That magical time of year is upon us, when the weather gets colder, we cozy up to a fire, and re-evaluate our insurance. I used to manage HR for a small company, and I was surprised to see how many people would procrastinate or get anxious about selecting their insurance plans.
The open enrollments deadline for many insurance plans is Dec 15th, so today we’re going to go through a few tips to make the process of selecting your insurance a bit less daunting.
📰 In the Headlines
Breaking down some of this week's biggest stories
Translation: Blue chip stocks are having a great day
The Dow Jones Industrial Average is an index of 30 large blue-chip companies stocks. Created in 1896, it is considered the benchmark index for the performance of the overall stock market. Today, it hit a major milestone, crossing 30,000 points. It hit 20,000 points less than 4 years ago, and many are attributing this milestone to the news that Trump has agreed to cooperate with Biden's transition team.
Translation: Snapchat is trying new things to stay competitive
TikTok has been the dominating social media pie throughout the pandemic, and Snapchat wants a slice. After releasing a new music feature just last month, the popular photo messaging app has officially launched a short form-video platform that looks oddly familiar. The big new feature? Their version allows creators to earn money for popular videos, offering users $1 million a day if their content goes viral.
Translation: More kids will be learning from home for the foreseeable future
Pull out the puzzles and crayons, it's going to be a long winter. Covid spikes in over 30 states are forcing schools to transition to virtual learning midway through the school year again. As of this Monday, 43.5% of US students were attending virtual-only schools, and the number is expected to continue increasing. That spells good news for the platforms schools are relying on to make virtual learning possible.
🩺 A Healthy Outlook
With the certain events *ahem pandemic*, the importance of having good insurance coverage is more important than ever. Yes, health insurance is expensive, but it's much better than paying for your own medical bills. Even the most basic medical procedures can put you in serious debt. We could go into an entire digression about the issues with the American Healthcare system, but the fact is, right now, you need insurance.
Selecting the best plan for you doesn't have to be scary, here are a few tips I picked up from my days in HR.
💬 Whatcha Say?
Reading through insurance policies can feel like translating another language, language from a culture that really likes to use fine print.
Like the world of finance, healthcare providers like to use confusing jargon, which can make the already daunting experience of selecting a plan that much scarier. Understanding the terms they use makes reading the plans available to you a whole lot easier.
Premium: What you pay every month to be on an insurance plan. If you work full time, your employer may offer to pay for part of your insurance premium as a part of your compensation.
Deductible: The amount you pay out of pocket (or pay for yourself) before your insurance kicks in. Say you have a $500 dentists bill and a $200 deductible, that means you’ll be paying $200 of that bill, and your insurance will pay the remaining $300. In most plans, the deductible resets every 12 months, so after you pay it once, your out of pocket costs will switch to co-insurance.
Coinsurance: After you've paid your deductible, your out of pocket expenses will be a fixed percentage say (20%) of the costs of the health care service. This is called ‘coinsurance’. Say you have another dental bill a month later that costs $300. If your coinsurance is 20%, you will pay $60 for it, and insurance will cover the rest.
Co-Pay: For certain medical services, your plan might use a co-pay rather than coinsurance. A co-pay is a fixed amount (rather than a percentage) you’ll pay for a medical service. For example, your co-insurance might be 20%, but going in for a checkup has a co-pay of $30. That means that no matter how much the bill for your checkup is, you’ll only have to pay $30 out of pocket. Co-pays are often used for predictable costs like getting an x-ray, going to the ER, or buying prescription drugs. In some instances, you may need to pay both a copay and coinsurance for the same service.
Flexible spending account (FSA): FSA’s are a special type of savings account that come with some insurance plans. You can use the money in your FSA to pay for copayments, deductibles, some drugs, and some other health care costs. There is usually a cap on how much you can keep in your FSA, but the best part about them is you don’t pay taxes on the money in there.
🤔 Preparing to Pick
There is one-size fits all solution when it comes to insurance, but it's helpful to go into the process with a game plan. Before you even look at what plans are available to you, sit down (maybe with your partner) and think through these questions:
What do you need?
The most important question in choosing health insurance is figuring out what you need. Do you have a bad back? Maybe pick a plan that includes a chiropractic. Plan on having a baby soon? Some plans include special coverage for maternity care, because having a baby in the US is expensive af. Think through and write down your biggest needs from insurance, so you won’t get distracted by all the extra add-ons and complex structures of insurance plans.
What can you pay?
The rule of thumb goes, the higher your deductible is, the lower your premiums, copays, and co-insurance will be. That means, the more you can pay out of pocket when you get a medical bill, the less you will have to pay every month. Most advisors recommend that you have the amount of your deductible in savings at all times, especially if you choose a plan with a low premium to keep your monthly costs low.
As I said before, choosing insurance is a complicated process, and there is no one size fits all plan. Everyones needs are different, and it's likely those needs will change throughout time. If you need additional help choosing the best plan for you or your family, talk to a certified Insurance or Financial advisor to help determine the best plan for you.
🍋 When Life Hands You Insurance
Wondering about life insurance? Most plans fall into one of two categories: permanent and term. Term life insurance policies function similarly to car insurance; you pay money each month, and if an ‘incident’ occurs—in this case, your early death—the account’s beneficiary is paid out. Term life insurance is solely for risk management, not investment.
Permanent life insurance, on the other hand, has an investment component as well as a payout. These policies let you borrow against it or potentially withdraw money from the account. Insurance companies tout these policies not only as protection if something happens to you, but also as a good investment tool. However, these plans usually come with a lot of hidden fees, like sales commissions and withdrawal fees.
If you need life insurance, most financial advisors recommend getting term insurance and using a 401(k), IRA, or other investing plan for savings. This advice is based on the fact that term life insurance usually has much fewer administrative fees than permanent life insurance, leaving money free for other investments that may offer a better return.
Word of the Day
(n.) When the term “Bull Market”or bullish is used to describe the stock market, that means that stock prices are generally rising, and many analysts and advisors believe that it is a good time to buy stocks.
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