
needed. While most of these specialists will be “participating providers”
in the HMO, there are circumstances in which patients enrolled in an
HMO may be referred to providers outside the HMO network and still receive
coverage.

PPOs and POS plans are categorized as managed care plans. (Indeed,
many people call POS plans “an HMO with a point-of-service option.”)
From the consumer’s point of view, these plans combine features of fee-for-service
and HMOs. They offer more flexibility than HMOs, but premiums are likely
to be somewhat higher.

With a PPO or a POS plan, unlike most HMOs, you will get some reimbursement
if you receive a covered service from a provider who is not in the plan.
Of course, choosing a provider outside the plan’s network will cost
you more than choosing a provider in the network. These plans will act
like fee-for-service plans and charge you coinsurance when you go outside
the network.

What is the difference between a PPO and a POS plan? A POS plan has
primary care physicians who coordinate patient care; and in most cases,
PPO plans do not. But there are exceptions!

HMOs and PPOs have contracts with doctors, hospitals, and other providers.
They have negotiated certain fees with these providers – and, as long
as you get your care from these providers, they should not ask you for
additional payment. (Of course, if your plan requires a copayment at
the time you receive care, you will have to pay that.)

Always look carefully at the description of the plans you are considering
for the conditions of payment. Check with your employer, your benefits
manager, or your state department of insurance to find out about laws
that may regulate who is responsible for payment.


Self-insured Plans

Your employer may have set up a financial arrangement that helps
cover employees’ health care expenses. Sometimes employers do this and
have the “health plan” administered by an insurance company; but sometimes
there is no outside administrator. With self-insured health plans, certain
federal laws may apply. Thus, if you have problems with a plan that
isn’t state regulated, it’s probably a good idea to talk to an attorney
who specializes in health law.


Appropriate Care

HMOs, PPOs, and fee-for-service plans often share certain features,
including pre authorization, utilization review, and discharge planning.

For example, you may be asked to get authorization from your plan
or insurer before admission to a hospital for certain types of surgery.
Utilization review is the process by which a plan determines whether
a specific medical or surgical service is appropriate and/or medically
necessary. Discharge planning is an approach that facilitates the transfer
of a patient to amore cost-effective facility if the patient no longer
needs to stay in the hospital. For example, if, following surgery, you
no longer need hospitalization but cannot be cared for at home, you
may be transferred to a skilled nursing facility.

Almost all fee-for-service plans apply managed care techniques to
contain costs and guarantee appropriate care; and an increasing number
of managed care plans contain fee-for-service elements. While the distinctions
among plans are growing increasingly blurred, the number of options
available to consumers increases every day.


How Do I Get Health Coverage?

Health insurance is generally available through groups and to individuals.
Premiums – the regular fees that you pay for health insurance coverage
– are generally lower for group coverage. When you receive group insurance
at work, the premium usually is paid through your employer.

Group insurance is typically offered through employers, although
unions, professional associations, and other organizations also offer
it. As an employee benefit, group health insurance has many advantages.
Much – although not all – of the cost may be borne by the employer.
Premium costs are frequently lower because economies of scale in large
groups make administration less expensive. With group insurance, if
you enroll when you first become eligible for coverage, you generally
will not be asked for evidence that you are insurable. (Enrollment usually
occurs when you first take a job, and/or during a specified period each
year, which is called open enrollment.) Some employers offer employees
a choice of fee-for-service and managed care plans. In addition, some
group plans offer dental insurance as well as medical.

Individual insurance is a good option if you work for a small company
that does not offer health insurance or if you are self-employed. Buying
individual insurance allows you to tailor a plan to fit your needs from
the insurance company of your choice. It requires careful shopping,
because coverage and costs vary from company to company. In evaluating
policies, consider what medical services are covered, what benefits
are paid, and how much you must pay in deductibles and coinsurance.
You may keep premiums down by accepting a higher deductible.


Pre-existing Conditions

Many people worry about coverage for preexisting conditions, especially
when they change jobs. The Health Insurance Portability and Accountability
Act (HIPAA) helps assure continued health insurance coverage for employees
and their dependents. Starting July 1, 1997, insurers could impose only
one 12-month waiting period for any preexisting condition treated or
diagnosed in the previous six months. Your prior health insurance coverage
will be credited toward the preexisting condition exclusion period as
long as you have maintained continuous coverage without a break of more
than 62 days. Pregnancy is not considered a preexisting condition, and
newborns and adopted children who are covered within 30 days are not
subject to the 12-monthwaiting period.

