How To Pay For Insurance

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Insurance

Guide

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Guide to Insurance Latino Community Credit Union 1

Insurance Guide

Latino Community Credit Union

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Copyright

©

2013 Latino Community Credit Union

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INTRODUCTION

WHAT IS INSURANCE?

INSURANCE

WHAT DOES IT COVER? EXAMPLE

LIFE Your dependents receive money to replace your income (until they are able to support themselves) in the event that you die prematurely.

If a head of household passes away, his or her spouse and children would receive money to cover their expenses and maintain their quality of life.

HOME Accidents or damages that occur on your property

If a tree branch damages the roof, the insurance will help you pay for the repairs. AUTO Car accidents. If you damage someone’s car door in a

parking lot, insurance will help you cover the costs incurred to fix the damages.

HEALTH Medical expenses. If you need surgery for appendicitis, insurance will help cover the medical expenses.

DISABILITY Supplements your income if you become sick or have an accident and are unable to work.

If you break your arm and cannot work for 3 months, disability insurance will supplement your income so that you and your family can cover your expenses and maintain your quality of life during that time.

LONG TERM CARE

Helps cover the cost of your daily living activities (eating, getting dressed, and bathing) in the event that you are unable to do so.

If you and/or your spouse are unable to care for yourselves as you get older, Long Term Care Insurance will help pay for services to help with your daily living activities.

In the event of an unexpected loss, you might have to pay a substantial amount of money out of pocket. With insurance, your family is protected and you can save money.

Insurance protects the financial well-being of you and your family in the case of an unexpected incident, or loss (such as a car accident, or a medical emergency). You periodically pay money (or a “premium”) to an insurance company, and in return they compensate you according to the terms of your insurance policy. There are various lines of insurance that cover different types of losses.

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COVERAGE LIMIT PREMIUM

DEDUCTIBLE PREMIUM

IMPORTANT TERMS FOR UNDERSTANDING INSURANCE

INSURED: The person covered by the insurance company, who pays the premium, and has the right to receive compensation. With home insurance, the insured is the home owner.

BENEFIT: Economic compensation you receive from the insurance company.

PREMIUM: The cost of the insurance, or the money that you pay periodically (every month, quarter, year) to the insurance company for your protection.

COVERAGE: The range of protection provided by the insurance policy when a loss

occurs. For instance, if you have insurance coverage that protects your home in the event of a fire, the insurance would pay for the repairs in case of a fire.

POLICY: A written document detailing what your insurance covers (including the clauses, riders, and exclusions), as well as your premium. Always make sure you

understand your policy before you sign a contract!

ADDITIONAL CLAUSE: Modification to the policy that adds, limits, or excludes certain coverage. Make sure you understand any clauses before signing a contract.

EXCLUSIONS: Events and accidents that are not covered by insurance. For example, many home insurance policies do not cover for floods.

COVERAGE LIMIT: The maximum amount that the insurance company pays for a certain incident. The lower

your coverage limit, the lower the premium you will pay.

DEDUCTIBLE: The amount that the insured pays before the insurance company will pay the remaining costs. The higher the deductible, the less you will pay for your premium.

Imagine that because of a fire you have to rebuild your home, which is valued at $180,000. If your homeowner’s insurance has a deductible of $500 and a coverage limit of $100,000, you would have to pay the first $500 in repairs and the insurance company would pay the rest up to the coverage limit. You would have to pay the remaining $80,000 dollars in repairs. DEDUCTIBLE (YOU PAY) UP TO COVERAGE LIMIT (INSURANCE PAYS) ABOVE THE COVERAGE LIMIT (YOU PAY) Don’t choose a deductible that is too

high or a coverage limit that is too low.

Think about how much you could pay

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STEPS TO BUYING INSURANCE

1.

How much insurance do you need? Choose an insurance company that can provide you with enough coverage to keep you well-protected. For example, with home insurance, you should choose a company that will provide you with enough coverage to rebuild your home in case of a severe loss.

2.

How much can you pay? When considering the amount of your deductible, think about how much money you could pay out of pocket in case of a loss. Also, think about how much you could afford to pay for your premium. Be sure you can afford your premium to avoid having to cancel your policy and lose your investment.

3.

Get quotes from various companies and compare them. You can

find companies and agents in the yellow pages, on the Internet, or by asking your friends and family members. Prices and conditions can vary considerably. Take the time to carefully review various offers before choosing the best option for you.

4.

Choose a trustworthy company. Remember, insurance agents generally receive a commission for their sales, so do not make a hurried decision if they are pressuring you.

5.

The insurance company will ask for certain information depending on the type of

insurance (for example, they might inspect your house or your car, or ask you for a medical exam) to determine if you are eligible and to provide a quote for your premium.

HOW TO CHOOSE A TRUSTWORTHY COMPANY

 The insurance companies and their agents should have a license for operation in

your state. You can verify licensing at the department of insurance in your state.

You can also research consumer complaints against this company.

 They should be sufficiently financially stable to make their required payments. Verify the financial status of insurance companies through independent organizations like A.M. Best, Moody’s Investors Service, and Standard & Poor’s.

 Good service: Your insurance company should respond to all of your questions

and make payments in a just and efficient manner. Find out about their service through family members and friends.

 Comfort and convenience: Be sure that it is easy to get a hold of your insurance

agent when necessary.

Do not provide false information. Sometimes insurance companies share their information; if they find out that you provided false information and cancel the policy, other insurance companies may not want to insure you.

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Guide to Insurance Latino Community Credit Union 8 You are considered eligible when you comply with certain necessary conditions. If the company denies you insurance, they are required to provide their reasoning. No one should be denied for reasons having to do with race, religion, or nationality. Normally, when an insurance company does not want to insure you, or they ask you to pay an

expensive premium, it is because insuring you would be very expensive for them. For

example, if you have a very risky job, it is possible that they would not want to give you disability insurance.

