As you learned in the last chapter,
if you have a large number of traffic violations or accidents on your motor
vehicle report or if you have several losses on your CLUE report, you may not
be able to obtain insurance through a standard automobile insurance carrier.
Most drivers that cannot obtain insurance in the standard market are able to insure their vehicles through a high-risk carrier.
Unfortunately, this is not the case for every driver. Depending on how many violations, accidents, or losses appear on your driver reports, you may find that even high-risk automobile insurance carriers are unwilling to insure you.
If you are unable to obtain automobile insurance by calling agents or shopping for insurance online, you may still be able to insure your vehicles through your state's automobile insurance plan.
Each state has a program designed to provide insurance to people who would not otherwise be insurable. You can obtain information about your state's automobile insurance plan from any insurance agent licensed to write automobile insurance in your state. If an agent is unable to provide you with this information, you can find out how to apply for state coverage by contacting your state's insurance department.
To qualify for your state's automobile insurance plan, you will have to be declined coverage by at least three automobile insurance carriers.
If you suspect you will be unable to obtain insurance through the primary insurance market, it is a good idea to ask each insurance agent that is unable to provide coverage for a declination letter. This letter will show the date you applied for coverage, the name of the company that declined to provide you automobile insurance, and the reason the insurance company declined coverage.
The specific coverages available through state automobile insurance plans vary from state to state. You will at least be able to obtain the minimum liability limits required by your state, as well as any other state-mandated coverages. In some cases, you may also obtain comprehensive and collision coverage on your vehicle to financially protect you in case of an accident.
After you have been insured through your state's automobile insurance plan for a time, typically one year, you may be eligible for a policy through the primary market. Often, you will be able to obtain an automobile insurance policy through the company that provided insurance through the state automobile insurance plan.
State automobile insurance plan policies are quite expensive compared to policies available in the primary market, but if you are unable to obtain insurance elsewhere, this can be a good method for meeting your state's automobile financial responsibility requirements.
We now turn to the topic of health
insurance, another type of
insurance that is crucial to your family's financial stability. In the next several chapters, you will learn what health insurance is, how you can use health insurance to manage the financial risks that come with illness and injury, and ways you can save money on your health insurance premiums.
WHAT IS HEALTH INSURANCE?
Ifyou have been to the doctor's office or emergency room
you know how much basic healthcare can cost. A simple checkup at
your doctor's office can cost you $100 or more, and a trip to the
emergency room can cost you thousands, even if you come away
with just a prescription.
If you have an illness or injury that puts you in the hospital, even for
an overnight stay, the costs associated with receiving healthcare can
climb even higher. A brief stay in the hospital can cost $10,000 or
more, especially ifyou require intensive care or surgery to address an
injury or health condition.
Few of us have the financial reserves to pay for a trip to the emergency room or the hospital. Even routine doctor's office visits or medications can add up to thousands of dollars over the course of a year.
Health insurance can help you to manage your healthcare costs. In exchange for payment of periodic premiums, healthcare coverage will pay part of the costs of your physician visits, prescription medications, emergency room and urgent care services,
hospitalizations, and surgeries.
Most health insurers offer several different types of plans with different coverage limits, deductibles, coinsurance requirements, and exclusions. You can choose the type of health insurance coverage you need based on your health, life style, and financial situation.
There are many health insurance plans that also offer disability coverage, which will pay a portion of your earnings in the event that you become ill or injured and are not able to work for a time. The length of this coverage is not as great as disability coverage offered by life insurance policies, but it is important coverage to have in place if you become disabled for more than a month. Health insurance may also cover dental expenses, from routine cleanings to major dental
surgery, and vision expenses, such as eye exams and glasses or contact lens purchases.
WHY DO YOU NEED HEALTH INSURANCE?
⏩ Many people, especially people without children and professionals just starting in their careers, assume that health insurance is an unnecessary expense. Health insurance premiums, even for employer-sponsored plans, can cost hundreds of dollars per month, and many young people simply feel the burden of these premiums represents too great an expense to justify buying this type of insurance.
The truth is that though health insurance premiums are more expensive than ever, even beginning professionals need this insurance to protect their financial well-being. A single accident or illness can put a working professional at risk of financial disaster - even an outpatient hospital stay for a routine procedure such as an appendectomy can result in a hospital bill of thousands of dollars or more. You cannot assume you will never become sick or injured, no matter how young you are or how well you maintain your health.