If you have had group health coverage for two years, and you switch
jobs and go to another plan, that new health plan cannot impose another
preexisting condition exclusion period. If, for example, you have had
prior coverage of only eight months, you may be subject to a four-month,
preexisting condition exclusion period when you switch jobs. If you’ve
never been covered by an employer’s group plan, and you get a job that
offers such coverage, you may be subject to a 12-month, preexisting
condition waiting period.

Federal law also makes it easier for you to get individual insurance
under certain situations, including if you have left a job where you
had group health insurance, or had another plan for more than 18 months
without a break of more than 62 days.

If you have not been covered under a group plan and have found it
difficult to get insurance on your own, check with your state insurance
department to see if your state has a risk pool. Similar to risk pools
for automobile insurance, these can provide health insurance for people
who cannot get it elsewhere.


What Is Not Covered?

While HMO benefits are generally more comprehensive than those of
traditional fee-for-service plans, no health plan will cover every medical
expense.

Very few plans cover eyeglasses and hearing aids because these are
considered budgetable expenses. Very few cover elective cosmetic surgery,
except to correct damage caused by a covered accidental injury. Some
fee-for-service plans do not cover checkups. Procedures that are considered
experimental may not be covered either. And some plans cover complications
arising from pregnancy, but do not cover normal pregnancy or childbirth.

Health insurance policies frequently exclude coverage for preexisting
conditions, but, as explained, federal law now limits exclusions based
on such conditions.

You should also remember that insurers will not pay duplicate benefits.
You and your spouse may each be covered under a health insurance plan
at work but, under what is called a “coordination of benefits” provision,
the total you can receive under both plans for a covered medical expense
cannot exceed 100 percent of the allowable cost. Also note that if neither
of your plans covers 100 percent of your expenses, you will only be
covered for the percentage of coverage (for example, 80 percent) that
your primary plan covers. This provision benefits everyone in the long
run because it helps to keep costs down.


What Happens to My Insurance if I Lose My Job?

If you have had health coverage as an employee benefit and you leave
your job, voluntarily or otherwise, one of your first concerns will
be maintaining protection against the costs of health care. You can
do this in one of several ways:

  • First, you should know that under a federal law (the Consolidated
    Omnibus Budget Reconciliation Act of 1985, commonly known as COBRA),
    group health plans sponsored by employers with 20 or more employees
    are required to offer continued coverage for you and your dependents
    for 18 months after you leave your job. (Under the same law, following
    an employee’s death or divorce, the worker’s family has the right
    to continue coverage for up to three years.) If you wish to continue
    your group coverage under this option, you must notify your employer
    within 60 days. You must also pay the entire premium, up to 102
    percent of the cost of the coverage.
  • If COBRA does not apply in your case – perhaps because you work
    for an employer with fewer than 20 employees – you may be able to
    convert your group policy to individual coverage. The advantage
    of that option is that you may not have to pass a medical exam,
    although an exclusion based on a preexisting condition may apply,
    depending on your medical history and your insurance history.
  • If COBRA doesn’t apply and converting your group coverage is
    not for you, then, if you are healthy, not yet eligible for Medicare,
    and expect to take another job, you might consider an interim or
    short-term policy. These policies provide medical insurance for
    people with a short-term need, such as those temporarily between
    jobs or those making the transition between college and a job. These
    policies, typically written for two to six months and renewable
    once, cover hospitalization, intensive care, and surgical and doctors’
    care provided in the hospital, as well as expenses for related services
    performed outside the hospital, such as X-rays or laboratory tests.
  • Another possibility is obtaining coverage through an association.
    Many trade and professional associations offer their members health
    coverage – often HMOs – as well as basic hospital-surgical policies
    and disability and long-term care insurance. If you are self-employed,
    you may find association membership an attractive route.

Frequently Asked Questions

Q What is the first thing I should know about buying health coverage?

A Your aim should be to insure yourself and your family against the
most serious and financially disastrous losses that can result from
an illness or accident. If you are offered health benefits at work,
carefully review the plans’ literature to make sure the one you select
fits your needs. If you purchase individual coverage, buy a policy that
will cover major expenses and pay them to the highest maximum level.
Save money on premiums, if necessary, by taking large deductibles and
paying smaller costs out-of-pocket.