How much is the premium? How do I pay it? Monthly, Quarterly, Annually...? How much is the deductible?

What are the limits for each type of coverage? What risks, accidents, or events are covered? Are there any exclusions? If so, what are they?

After I have signed my policy, when does my coverage begin? How can I reduce my premium?

Can I renew the policy under the same conditions?

Remember! Your premium will increase the more claims you make on your policy.

6.

Determine how you can save on your insurance. Sometimes you can save money by “bundling” your services, or purchasing various types of insurance (for example, home and car) with the same company.

7.

Ask all the necessary questions to better

understand the policy before you sign. Insurance agents are there to answer your questions.

HOW DO I FILE AN INSURANCE CLAIM?

If a covered event occurs, you will need to call your insurance company as soon as possible to solicit payment. For example, if your home burns down, you will need to call your insurance company and give them all the necessary information so that they can pay for the repairs.

Once you have a signed contract with your insurance company, they have a legal obligation to process your claim quickly and send the payment, if applicable, as soon as possible. If you have a question about insurance law, consult the Department of Insurance in your state.

SOME IMPORTANT QUESTIONS

These are some basic questions that you should always ask when purchasing an insurance policy. Later, we will look at more specific questions for each type of insurance.

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LIFE INSURANCE

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Life insurance protects the future of your loved ones in the event that you and/or your spouse pass away. Your designated beneficiaries are compensated for the loss of your salary, funeral costs, pending debts, and/or other costs such as education.

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The following questions can help you decide:

Certain life events make it necessary to have a life insurance policy, such as the birth of a child, a marriage, purchasing a house, or caring for elderly parents.

In general, children DO NOT need to have a life insurance policy given that the main objective of life insurance is to compensate for the loss of a salary. It might make sense to purchase life insurance for a child if you suspect that, due to health reasons, it would be difficult for them to obtain life insurance as an adult.

What would happen if you or your spouse passed away today? How would your family survive?

Do you have a spouse, small children, or other dependents (for example, elderly parents) that count on your paycheck? Do you have enough savings to cover the needs of these dependents, at least for a short period of time, if you pass away?

Do the basic needs of your family fall solely on you?

You probably do not need life insurance if you are

single, your spouse has sufficient income, and you do not have dependents. Your only responsibility would be to ensure you have enough savings to cover funeral costs.

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Guide to Insurance Latino Community Credit Union 10 The return rate is the

interest you hope to receive from your

invested money.

T

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Term life insurance protects your loved ones for a predetermined time versus permanent insurance, which protects you for life with a death benefit and accumulates a cash value, or tax-deferred savings component. Below is a more detailed explanation:

TERM LIFE INSURANCE PERMANENT LIFE INSURANCE

Duration of coverage

A predetermined period of time, usually the number of years your dependents would count on your salary (10, 20 or 30 years).

For life, as long as you continue paying the premium.

Premium Less expensive at first, but increases over time.

More expensive at first, but does not increase over time.

Cash Value No. Yes, tax deferred.

Advantages Normally this is the least expensive option if your goal is to protect your beneficiaries for a specific period of time.

This type of life insurance can be used as an investment that can be used for multiple purposes such as emergency expenses, a child’s education, and of course, supplementing retirement income.

Moreover, there are different types of permanent insurance:

 With certain types of policies, you have the option of varying your premium amount, but you must pay a minimum amount to guarantee your benefit.

 You can choose a guaranteed rate of return or try to get better return rates by allocating your premium amongst different accounts and investments (bonds and stocks, normally).

Whole Life Insurance

Premiums are the same for life. Your death benefit and rate of return are guaranteed.

Variable Life Insurance

Premiums are the same for life and your death benefit is guaranteed, but you can allocate your money to a variety of investment accounts to maximize your returns.

Universal Life

Adjustable premiums can offer you flexibility. You must pay a minimum amount in premiums to guarantee your death benefit. Some policies offer a guaranteed rate of return.

Variable Universal Life

Offers a flexible premium, but you must pay a minimum amount in premiums to guarantee your death benefit. You can allocate your money to various investment accounts to maximize your rate of return.

For example, if you apply for term life insurance at 40 years old for a period of 20 years until your children have finished their studies, they would not receive anything if you were to die at 61 years old.

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KEY QUESTIONS FOR CHOOSING YOUR POLICY

What type of insurance works better for me?

Is it possible to switch from term life insurance to permanent? Is it possible to renew the term insurance under the same conditions? Up to what age? Would the premium be higher? Do I maintain the same benefits throughout the life of the policy?

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Life insurance needs are often calculated in the following way:

Examples:

Immediate expenses: medical expenses that aren’t covered, funeral costs, debts, mortgage… Future expenses: expenses that support your family and/or your dependents in the future (such as college tuition and retirement costs)

The following questions will help you decide how much life insurance you need:

Do you only need to cover funeral costs? If you do not have dependents, you would only need to

cover the funeral expenses. How much money will your family need to

maintain their quality of life in the event that you die?

Think about how much financial assistance your family would need to maintain their lifestyle until they were able to find another income source.

Do you want to leave your mortgage paid?

This is important in order to prevent your family from potential foreclosure if they are unable to cover the mortgage payment.

Do you have unpaid debts? You probably want to avoid leaving this burden to family.

Do you want to leave money to pay for your children’s higher education?

You might want to ensure that your children are financially able to attend college if they choose.

How much assistance will your

dependents require, and for how long?

Once your children are older, this coverage may not be necessary, but you may want ensure that your spouse has an income for life.

Do you want a savings component as well as the death benefit for dependents?

If you want your life insurance to act as a savings vehicle, you may want to consider getting a permanent policy.

Immediate and future expenses Salary of your spouse, savings, investments, other income Life insurance that you need

Age is important. If you are young, you will need enough coverage to protect your dependents, spouse, and children. If your children no longer need your financial support, you may want to consider if your spouse would be able to maintain their quality of life with savings, retirement savings, and social security assistance.