Health insurance can also help pay for long-term expenses if you become disabled because of an extended illness or injury. If you were diagnosed with a long-term illness today that prevented you from working for several months, how would you replace your income for the period during which you were unable to work? Unless you have saved up several months' worth of your salary, paying your mortgage
and other monthly bills would be a difficult task.
Another reason to purchase health insurance while you are still healthy is once you are diagnosed with an illness, you may not be able to obtain health insurance coverage, or an insurer may be unwilling to pay for treatment and services related to your condition.
You cannot wait until you need health insurance to purchase a policy. If you decide to have children, some health insurance policies will
cover the costs of prenatal care, such as obstetrician's office visits, ultrasounds, and other measures necessary to ensure the good health of your unborn child. It will cover the costs of delivery and postnatal care services after your child is born. Your child will also be added to the policy at birth, so any healthcare necessary to address congenital health problems would be covered under your health
insurance policy as well.
An excellent reason to buy health insurance is it will give you the financial incentive to consult a doctor or specialist before an illness or health condition becomes severe enough to require major medical treatment of hospitalization. Many people are more likely to see a doctor for a routine checkup, a nagging pain, or other symptom if they have health insurance in place to pay for the office visit. This allows your doctor to help you detect and treat conditions early, which can
save you thousands of dollars in avoided medical expenses and lost
The best reason to purchase health insurance is it helps you manage the financial uncertainty of your current or future medical needs. You may be in perfect health today, but the unfortunate reality is you could be diagnosed with an illness tomorrow that would require long-term medication, frequent doctor's office visits, hospitalization, or surgery.
Not having health insurance in place before you become ill or injured can be an efficient path to financial disaster.
Understanding your health insurance options is important because knowing the types of insurance available will help you choose the type of plan that is right for you.
types of health insurance policies
Although coverages under health insurance plans vary by company, there are four basic types of health insurance you can purchase to protect your financial well-being.
SINGLE INDIVIDUAL HEALTH INSURANCE
Single individual health insurance is a policy that covers only you.
This type of health coverage includes
provisions for paying for routine medical expenses and prescription costs, as
well as incidental medical expenses such as emergency room treatment, urgent care
services, hospitalization costs, and surgeries. Your policy may also include
benefits for preventative care, vision, and dental costs, depending on the plan
selected by you or your employer.
The cost of a single individual health insurance policy is a small fraction of the cost of family medical coverage. If you do not have a spouse or dependant, this can be a good option for obtaining health insurance at a relatively affordable premium.
If you experience a qualifying event, such as marriage or the birth of a child, you will be able to convert your health insurance policy to a family plan by notifying the insurer of the qualifying event. You must do so within 30 days of the event - otherwise, the health insurance company is not obligated to allow you to convert your policy to a family plan.
FAMILY HEALTH INSURANCE
⏩Family health insurance plans offer the same coverage as single individual health plans but cover other members of your immediate family. If you are married and have children, this is the most affordable way to obtain health insurance for your family.
If you are married but do not have children, you may choose to insure yourself and your spouse under a family health insurance plan, or you and your spouse may each elect to be covered under separate individual health insurance plans. Often, the cost of two individual plans is lower than the cost of one family health plan. If you and your spouse have a child later, you can compare the costs of a family plan through your respective health insurance plans and decide which policy to convert to a family plan.
Family health insurance plan premiums do not ordinarily change depending on the number of children you have. You will pay the same monthly premium for a family plan whether you have one child or six children.
SUPPLEMENTAL HEALTH INSURANCE
Supplemental health insurance is designed to cover costs associated with illness or injury that are not covered by your primary health insurance policy. It is important to understand that if you become ill or injured, prescription drug costs and hospital charges are not the only costs you will incur. Here are some of the most popular types of supplemental health insurance coverages available today:
• Accidental Death and Dismemberment Coverage. This type of policy is designed to provide payment for medical services not covered by your primary health insurer in the event of an accident. It also pays a stated benefit to your beneficiaries if you die as a result of an accident and to you if you become permanently disabled because of an accident. If you lose a limb or digit, you may be entitled to a portion of the death benefit listed in your policy.
