Insurance World

As you graduate college and head into the great, big, scary world, there are probably a lot of things on your mind. First and foremost is finding a good job, then finding a place to live, and then maybe figuring out how to pay back those student loans. One thing that might not cross your mind is health insurance. All of your life, you’ve most likely been a dependent on your parents’ coverage, but that ship is about to sail—if it hasn’t already.

We know what you’re thinking, “Why do I need health insurance? I’m young, I’m healthy, and doctor visits are few and far between. So why pay for something I’ll never use?” Hey, we understand where you’re coming from. But accidents and illnesses happen without warning, even to the strapping young adults such as you. Sure, health insurance is expensive, but not having it will cost you dearly.

First things to know

Let’s get one thing straight, health care in the United States is a nightmare, few will argue that. There are thousands of options when it comes to receiving care and paying for it, some of them good, some of them not so much. When it comes to choosing an insurance policy that’s right for you, confusion abounds. So let’s learn a little more about your options.

There are two essential categories of health insurance: managed care and indemnity plans. Though you’ll pay more for indemnity coverage, it offers much more flexibility than does a managed care plan. Through indemnity coverage, you’ll have your choice of doctor, lab, hospital or specialty clinic. When you seek medical care, you’ll have to pay an out of pocket expense—called a deductible—before your coverage will kick in. Deductibles range from a few hundred dollars up to $1,000 or more, depending on your policy. Also, indemnity plans require a co-payment on medical care; meaning you’ll be responsible for a percentage of the treatment costs along with your deductible. Generally, indemnity plans pay only for accidents or illness; they usually don’t cover preventative care.

Managed care is the complete opposite of indemnity coverage. Deductibles are usually smaller, co-payments are lower, and preventative care is usually covered. Your options, however, are limited. Through a managed care plan, you can only choose between health care providers who are contracted by your health maintenance organization. If you go elsewhere, you pay—the full amount. Since that’s a pretty rough deal, many managed care plans are offering hybrid options that include many of the desirable characteristics of an indemnity plan.

Which way to go

If you find a job that offers health insurance and you’re single, take it. It may not be perfect, but it beats anything you can find on your own. When you sign up through your employer, you’ll probably be confronted with many options. Take a good, long look at them and ask for help from a human resources representative if need be, but make sure you choose the plan that’s right for you. Chances are—if you’re young and healthy— you’ll want a plan with a low premium and higher deductible. Look for a plan that minimizes your out-of-pocket expenses. When it comes to choosing between and indemnity plan or a managed care plan, you may or may not have a choice depending on your employer. Both offer advantages and disadvantages, so make sure to crunch the numbers before committing to one or the other.

Make yourself a deal

Though health insurance is a costly part of our lives, there are ways to save. If you’re self-employed, shop around before you commit to a plan. If you’re under 50 and in good health, insurance companies will want your business, and cut rates are to be had. Also, take advantage of breaks from Uncle Sam. The self-employed can write off up to 45 percent of their insurance premiums. Some employers offer flexible spending accounts, where you can pay for premiums and costs not covered by insurance with cash that isn’t subject to taxes.

If you’re married and your spouse also can get coverage from their employer, weigh your options carefully. It might benefit you financially and coverage-wise if you measure the pros and cons of separate coverage, double coverage, or one of you opting out of your work’s plan and enrolling in the other’s.

Finally, if you’ve been healthy and believe you can get by with minimum health coverage, look into purchasing “catastrophic coverage”. This indemnity policy offers extremely low premiums, but deductibles can be very high—up to $2,500. Coverage is extremely limited to “catastrophic” events, which you’ll need to learn all about.

Whatever type of insurance you are taking out, there are some common mistakes that people make which cost them money and may leave them without cover when they most need it. If you are looking at insurance then you should avoid these common mistakes if you want to be fully covered and save yourself money:

Not updating policies

It is important to keep all insurance policies up to date to make sure that you have adequate and accurate cover. If your policy doesn’t allow for inflation then you might need to increase its value every few years. Also, with life insurance remember to keep beneficiaries up to date when any new event such as marriage or birth or death occurs.

Letting insurance lapse

If you have various bank accounts and insurance policies it can be easy to let an insurance policy lapse when changing accounts or closing an account. You need to make sure you keep track of all your policies, because any lapse could mean that you are not covered or that any continuous cover benefits you had are wiped out. For example, if you lapse on medical insurance you will be treated like a new customer and will not be covered for any previous illnesses you have had.

Not shopping around

Too many people take the first insurance policy that they are offered, without looking to see if it is really competitive or what they want. Just because you can afford a policy doesn’t mean it is the best one for you. You should always take your time to look for insurance, and get quotes over the phone or online before arranging meetings and finalising a deal.

Getting inadequate cover

Another common mistake is not getting adequate cover, either for home or life insurance. Although Ј100,000 might seem a lot for cover, if you die then your family has to live off this amount for years and it won’ t be enough. Make sure that you are fully covered for the value of your home and its contents and that your life insurance policy is adequate so that your family can survive.

Lying on the application

Although it might seem tempting to lie on your policy about something, the lender will usually find out and if they do you might be left with no cover. Although you might pay more for your policy by disclosing all medical problems, it is important to be honest on your application.

Using the wrong insurer

Perhaps the biggest mistake you can make is picking the wrong insurer for your policy. Although many insurers are perfectly honest, there are some that will cost you more money and simply won’t pay out when you need them to. If you are unsure about anything in the insurance agreement, do not sign it. Make sure you check over anything you sign and consult a solicitor if necessary.