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Guide to Insurance Latino Community Credit Union 12 You can find life insurance calculators online, and any insurance agent can provide estimations. To start, below is a basic worksheet to estimate your life insurance needs (it does not take into account inflation or interest).

Oftentimes employers offer a life insurance plan as part of their employee benefits package. Generally, the employee can increase the coverage by paying the difference out-of-pocket.

IMMEDIATE EXPENSES ASSETS

Medical expenses $ Savings $ Funeral expenses $ Investments $ Loans and debts Annual income:

Mortgage $ Spouse’s salary $ Car loan $ Pension/Retirement Plan $ Credit card $ Social Security $ Personal loan $ Other income $ Other debts $ Total annual income $ Total immediate expenses $ Total income (year x # of years) $ Total assets $ FUTURE EXPENSES

Monthly expenses

Rent $

Water, gas, telephone… $

Transportation $

Food $

Children’s education $ Other monthly expenses $ Total monthly expenses $

Future annual expenses (monthly expenses x 12) $

$ How long do I want to pay for these expenses? $ Total future costs (annual expenses x # of years) $

Insurance needs:

Immediate expenses $

+

future expenses $

-

assets $ $

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LAIMS

If the insured person passes away, you must notify the insurance company, which will contact the designated beneficiaries to begin the insurance payment process. In some cases, the insurance company may conduct an investigation to ensure the cause of death was not fraudulent, especially if the death occurred shortly after the life insurance policy was purchased.

increase the

price

Being overweight, as it can cause numerous

health problems (diabetes, cholesterol, high blood pressure…).

If you smoke and are over 40 years old, you could pay up to 3 times more for your policy.

If you have a poor driving record with a lot of traffic violations, especially for speeding.

A family history of heart disease, cancer, or diabetes.

decrease the

price

Women pay less because their life

expectancy is longer.

The younger you purchase the policy, the less you will have to pay.

Type of job People who have jobs that are less

prone to accidents (for example, someone who works in an office instead of in construction).

Make sure you keep your beneficiaries updated in your policy. Remove your children when they

no longer need your assistance and add other dependents that count on you for their livelihood.

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HOME INSURANCE

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Home Insurance or Homeowner’s Insurance protects you if your home and your possessions inside are damaged or stolen due to a storm, fire, or robbery. Normally, the basic coverage for a

homeowner’s insurance policy includes:

You might need additional coverage for:

Most insurance policies do not cover: earthquakes, floods (unless you purchase additional coverage), war and nuclear accidents. Find out what natural disasters are covered before purchasing your policy. For example: fires, lightning, thunderstorms, explosions, robbery, vandalism, smoke, volcanic

eruptions, fallen objects, the weight of ice and snow, frozen pipes and damages caused by poorly installed electrical and heating systems.

The structure of the home: the policy pays for repairs or reconstruction of the home if it is damaged or destroyed. These typically include the installation of heating and air-conditioning systems, plumbing, as well as other structures on the property such as a garage or a shed.

Personal possessions: furniture, clothing, home appliances, etc. This insurance may also cover other items may carry with you outside of your home (for example, a digital camera)

Lodging expenses: pays for your hotel and restaurant fees if you have to temporarily leave your home while it is being repaired.

Liability insurance: covers expenses for accidents that occur on your property and for which you are responsible. For example, if a guest falls and they sue you, your insurance will cover the claim. It also covers accidents that your pets may cause to others or to their property.

Floods or earthquakes: depending on the

geographic area in which you live.

Personal items or other valuables, like jewelry, artwork, electronics or antiques.

The homeowner is responsible for regular maintenance of the home, not the insurance company.

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Renter’s insurance: in general, if

you are renting your home, you do not need to obtain home

insurance to protect it. The homeowner should have an active policy. However, it might be important to have some coverage for your possessions, especially if you have a lot of valuables.

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If you apply for a mortgage loan, you will be required to purchase home insurance. No financial institution will approve your loan without it because, in the case of a disaster, they will require compensation for their investment.

Once you have paid off your mortgage, even though it is not required, it is highly recommended that you continue to insure your home. It is, after all, your one of your biggest investments to protect.

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In order to be well protected, your insurance should cover:

1.

The structural value of the house: you should insure your home for the cost of rebuilding or replacing your home, not for the appraised value or the value of the mortgage. You can calculate the approximate cost of rebuilding your house by multiplying the surface area (in square feet) by the cost per foot of local construction companies. You will also have to consider other factors of the

home including style, materials, the number of rooms and bathrooms, and other structures such as a garage or shed.

2.

Your personal possessions: The best way to make sure that your possessions are covered is by calculating their value with an inventory (note the make, model, and date of purchase and save your receipts). Moreover, if there is a fire, you probably won’t remember everything that you had in your home. We recommend maintaining an inventory. There are two ways to determine the value of your possessions:

Actual cash value or depreciated value: your insurance company will

compensate you for the amount you would obtain for the possessions if you were to sell them at this moment, regardless of their value when you first bought them. For example, if your 10 year old TV was robbed, the insurance company would pay the depreciated value of $100, rather than the $800 you paid when you first purchased it.

Replacement cost: your personal

effects are insured for the amount it would cost you to buy something new with the same characteristics. Normally this coverage is more expensive, but is much better since you know that you could replace all of your possessions with similar ones.

Appraised value is

the estimated value of the property as determined by an

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KEY QUESTIONS TO HELP YOU CHOOSE YOUR POLICY

What are the limits for different types of coverage? Are they adequate? Can you increase the coverage limit? What would I have to do to make this

adjustment?

Are your possessions covered according to their replacement value? Are you covered for the cost of your home’s reconstruction?

Do you need to include any additional coverage?

3.

Liability: companies often offer a minimum value of about $100,000, but you can pay more for higher coverage if you need it.

4.

