Insurance World

Should I lease a car or buy it?

Think of a term life insurance policy as leasing a car. When you lease a car you get the benefits of using the car, but when you stop paying you don’t have a car anymore. As with term insurance as long as you pay your premiums you get the benefit of the term life insurance policy, but when you stop paying, you no longer have any coverage.

Whole life or “permanent policies” are designed to build up a cash value. So similar to buying a car you have an asset that you can keep. Unlike a car, hopefully this asset will grow in value. Whole life, Universal life and Variable Universal life are all different types of permanent insurance. Permanent insurance, most of the time, is meant to keep until you die or as a saving vehicle.

The way the policy grows in value gives you the different names of insurance such as, Whole Life, Universal Life, and Variable Universal Life. That leads to the understanding of the different types of permanent policies.

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Whole Life- Is an insurance policy where premium payments are usually the same throughout the life of the policy, as is the death benefit. You usually need to pay the premiums as long as the policy is in force.

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Universal Life - Is an insurance policy where premium payments may be changed and the death benefit can also be changed by the owner. Usually if the death benefit is being raised you will have to show some evidence of insurability (medical information) or other information requested. Your policy grows at a stated interest rate which changes every so often.

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Variable Universal Life - Is an insurance policy where premium payments may be changed and the death benefit can also be changed by the owner. Usually if the death benefit is being raised you will have to show some evidence of insurability (medical information) or other information requested. Your policy grows at the rate of your investment choice you choose. Since you may invest in market instruments similar but not exactly like mutual funds. Your policy can lose value causing larger premium payments than expected.

Take a step back and think about it from the insurance company’s point of view, its easier to understand the difference. A portion of the cash value that builds in the insurance contract will pay for the “cost of insurance”.

Whole life- The insurance company is taking most of the risk. They are paying a death benefit to you no matter what happens to the cash value in the account. As long as you make your payments the insurance company has to pay your death benefit. This may be the most expensive.

Universal life - The insurance company is taking some risk. The policy grows give the current interest rate it pays. At times you are only able to earn low interest rates. You may need to make up more payments to keep your policy.

Variable Universal life - The insurance company has taken the least amount of risk. In the Variable policy the rate of return is variable, meaning you don’t know how fast your policy will grow or shrink. This type of policy is most likely used for someone who is younger and can ride out the volatility of their portfolio. Since you take on the most risk in this type of policy it usually has the smallest premiums.

More than half of the 45 million Americans who lack health insurance are self-employed or work at small businesses. Most simply cannot afford the sky-high premiums associated with traditional health insurance policies.

Consumer-guided health plans offer an affordable alternative. The best plans, such as those powered by HealthMarkets, allow consumers to shop online for a doctor or hospital with powerful, user-friendly tools.

But not all consumer-guided health plans are created equal. Some offer little more than cheap rates and few benefits. Three questions can help you separate a real consumer-guided plan from a “look-alike,” ensuring you get the most for your money.

Question 1: Will the plan help stretch my health care dollars?

A well-kept secret is that doctors charge very different prices for the same medical procedure or service. One doctor might charge $90 for a routine office visit, while another in the same town charges $130.

Under a traditional managed care plan, patients don’t know and don’t have a reason to care about differences in price. They might pay the same $20 co-pay at either office.

A consumer-guided plan takes the mystery out of health care pricing. With a consumer-guided plan, patients seeking non-emergency care have a way to know how much things really cost, and a reason to care. By setting a reasonable maximum charge that the policy will pay for any given procedure or service, consumer-guided plans keep premiums low. By giving consumers new tools, they can compare out-of-pocket costs from one doctor to another.

A spending account for routine care helps too. On Day 1 of coverage, well-designed plans typically offer a spending account for routine or preventive services. Money left in the account at the end of the year rolls over. If the fund is depleted, routine services remain covered, but are subject to deductibles and coinsurance. The result: an incentive to go to the doctor for preventive care at a reasonable price.

Many consumer-guided plans also incorporate Health Savings Accounts (HSAs), which allow you to set aside money in a tax-advantaged account for health care needs, adding to a sense of ownership over healthcare spending.

Question 2: Does the plan provide information on quality?

To focus only on money misses the point of health care. Consumers also need quick, easy access to other information, including a doctor’s board certification, medical school, and years in practice, and a hospital’s adherence to patient safety standards, volume of procedures and clinical outcomes.

The best consumer-guided plans let consumers post feedback on physicians for other members to view, creating a powerful feedback mechanism such the one used on Internet auction sites. Rude doctors, beware!

Question 3: Does the plan offer education and support services?

Being a smart healthcare consumer can be complicated. A good plan offers customer service representatives trained to discuss the critical issues faced by healthcare consumers, such as how to compare cost among various providers and how to manage financial accounts.

EDITOR’S NOTE:

About HealthMarkets

HealthMarkets is America’s leading provider of affordable health insurance for the individual, self-employed and small business markets. HealthMarkets is also a leader in student and hourly employee insurance nationwide. HealthMarkets has a dedicated agent and broker force of more than 4,000 professionals who are trained and licensed through the company’s agency associates in 44 states.

HealthMarkets sells insurance in 44 states. Please note that HealthMarkets has consumer guided plans approved in the following states: Alabama, Arizona, Arkansas, Florida, Georgia, Illinois, Michigan, Mississippi, Missouri, Nevada, Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas and Virginia.