• Specific Disease Coverage. This policy will directly pay you a set amount if you are diagnosed with a covered disease. This amount may be paid on a lump sum or a per-day basis and is independent of any medical expenses you may incur for treatment of the disease. You are free to spend the money however you want.
Common diseases covered under specific disease coverage policies include cancer, leukemia, multiple sclerosis, and renal disease. The benefit amount may be different for each disease covered under this type of policy.
• Hospital Indemnity Insurance. This supplemental policy pays you a specified amount for each day you are hospitalized, up to a maximum number of days specified in your policy. The benefits under a hospital indemnity policy are not reduced by any coverage for hospital or medical expenses paid by your primary health insurer.
This is a valuable coverage, because if you are hospitalized, you will incur additional living expenses above the cost of your hospital stay and medical treatment. You may need to pay someone to care for your children or pick them up from school, shop for groceries for your children, mow your lawn, or handle other household tasks you would perform if not for your hospitalization. Hospital indemnity insurance is inexpensive but can provide needed funds to cover your additional living expenses if you are hospitalized.
• Excess Medical or Catastrophic Medical Coverage. This policy protects you from being required to pay hospital and medical expenses that exceed the policy limits of your primary health insurance plan, or medical expenses not covered by your primary plan. Excess medical coverage carries a high deductible you or your primary health insurer may be responsible for $20,000 or more of your hospital or medical expenses before coverage begins under this type of policy.
If you have sufficient financial reserves to cover the deductible, excess medical coverage can be a good solution for obtaining inexpensive healthcare coverage to pay for catastrophic medical expenses; however, most people who purchase this type of policy use it as a supplement to primary health coverage.
• Dental and Vision Coverage. Some primary health insurance policies offer benefits for dental or vision services, but there are a number of plans under which these coverages are not available. You can purchase these coverages under a supplemental policy to cover the costs of dental procedures and vision-related expenses.
Dental coverage pays for preventative care expenses, such as periodic dental checkups, x-rays, and routine cleanings. It also provides benefits for corrective dental work, such as root canals, fillings, bridge work, and oral surgery. It may also pay a portion of your expenses for dentures and orthodontic work, although coverage for orthodontics has decreased in recent years. Dental coverage will not pay for cosmetic dental work, such as tooth whitening.
Vision coverage pays for routine vision exams and screenings and pays a portion of the costs of corrective lenses, eyeglass frames, and contact lenses. Some vision plans pay for a portion of your expenses for contact lenses ordered by mail. Insurance companies may limit you to a specified list of vision care providers and may pay a reduced benefit or refuse to pay for vision services if you use a provider outside the insurer's network.
Dental and vision coverage is sometimes offered on a reimbursement basis - if this is the case, you will have to pay for the costs of dental or vision services, and then the insurance company will send you a check for the benefit amount.
• Long-term Care Coverage pays for medical, nursing, and therapeutic expenses if you become partially or completely disabled as a result of a disease, illness, or accident and require care on a longterm basis. These services are not covered under a primary health insurance policy, so long-term care coverage can be valuable. Services may be provided on an inpatient or outpatient basis - many times, you can receive all of your longterm care at home.
Long-term care coverage benefits are paid on a per-day basis you can obtain coverage that will pay from $40 to more than $200 per day for medical and nursing services.
Your policy may stipulate that an elimination period must be met before coverage can begin - an elimination period is a specified number of days that you must receive and pay for long-term care expenses out of pocket. Be sure to check the length of the elimination period before you purchase a long-term care policy. An elimination period of 60 days may mean you will be responsible for $10,000 or more of your long-term care expenses before your benefits begin.
If you are traveling outside the United States, medical facilities in foreign countries may not honor the coverage provided by your primary health policy. If you require medical attention while traveling in a foreign country, you may be required to bear the entire cost of the care you receive.
Travel insurance is a special policy that provides medical coverage while you are in another country. These are short-term policies that cover time periods from five days to one year and provide benefits for illnesses, accidents, and medical emergencies. It may also provide limited coverage for an acute onset of illness caused by a pre-existing condition.
Some travel insurance policies also offer additional coverages, such as benefits for accidental death while traveling abroad, repatriation expenses, and the costs of medical evacuation.
This is an important policy to purchase if you will be traveling outside the United States or living in another country for a short time. If you currently have a primary health insurance policy, you will not need to submit to a medical exam to obtain this coverage.