Lodging costs: covers hotel, restaurants, and other expenses associated with living away from your home. They generally cover costs equivalent to up to 20% of the insurance on your home. Consider adding coverage for floods or earthquakes (depending on the area where you live) or to protect your valuables (jewelry, electronics, etc.)

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The age of the house and its systems (electricity, plumbing, heat…). The older the house, the more expensive it may be to insure.

Some types of structures are more expensive to insure because they are less resistant to wind, storms, or other dangers (for example, houses made of wood are more expensive to insure than

brick houses).

Additional coverage.

decrease the price

Having security systems installed in the home, like burglar alarms, fire alarms, and security cameras,

etc.

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1.

If your home has been burglarized, report it to the police and save the police report.

2.

Call your insurance company immediately.

Find out if you are covered, if you’ll have to pay a deductible, and the process of filing a claim. How long will they take to process your claim, if you have to get several quotes for repairs, etc.

Ask that an adjuster come to your home to evaluate the damages. Complete the necessary claim forms, and send them as soon as possible to avoid delays.

3.

Create a list of damaged or lost items. Do not throw anything away until the adjuster has inspected your home. We recommend taking photos of the damage if possible. Give the adjuster the inventory of your possessions.

4.

If you need to make an urgent repair and you can’t wait until the insurance company processes your claim, save all of the receipts, so you can request reimbursement from the insurance company.

5.

If you cannot live in the house temporarily, save all of your hotel and food receipts, so you can request reimbursement from the insurance company.

Umbrella policy: you can obtain additional liability insurance

that covers more than your home and auto insurance. If your claim exceeds the coverage limit of your insurance policy, this policy can help you pay the difference, up to a specified limit.

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Guide to Insurance Latino Community Credit Union 18 In North Carolina the minimum liability insurance requirements for private passenger vehicles are: $30,000 for bodily harm to a person, $60,000 for bodily harm for two or more people, and $25,000 for damage to property. (North Carolina Division of Motor Vehicles, 2010)

COVERAGE LIMIT PREMIUM

DEDUCTIBLE PREMIUM

CAR INSURANCE

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Car insurance and auto insurance protects you from the losses you suffer if you are in a car accident and also includes liability coverage if you cause bodily and/or property damage to others.

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Unequivocally, yes. Almost all states in the United States require drivers to have at least liability coverage for injuries and property damages committed against others. The consequences of not having car insurance can be severe. You can be fined, have your license suspended or revoked, have your car’s registration revoked, or even spend time in prison. In some cases, like in North Carolina, you must have liability insurance before you can even obtain a license.

If you are financing your car, the financial institution will likely require you to have insurance.

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 Find out your state’s minimum liability insurance requirement.

 If you are financing your car, find out how much insurance your lending institution requires.

 Decide if you need more coverage.

If you have an old car that is not very valuable, you may not want more than basic liability insurance. On the other hand, it is important to consider the amount you would pay in monthly premiums versus

the amount you might have to pay for car repairs in the case of an accident.

 Remember that:

Yes

Do not automatically elect the plan with the highest deductible in order to save money on your premium. With a very high deductible, you would pay a significant amount out of pocket if you have an accident. Think carefully about the maximum amount you could realistically pay in case of an accident.

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TYPES OF COVERAGE – CAR INSURANCE

Coverage What is covered Advice

Bodily Injury Liability If you are responsible for the accident, medical expenses are covered for the damages you caused the other people.

Usually auto insurance is required. State laws determine the minimum amount of coverage for your policy. However, if the cost of damages exceeds the amount of coverage on your policy you will have to pay money out of pocket. So, it is not in your best interest to have a very low limit.

Property-Damage Liability

If you are responsible for the accident, it covers the damaged property that you have caused others.

Collision coverage Covers repairs to your car if you have an accident involving another car or object, or if your car overturns.

Important for new cars or expensive cars. If you are financing your car with a financial institution, they will require this coverage.

Comprehensive coverage Repairs to your car that are not caused by overturning or a crash, such as fire or robbery.

Medical Payments Pays necessary medical expenses resulting from an accident to insured individuals or passengers in the insured car.

If you have medical insurance that covers accidents you might not need coverage for medical expenses. If the policy includes medical insurance, it will help you pay for your medical insurance deductible. Personal injury protection can be a good supplement to your medical insurance, providing additional protection.

Personal Injury Protection

Pays necessary medical expenses resulting from an accident to insured individuals and

passengers in the insured car. It sometimes also includes rehab, loss of income, substitution services (child care if one of the parents remains disabled), and funeral costs.

Uninsured Motorist Damages caused by a driver that does not have

insurance or flees the scene of an accident. In some states this coverage is _{required. If you are injured in an} accident with a person whose car is uninsured or underinsured, your damages will be covered.

Underinsured motorist Damages caused by a driver that does not have enough liability insurance.

Towing/Roadside assistance

Towing costs in case of a breakdown. If you have a similar service (for example, AAA), you do not need this coverage.

Rental Reimbursement Cost of a car rental while you are unable to use your car due to an accident.

If you have an alternate means of transportation, you do not need this coverage.

Umbrella policy An additional liability insurance that you can use to supplement your basic home and auto insurance policy.

This can be helpful if your claim exceeds the liability coverage limit of your insurance policy.

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1.

Call the police immediately, even if it is a small accident. Do not leave the scene of the accident until the police arrive. Ask for a copy of the police report and note the officer’s name and badge number.

2.

If someone is injured, call 911.

3.

If possible, do not move the cars. Only move the cars if they are not in a safe place.

4.

Speak with your insurance company immediately.

5.

Write down the information of the other drivers: name, addresses, phone numbers,

insurance company, policy numbers, license plate numbers, and driver’s license numbers. Take notes about the accident and the damages to the vehicles involved. If you have a camera, it is helpful to take some photos.

6.

Describe the circumstances of the accident honestly and in as much detail as possible.

7.

