Personal Lines

by Patrick Griffin

One inevitability faces us all death. Certain financial consequences arise at that time that a prudent person addresses while still living. Health pitfalls face us, too, whether from accident or illness.

It has been said that we either die too soon or live too long (it would be convenient if we knew when we would die). If we die too soon, then term insurance would be perfect for almost all of us.

If we live too long, permanent insurance and its cash value component can help us with income or estate planning needs. We will always have final expenses, but often outlive debt retirement and income replacement needs. Estate planning needs should be addressed.

Life insurance is a necessity to protect our families from financial loss that occurs upon death. It's not fun to talk about, or spend money on. It's almost the last "necessity" we buy, and one of the first to go when the budget gets tight. That's why it's important to determine your needs and your income, and how to blend the two together with a plan that you can live with.

Since our financial position continually changes during our lives, this plan needs regular monitoring and adjusting. Products such as universal life, variable life and adjustable whole life have made the review of our plans a lot more interesting.

The key is to find an agent or broker with whom you can communicate. Then, buy term to protect term needs and permanent life insurance for life-long needs.

Health insurance is something most of us accept as a necessity. It used to be relatively simple (at least, after they combined hospital, surgical and the other policies into a "major medical" policy).

You chose a deductible and got to pay a percentage of an amount after that each year (coinsurance) up to a stated amount ($5,000 has been popular) with a plan's upper limit at $1 million or $2 million. Deductibles could be annual or per occurrence.

Then, as medical inflation soared (to meet our demand for the finest health care in the world), "cost containment" measures were introduced. Precertification became widely accepted, networks of providers were developed, and then managed care emerged as the leading cost containment weapon. Health maintenance organizations (HMOs) and preferred provider organizations (PPOs) have become the standard for most Americans' health plans.

Those plans are evolving, too, with less reliance by HMOs on primary-care physicians, and enhancements to PPO plans that make them as attractive from a copay standpoint (the copay is the flat amount you pay when you utilize a service such as a doctor's office visit) as HMOs. In Springfield, you only have one choice if you desire an individual HMO.

HIPAA (the Health Insurance Portability and Accountability Act or "Kennedy Kassebaum Bill") has further muddied the individual health insurance marketplace. It was proposed to be a panacea by guaranteeing "affordable" health insurance coverage to those leaving the group marketplace and needing individual coverage.

Special HIPAA plans with high price tags have been the norm, though. Since most people with individual health insurance would tell you that they can't afford to pay more, special HIPAA plans are a viable alternative.

Living death that's what some call disability, when we become injured or sick and cannot work. Most of us face the risk of becoming disabled for at least three months that risk is three times greater than our risk of dying. Yet most do not have adequate disability coverage.

You cannot even file for Social Security disability until you have been disabled five months. It starts paying, if you qualify, after six months, but the processing often takes you to the 11th or 12th month before you receive a check.

Will your company continue to pay you if you can't work? Will your creditors let you keep your home or your car if you can't meet your payments? How long can you live on your savings? How would you feel if you were laid up and saw your family lose your savings, your vehicle(s) and even your home?

If you can't afford a full-blown disability policy, some life insurance companies have disability coverage riders that can be added to their life insurance policies to at least make the house and car payment for you. They are usually pretty affordable and always a lot better buy than credit disability insurance from a lender.

There are other policies you can buy cancer, accidental death and such. Buy coverage for your primary exposures first. If your family has a history of cancer or you have a hazardous hobby or occupation, those may be polices to consider.

Sit down with your agent or broker. Review your current policies and exposures to see if you can spend your premium dollars more efficiently.

(Patrick Griffin, CPCU, AAI, AIS, is an insurance consultant with Man-Morris Insurors.)

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