Q Can I buy a single health insurance policy that will provide all
the benefits I’m likely to need?

A No. Although you can select a plan or buy a policy that should
cover most medical, hospital, surgical, and pharmaceutical bills, no
single policy covers everything. Moreover, you may want to consider
additional single-purpose policies like long-term care or disability
income insurance. If you are over 65, you may want a Medicare supplement
policy to fill in the gaps in Medicare coverage.

Q I’m planning to keep working after age 65. Will I be covered by
Medicare or by my company’s health insurance?

A If you work for a company with 20 or more employees, your employer
must offer you (through age 69) the same health insurance coverage offered
to younger employees. After you reach age 65, you may choose between
Medicare and your company’s plan as your primary insurer. If you elect
to remain in the company plan, it will pay first – for all benefits
covered under the plan – before Medicare is billed. In most instances,
it is to your advantage to accept continued employer coverage.

But be sure to enroll in Medicare Part A, which covers hospitalization
and can supplement your group coverage at no additional cost to you.
You can save on Medicare premiums by not enrolling in Medicare Part
B until you finally retire. Bear in mind, though, that delayed enrollment
is more expensive and entails a waiting period for coverage.

Q I’ve had a serious health condition that appears to be stabilized.
Can I buy individual health coverage?

A Depending on what your condition is and when it was diagnosed and
treated, you can probably buy health coverage. However, the insurer
may do one of three things:

  • provide full protection but with a higher premium, as might
    be the case with a chronic disease, such as diabetes;
  • modify the benefits to increase the deductible;
  • exclude the specific medical problem from coverage, if it is
    a clearly defined condition, as long as the insurer abides by state
    and federal laws on exclusions.

Q One of my medical bills was turned down by the insurance company
(or health plan). Is there anything I can do?

A Ask the insurance company why the claim was rejected. If the answer
is that the service isn’t covered under your policy, and you’re sure
that it is covered, check to see that the provider entered the correct
diagnosis or procedure code on the insurance claim form. Also check
that your deductible was correctly calculated.

Make sure that you didn’t skip an essential step under your plan,
such as pre admission certification. If everything is in order, ask
the insurer to review the claim.


Comparing Plans

Whether you end up choosing a fee-for-service plan or a form of managed
care, you must examine a benefits summary or an outline of coverage
– the description of policy benefits, exclusions, and provisions that
makes it easier to understand a particular policy and compare it with
others.

Look at this information closely. Think about your personal situation.
After all, you may not mind that pregnancy is not covered, but you may
want coverage for psychological counseling. Do you want coverage for
your whole family or just yourself? Are you concerned with preventive
care and checkups? Or would you be comfortable in a managed care setting
that might restrict your choice somewhat but give you broad coverage
and convenience? These are questions that only you can answer.

Here are some of the things to look at when choosing and comparing
health insurance plans.

Health Insurance Checklist

Covered medical services

  • Inpatient hospital services
  • Outpatient surgery
  • Physician visits (in the hospital)
  • Office visits
  • Skilled nursing care
  • Medical tests and X-rays
  • Prescription drugs
  • Mental health care
  • Drug and alcohol abuse treatment
  • Home health care visits
  • Rehabilitation facility care
  • Physical therapy
  • Speech therapy
  • Hospice care
  • Maternity care
  • Chiropractic treatment
  • Preventive care and checkups
  • Well-baby care
  • Dental care
  • Other covered services

Are there any medical service limits, exclusions, or preexisting
conditions that will affect you or your family?

What types of utilization review, pre authorization, or certification
procedures are included?


Costs

How much is the premium?

$_____________________________________________

Are there any discounts available for good health or healthy behaviors
(e.g., non-smoker)?

__________________________________________________________________

How much is the annual deductible?

$_________________________________ per person

$_________________________________ per family

What coinsurance or co-payments apply?

_________________________________% after I meet my deductible

$_________________________________copay or % coinsurance per office
visit

$_________________________________copay or % coinsurance for “wellness”
care (includes well-baby care, annual eye exam, physical, etc.)

$_________________________% copay or coinsurance for inpatient hospital
care


Other Forms of Health Insurance

In addition to broad coverage for medical, surgical, and hospital
expenses, there are many other kinds of health insurance.