The police and insurance company may conduct an investigation to determine who is at fault for the accident. If you are at fault, your insurance company will likely have to pay for the damages, although this can vary from state to state. Some states have a “no-fault” insurance law, which means each driver pays for the damages, regardless of who is at fault. Note! Don’t sign any documents unless they come from the police or an insurance agent.

increase the price

A bad driving record (with accidents, speeding violations…)

The farther you drive each day, the more you will have to pay.

reduce the price

Basic models are cheaper to insure than

fancier ones.

Cars that are safer are also cheaper to insure.

Safety protection mechanisms against robbery (i.e.

alarms) and accidents (i.e. airbags)

Years of experience as a driver. Those under

25 pay more.

Being married, because married persons tend

to be safer drivers

If you are a recent immigrant, it might be worth finding out if your insurance company will consider your driving record in your country. If not, you will be viewed as an inexperienced driver (even if you’ve been driving in your country for years) and the insurance will be much more expensive.

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Guide to Insurance Latino Community Credit Union 21 Example: for surgery you would pay: Co-payment: $30 to visit a specialist Co-insurance: 20% of the cost of the

surgery (the insurance will pay up for the remaining 80%)

Hasta el valor de su deducible.

HEALTH INSURANCE

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The cost of healthcare in the United States can be very high. Many people go into debt and may even have to sell their homes to pay for their medical costs.

Many people do not have health insurance because they think:

 “It is really expensive.” In reality, if you get sick and do not have

insurance, your costs can be much higher than the cost of paying your premium each month.

 “I won’t get sick.” Even if you are very healthy, you should not wait until

you are sick to get a health insurance policy because it can be very expensive. Additionally, if you have health insurance, it is more likely that you will receive preventative care, which may help you stay healthy.

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EALTH

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NSURANCE Co-pay: a fixed quantity that you pay for each visit to the

doctor.

Co-insurance: percentage of the cost of service that you have to pay (apart from your co-payment and deductible). Deductible: the amount that you pay before the insurance will cover the remaining expenses (up to your coverage limit).

Covered expenses: the medical expenses that the insurance company will pay.

Coverage limit: Maximum amount of medical expenses that your insurance will pay. This could be a specific amount of money or it could be a maximum number of medical visits. Once you have reached the limit, the insurance company will stop making payments on your behalf.

If your policy has an annual limit of $1 million, you will need to assume expenses exceeding $1 million during that year. There might also be limits for certain services, for example maximum of $15,000 for chemotherapy. Be aware of these limits to ensure you have sufficient coverage.

Health insurance helps you pay medical bills if you or any of your family become sick or have an accident, or even if you are healthy and want preventative care.

The Affordable Care Act of 2010 prohibits health plans from imposing lifetime dollar limits and will phase out annual dollar limits by 2014.

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Guide to Insurance Latino Community Credit Union 22 Out-of-pocket maximum: the maximum amount of medical payments (co pays, co-insurance, and deductibles) that you pay in a year. If you have reached this amount in out-of-pocket expenses, the insurer will pay for the remainder of expenses. It is not advisable to choose an insurance plan that does not have an out-of-pocket maximum.

Health care provider: any professional or health care service provider (nurses, doctors, pharmacies, hospitals, etc.)

In-network provider: a healthcare service provider that has a contract with your insurance company. The insurance company can negotiate discounts, so that your co-payment or co-insurance will be lower if you use the providers that are inside your insurance’s network.

Prior authorization: authorization from your insurance company prior receiving a certain treatment detailing how it will be covered under your policy. Prior authorization is not required for routine services, but it is advisable for special treatments to avoid any unexpected out-of-pocket expenses. Explanation of benefits: Written document that the insurance company sends to the patient explaining how much the insurance company and the insured will pay for a given service. Pre-existing condition: medical condition or illness you had prior to applying for your health insurance policy. In some cases, the insurance company may limit your coverage through an exclusion period during which your pre-existing condition will not be covered.

W

HAT

D

OES

M

EDICAL

I

NSURANCE

C

OVER

?

In general all medical insurance policies cover the following:

Your state’s Department of Health has information about the type of coverage your insurance company is required to offer by law.

In accordance with the Health Insurance Portability and Accountability Act, or HIPAA, the period of

execution for a pre-existing condition cannot last more than 12 months, or 18 months in some cases. If

you switch jobs, or insurance, and you are uninsured for less than 63 days, the new insurance cannot impose limitations based on a pre-existing condition.

Emergency Visits are only covered if they are

considered urgent (for example a heart attack).

Surgery Routine services,

like annual medical exams.

Diagnostic tests, like

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If you leave or lose your job, the COBRA

(Consolidated Omnibus Budget Reconciliation Act of 1985) program

guarantees your coverage for 18 months, as long as you make the payments. Some states (like North Carolina) offer the State Continuation program, which also allows you to keep your insurance, as long as you pay the premium, but not longer than 18 months.

Children 18 years old and under whose parents earn too much money to qualify for programs like Medicaid, but not enough money to have private insurance can receive low cost medical attention through the state/federal program

Children's Health Insurance Program (CHIP).

Some services are often excluded such as: dental, vision (glasses, contact lenses, etc.), cosmetic surgery, specific treatments (sterilization, acupuncture, etc.). You can get additional insurance to cover what is not covered in your basic health insurance plan such as dental insurance, hospital stays

H

OW

C

AN

I

G

ET

H

EALTH

I

NSURANCE

?

 Most employers offer a group health insurance plan for full-time employees and pay for part or all of the premium. It is cheaper than individual plans and all members of the group pay the same amount regardless of their health history.

 If your employer does not offer a group health

insurance plan, you can apply for an individual health plan, although they tend to be more expensive,

especially if you are not in good health. The insurance company will ask you questions to determine your eligibility and the price of your premium.

 The state offers health care plans like Medicaid (health care assistance program for low-income citizens and permanent residents) and Medicare (health care assistance for those who are older than 65 or have certain disabilities).

 If, because of a pre-existing condition, it is difficult for you to find an insurance plan you can look into the Pre-Existing Condition Insurance Plan (PCIP), a new program offered by all states thanks to the Affordable Care Act.

W

HAT

A

BOUT

M

Y

D

EPENDENTS

?

You can usually include your dependents (spouse and children) in your insurance plan by paying a higher premium. Your children can stay on your insurance until they are 26 years old.

Flexible Spending Account (FSA): Often, employers will offer the FSA so that employees

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T

YPES OF

H

EALTH

P

LANS

 Traditional or Indemnity: the insurance company reimburses covered medical expenses up to a

reasonable and customary amount. If your doctor charges more than that amount, you will be required to pay the difference. You can choose the health care providers that you prefer, but the deductible, premiums and co-pays tend to be higher.

 Managed Care: tend to be the most affordable plans. To keep costs low, this insurance plan

contracts with different doctors, clinics, hospitals, laboratories, and other providers to offer lower prices to their insurance members. Health care providers with this insurance agreement form a network of providers. There are two types of networks:

Health Maintenance Organization-

HMO You cannot choose doctors or providers who are not in the network.

You cannot go to a specialist unless your Primary Care Provider (PCP) refers you.

Preferred Provider Organization -

PPO You can use providers outside of the network, but you will pay more for the visit.

You can go to a specialist without a referral from your Primary Care Provider.

 High deductible plans: These plans are less expensive because you pay a high deductible. This is an affordable option if your regular medical costs are not very high (you are in good health and do not take a lot of medication). To complement these plans, some employers offer a Health Savings Account, or a tax-exempt savings account to cover your out-of-pocket medical expenses (co-pays, co-insurance, and deductibles).

H

OW TO

C

HOOSE THE

B

EST

H

EALTH

P

LAN FOR

Y

OU AND

Y

OUR

F

AMILY

PLAN HMO A PLAN HMO B PLAN PPO C

In-network Out-of-network

Monthly premium $60 $23 $95

Annual deductible 0 $500 $100 $500 Co-insurance

maximum 0 $2000 $2000 $3000

Cost of medical visits Primary Care

Provider $15 co-pay $20 co-pay $15 co-pay You pay 30% after the deductible.

Specialist

$45 co-pay $60 co-pay $45 co-pay You pay 30% after _{the deductible.}

When you are purchasing a plan, keep the following in mind:

1. Premiums 2. Coverage/benefits

3. Access to doctors, hospitals, and other providers

4. Access to emergency services and attention outside of normal office hours

5. Out-of-pocket payments that you have to make (co-insurance, co-pay and deductible) 6. Exclusions and limits of your

coverage

Compare your plan options with the sample health plan comparisons.

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5 facts about the new Affordable Care Act

1. Insurance companies can no longer impose lifetime dollar limits on essential coverage.

2. Insurance companies are no longer allowed to deny or exclude coverage for your children (under age 19) based on a pre-existing condition.

3. If your children are 26 or under, you can generally insure them if your policy allows for dependent coverage. The only exception is if you have an existing job-based plan, and your children can get their own job-based coverage.

4. Starting in 2014, if your income is less than the equivalent of about $88,000 for a family of four today, and your job doesn’t offer affordable coverage, you may get tax credits to help pay for insurance. 5. Starting in 2014, more plans will cover pregnancy and newborn care, along with vision and dental

coverage for children.

http://www.healthcare.gov/foryou/family/top5/index.html

6. http://www.healthcare.gov/foryou/family/top5/index.html

KEY QUESTIONS FOR CHOOSING YOUR POLICY

What providers (doctors, hospitals, etc.) are in-network? How much will I have to pay for out-of-network providers?

Are the services I need covered? If you are sick and you need a specific treatment, it is important to make sure that you are covered.

Can I see a specialist whenever I want?

In case of an emergency, can I go to any medical service provider?

If I have a pre-existing condition (for example, diabetes or asthma), is it covered? Are alternative therapies covered, like acupuncture and chiropractic appointments?

Does the plan cover preventative medical appointments like visits to a nutritionist, routine medical exams, and vaccines?

Do I have to complete a claim form for payment?

H

OW TO

D

ETERMINE THE

Q

UALITY OF A

P

LAN

 The National Committee of Guarantees and Quality and the Joint Commission on Accreditation of Health Organizations review the quality of health plans.

 Ask the Department of Insurance in your state about the number of complaints they have received about the plans you are considering.

 Ask family, friends, and doctors who have had experience with the plan.

Remember that the least expensive policy with high deductibles and out-of-pocket maximums could leave you without sufficient coverage. If you become ill, it could be difficult to make your payments. Choose your policy carefully.

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DISABILITY INSURANCE

W

HAT IS

D

ISABILITY

I

NSURANCE

?

D

O

I

NEED

D

ISABILITY

I

NSURANCE

?

To find out if you need disability insurance, ask yourself the following questions:

If you cannot work for a period of time due to an accident or illness, your family could experience financial hardship. You may even have to sell your home or use your savings. The last thing you want to do if you are sick or injured is to have to worry about money.

K

EY

T

ERMS

F

OR

U

NDERSTANDING

D

ISABILITY

I

NSURANCE

Total disability: is generally defined as a situation in which someone cannot complete the necessary tasks required by the job for which they were previously qualified either in training or in experience.

How would you and your family sustain themselves if you were suddenly unable to work for a period of time and you stopped receiving a paycheck? Does your spouse have a salary? Do you have enough savings?

Are you paying a mortgage? Do you have a lot of debt?

Could your family maintain the same lifestyle?

It is important to know how your insurance provider defines disability.

If your insurance provider considers you disabled when you cannot carry out the job you had at the

time that the disability began, you will receive compensation for being unable to do that job, even if

you are still able to do other jobs. In this case, a soccer player that is injured and cannot play will receive benefits. This type of coverage is more expensive, but much more comprehensive.