Hospital-surgical policies, sometimes called basic health insurance,
provide benefits when you have a covered condition that requires hospitalization.
These benefits typically include room and board and other hospital services,
surgery, physicians’ non surgical services that are performed in a hospital,
expenses for diagnostic X-rays and laboratory tests, and room and board
in an extended care facility.

Benefits for hospital room and board may be a per-day dollar amount
or all or part of the hospital’s daily rate for a semi-private room.
Benefits for surgery typically are listed, showing the maximum benefit
for each type of surgical procedure.

Hospital-surgical policies may provide “first-dollar” coverage. That
means that there is no deductible, or amount that you have to pay, for
a covered medical expense. Other policies may contain a small deductible.

Keep in mind that hospital-surgical policies usually do not cover
lengthy hospitalizations and costly medical care. In the event that
you need these types of services, you may incur large expenses that
are difficult to meet unless you have other insurance.

Catastrophic coverage pays hospital and medical expenses above a
certain deductible; this can provide additional protection if you hold
either a hospital-surgical policy or a major medical policy with a lower-than-adequate
lifetime limit. These policies typically contain a very high deductible
($15,000 or more) and a maximum lifetime limit high enough to cover
the costs of catastrophic illness.

Specified or dread disease policies provide benefits only if you
get the specific disease or group of diseases named in the policy. For
example, a policy might cover only medical care for cancer. Because
benefits are limited in amount, these policies are not a substitute
for broad medical coverage. Nor are specified disease policies available
in every state.

Hospital indemnity insurance pays you a specified amount of cash
benefits for each day that you are hospitalized, generally up to a designated
number of days. These cash benefits are paid directly to you, can be
used for any purpose, and may be useful in meeting out-of-pocket expenses
not covered by other insurance.

Hospital indemnity policies frequently are available directly from
insurance companies by mail as well as through insurance agents. You
will find that these policies offer many choices, so be sure to ask
questions and find the right plan to meet your needs.

Some policies contain limitations on preexisting medical conditions
that you may have before your insurance takes effect. Others contain
an elimination period, which means that benefits will not be paid until
after you have been hospitalized for a specified number of days. When
you apply for the policy, you may be allowed to choose among two or
three elimination periods, with different premiums for each. Although
you can reduce your premiums by choosing a longer elimination period,
you should bear in mind that most patients are hospitalized for relatively
brief periods of time.

If you purchase a hospital indemnity policy, periodically review
it to see if you need to increase your daily benefits to keep pace with
rising health care costs.

Medicare supplement insurance, sometimes called Medigap or MedSup,
is private insurance that helps cover some of the gaps in Medicare coverage.

Medicare is the federal program of hospital and medical insurance
primarily for people age 65 and over who are not covered by an employer’s
plan. But Medicare doesn’t cover all medical expenses. That’s where
MedSup comes in.

All Medicare supplement policies must cover certain expenses, such
as the daily coinsurance amount for hospitalization and 90 percent of
the hospital charges that otherwise would have been paid by Medicare,
after Medicare is exhausted. Some policies may offer additional benefits,
such as coverage for preventive medical care, prescription drugs, or
at-home recovery.

There are 10 standard Medicare supplement policies, designated by
the letters A through J. With these standardized policies, it is much
easier to compare the costs of policies issued by different insurers.
While all 10 standard policies may not be available to you, Plan A must
be made available to Medicare recipients everywhere.

Insurers are not permitted to sell policies that duplicate benefits
you already receive under Medicare or other policies. If you decide
to replace an existing Medicare supplement policy – and you should do
so only after careful evaluation – you must sign a statement that you
intend to replace your current policy and that you will not keep both
policies in force.

People who are 65 or older can buy Medicare supplement insurance
without having to worry about being rejected for existing medical problems,
so long as they apply within six months after enrolling in Medicare.

Long-term care policies cover the medical care, nursing care, and
other assistance you might need if you ever have a chronic illness or
disability that leaves you unable to care for yourself for an extended
period of time. These services generally are not covered by other health
insurance. You may receive long-term care in a nursing home or in your
own home.

Long-term care can be very expensive. On average, a year in a nursing
home costs about $40,000. In some regions, it may cost much more. Home
care is less expensive, but it still adds up. (Home care can include
part-time skilled nursing care, speech therapy, physical or occupational
therapy, home health aides, and homemakers.)

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.”