On the other hand, if your insurance provider considers you to be disabled when you cannot do the job

that you held or another similar position, they will not pay for your benefits if you can still work. For

instance, if the soccer player we mentioned could work as a trainer, he would not receive benefits. If you have an accident or become ill and you are unable to work, disability

insurance will protect you and your loved ones, providing you with a certain amount of income during a specific period of time to compensate for the loss of your salary. According to the National Association of Insurance Commissioners (NAIC), if you are between 35 and 65 years old, you have a 50% chance of becoming disabled for a period of 3 months or more. Most people do not have enough savings to cover their expenses for more than 3 months, so becoming disabled could be a financial hardship for your family.

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Guide to Insurance Latino Community Credit Union 27 Partial disability: occurs when you are still able to perform some job functions (for example, a salesman cannot drive and make personal visits but he can still make phone calls to clients). In this case, you would receive partial benefits. Not all policies cover partial disability.

Benefits or coverage period: maximum period during which you can receive benefits.

Waiting period: time between becoming disabled and when you start to receive benefits. Normally this is a 90 day (3 month) period. Before you choose the waiting period, think about how much time you and your family can survive without the help of insurance.

Ana fell down the stairs and her insurance helped her until she could continue her work as a teacher.

T

YPES OF

D

ISABILITY

I

NSURANCE

Waiting period Benefits period

Short term: helps you if, for example, you break an

arm and cannot work for a few months.

1-3 days 52 weeks maximum

Long term: helps you if you become disabled for a

long time, for example if you have a serious illness.

90 days Until you return to

your job or turn 65 years old, whichever happens first

Waiting period

Benefits period

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2. Social Security Disability Insurance

Social Security can pay your disability benefits if you have certain tenure at your job and have paid your taxes. The process is slow and can take more than a year for you to begin receiving your check.

4. Disability insurance through your employer

Sometimes employers offer group disability insurance for their employees. Normally, the coverage is very basic and you receive up to 70% of your salary. This is the most cost-effective way to get disability insurance.

H

OW CAN

I

GET

D

ISABILITY

I

NSURANCE

?

If you have an accident on the job, you can receive help from both your employer (Workers’ Compensation) as well as Social Security (Social Security Disability Insurance). This insurance may

not be sufficient, especially if your family depends solely on your income for survival.

H

OW

M

UCH

D

ISABILITY

I

NSURANCE

D

O

I

N

EED

?

If you decide to apply for disability insurance, calculate your expenses and make sure they are covered. The following table can help you estimate your expenses:

Monthly expenses Monthly income

Rent/mortgage $ Spouse’s income $ Water, gas, phone… $ Disability benefit from your

employer _$ Transportation $

Food $ Social security $ Children’s education $ Investments $ Loans $ Other income $ Credit card $ Total monthly income $ Other monthly expenses $

Total monthly expenses $ Insurance need = expenses– income= $_______

1. Workers' Compensation

In the US, most employers are required to have insurance to cover their workers in case of an accident or illness caused by their job. Generally this includes medical costs, and in some cases, financial compensation for temporary or permanent disability. The compensation rules for workers vary from state to state.

3. Individual disability coverage

If your employer does not provide disability insurance, you can purchase your own plan. The main advantage of individual coverage is that you are always covered regardless of where you work.

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KEY QUESTIONS TO ASK ABOUT YOUR POLICY

How does your policy define total disability?

How long is the waiting period? What about the benefits period? Is partial disability covered?

Are inflation / cost of living increases included?

Can I renew the policy each year under the same conditions? Up to what age? How? Do I have to continue paying the premium if I begin to receive benefits?

Is there an option to return my premiums? Will part of the premium be returned if I don’t submit any claims?

Is it possible to include any additional clauses? If so, which ones? Will I have to pay a higher premium?

Will I have to apply for SSDI (Social Security Disability Insurance) benefits before I can receive insurance benefits? Some companies require that you apply for SS benefits before collecting benefits. Avoid this requirement if possible because the SS claims process can take almost a year before you receive benefits. You should look for a policy that pays you benefits as soon as your waiting period is over, without any conditions.

W

HAT

F

ACTORS

A

FFECT THE

P

RICE OF

I

NSURANCE

?

Important Notes: (1) Look for policies that do not require you to continue paying premiums after you start receiving benefits. (2) Your insurance company may return part of your money if you have not filed a claim in a number of years.

increases the price

Having a job with high risk of injury, for example, roofing

Having a career for which an accident could cost you your livelihood. For example, a pianist. If you break a

finger, you may never play the piano again. The longer your benefits period, the higher the

premium you will pay.

Additional clauses with extra benefits that you add to a basic policy.

decreases the price

Having good health.

The longer your waiting period, the lower the premium you will pay.

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LONG TERM CARE INSURANCE

W

HAT

I

S

L

ONG

T

ERM

C

ARE

I

NSURANCE

?

Due to age, an accident or illness, some people may not be able to continue to care for themselves and will need help with daily living activities (like bathing, getting dressed, or eating). Long term care insurance can help you pay for these services.

The federal government defines the need for long term assistance as something that lasts longer than 90 days.

D

O

I

N

EED

L

ONG

T

ERM

C

ARE

I

NSURANCE

?

Ask yourself the following questions to help you decide:

It is difficult to imagine needing long term care until you get older, but you might need it earlier if you become ill or are in an accident. The cost of long term care can be catastrophic and most medical insurance plans do not cover it. Medicare will provide long-term care services under limited circumstances and Medicaid will only help if you do not have financial means. In both cases, you cannot choose the type of care you receive. While your family may want care for you, you may not want to be a burden, or they may not have the means to provide sufficient care for you.

When should you NOT apply for long term care insurance?

 If your only source of income is a Social Security check, or if you are already receiving, or will receive, Medicaid assistance (if you have limited savings or low retirement account, you will probably qualify for Medicaid).

 If you are unsure as to whether you will be able to pay the premiums over the necessary time period or if you have trouble making ends meet.

However, if you have personal assets and want to protect them, you should consider long term care insurance. If you are married, the cost of long term care could deplete your savings and make it difficult for your spouse to maintain the same quality of life.

What would I do if I needed help with daily living activities? Do I have family members who could help take care of me? Would I be a burden for my family?

Do I have enough savings to support myself if necessary? Am I willing to spend my savings paying for my care? Would I like to choose the type of care I receive?

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H

OW

M

UCH

L

ONG

T

ERM

C

ARE

I

NSURANCE

D

O

I

N

EED

?

Estimate how much long term care you need based on the following:

 What type of care you would like to receive: a nursing home, a residential assistance facility, a

center for adult day care, a hospice, or in your own home.

 For how long: over 2, 3 or 5 years or for life.

To determine the approximate amount of the daily benefits you will need, find out the daily of your preferred institution. For example, if the cost is $100 per day. If you decide to apply for long term care that will last for 3 years, you would have to apply for an insurance policy for: $100 x 365 x 3 = $109,500.

When should I apply? You cannot apply for long term care insurance after you become ill or disabled. It is typically recommended that you obtain this type of insurance in your 50s or 60s.

W

HAT

F

ACTORS

A

FFECT

T

HE

P

RICE OF YOUR

I

NSURANCE

?

It is preferable to find a policy that stops charging you a premium when you start to receive benefits.

W

HEN

D

O

I

S

TART TO

R

ECEIVE

B

ENEFITS

?

Most long term care policies have a waiting period. This means that you will need to wait between 30 and 90 days before you start receiving your benefits.

increases the price

A history of illness in your family.

Inflation protection: if you want your

policy to reflect the changes in cost of living.

Certain types of care are more expensive.

The location of the long term care

institution can increase the price (i.e.,

New York is more expensive than North Carolina)

decreases the price

Discounts for spouses, in some cases.

Having good health.

The longer your waiting period, the lower the premium.

The younger you are when you apply for

insurance, the less you will pay (although you will pay for a longer period of time).

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GLOSSARY

Appraisal value: property value according to a certified evaluator.

Beneficiary: the person who receives the insurance benefits. With life insurance the

beneficiary is the person (or people) who receive(s) the benefits if the insured person dies.

Benefit: financial compensation that you receive from insurance.

Capital: assets or money saved that can generate interest.

Co-insurance: percentage of the costs for the medical services that you pay.

Co-pay: fixed amount that you pay for each visit to the doctor.

Deductible: amount the insured person pays before the insurance company pays the remainder.

Exclusion: event, accident or service that is not covered by the insurance company.

Insured: the person who applies for insurance, pays the premium, and has the right to receive

compensation. For example, in the case of home insurance, it is the homeowner.

Liability: In general, it is the responsibility of each person to compensate for the damages that they

cause another person. For example, if there is a car accident, you would be responsible for paying the damages you caused the other driver.

Medicaid: a program provided by the United States government that provides medical assistance

to low-income citizens and permanent residents who cannot pay for health insurance. This is administered at the state level.

Medicare: a program provided by the United States government that provides medical assistance to

those who are older than 65 and/or have certain disabilities.

Policy: written contract that states the conditions and circumstances under which the

insurance company agrees to compensate the insured including term limits, deductibles, and premiums you pay.

Premium: the amount of money the insured pays periodically (each month, quarter, or year) to

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RESOURCES

Information specific to North Carolina is included for the programs that are administered at the state level.

 North Carolina Insurance Department: www.ncdoi.com

 Classifications / ratings of insurance companies:

A.M. Best www.ambest.com

Moody’s Investors Service: www.moodys.com

Standard & Poor´s: www.standardandpoors.com

 Division of Motor Vehicles of North Carolina: www.ncdot.org/dmv

 COBRA:

US Department of Work: www.dol.gov/dol/topic/health-plans/cobra.htm

 State Continuation:

A Consumer's Guide to State Continuation Rights from your North Carolina Department of Insurance. North Carolina Department of Insurance. Consumer Services Division

www.ncdoi.com/Consumer/consumer_home.asp

 Medicaid

US Department of Health and Human Services: www.cms.gov

Division of Medical Insurance North Carolina: www.ncdhhs.gov/dma/medicaid/index.htm

 Medicare:

US Department of Health and Human Services: www.medicare.gov

 Pre-Existing Condition Insurance Plan (PCIP)

US Department of Health and Human Services: www.pcip.gov

 Children´s Health Insurance Program (CHIP):

US Department of Health and Human Services: www.insurekidsnow.gov

North Carolina Division of Medical Assistance: www.ncdhhs.gov/dma/healthchoice/index.htm

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 Classifications and evaluations of health plans:

National Committee for Quality Guaranty: www.ncqa.org

Joint Commission of Accreditation and Health Organizations: www.jointcommission.org/

 Workers Compensation

North Carolina Industrial Commission: www.ic.nc.gov

 Disability Insurance

How To Pay For Insurance

Insurance

Guide

Insurance Guide

Latino Community Credit Union

Copyright

2013 Latino Community Credit Union

TABLE OF CONTENTS

INTRODUCTION

WHAT IS INSURANCE?

INSURANCE

WHAT DOES IT COVER? EXAMPLE

IMPORTANT TERMS FOR UNDERSTANDING INSURANCE

STEPS TO BUYING INSURANCE

1.

2.

3.

4.

5.

6.

7.

HOW DO I FILE AN INSURANCE CLAIM?

SOME IMPORTANT QUESTIONS

LIFE INSURANCE

W

L

I

?

D

I

N

L

I

?

T

L

I

H

M

L

I

D

I

N

?

+

-

W

F

A

P

Y

I

?

I

C

increase the

price

decrease the

price

HOME INSURANCE

W

H

I

?

D

I

N

H

I

?

H

M

H

I

C

D

I

N

?