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It seems like this day may have never come, but you're
finally nearing retirement. You may have been planning your retirement
since the day you started working, but you still have a little bit
of work to do. Leaving the workplace usually means leaving some
of your benefits behind; therefore it is important to do a thorough
review of your insurance program.
The primary purpose for life insurance is to protect
you family's financial well being, but life insurance can be applied
differently in many situations. Your primary use of life insurance
may have been to provide protection for your spouse, but now that
you have saved up sufficient financial resources you may think it
is unnecessary. This is probably untrue. The following are three
important considerations to make when evaluating your life insurance
program at this stage:
- Pension Benefits - If you have a qualified retirement
plan that is sponsored by your employer, then you will have a
decision to make near the time you decide to retire and begin
receiving benefits. The decision concerns an election of benefits.
You will probably be given a choice of taking a full lifetime
benefit or survivor benefit option in which life insurance could
play an important role.
- Estate Planning - Life insurance can provide the necessary
liquidity and cash to pay for estate and inheritance taxes at
death.
- Final Expenses and Cash Bequests - Life insurance can
also provide the needed cash to pay for funeral and estate administration
expenses, and can be used to provide cash gifts to loves one or
a favorite charity.
Once you reach age 65 you will become eligible for
Medicare which is administered by the Social Security Administration.
Medicare Part A covers hospital benefits and Medicare Part B covers
medical benefits. If you retire prior to age 65 then you will still
need health insurance coverage. If you are leaving an employer and
you have health insurance then you may be able to extend the coverage
either 18 or 36 months under COBRA if you qualify. Another alternative
is to purchase an individual health insurance policy on your own.
To start with, you need to understand the 3 basic
types of individual health insurance.
This type of plan lets you visit the healthcare provider
of your choice, and it reimburses you for a portion of the expenses.
The portion of the medical expenses you are responsible for is called
co-insurance which is usually twenty-percent of the charges that
are considered reasonable and customary (reasonable and customary
charges are the prevailing fees charged by healthcare providers
in a particular region of the country). Many fee-for-service plans
also have a deductible that must first be met before medical expenses
are eligible for reimbursement. In addition, most plans also have
"maximum-out-of-pocket expenses" or "stop-loss" provisions that
limit the amount of co-insurance a patient is responsible for. After
co-insurance payments reach a policy's stop-loss provision, the
insurance company pays for the remainder of the annual expenses
at one hundred percent of reasonable and customary charges. Fee-for-service
plans, like all other types of health insurance, have lifetime limits
which place a cap on the total amount of medical expenses an insurance
company will pay for. You should look for a policy with unlimited
lifetime benefits or at least $1,000,000 in coverage.
HMOs are managed care health plans that restrict
you to a designated network of healthcare providers. Under an HMO,
you must select a primary care physician in the network. If you
become ill or injured (non emergency) then you must first visit
your primary care physician before being referred to a specialist.
HMO's usually pay for all of your medical expenses except for a
small co-payment which is your responsibility for each visit to
your healthcare provider. HMOs will not reimburse you for any medical
expenses if you obtain care outside of the HMO network unless your
HMO plan has a POS (Point of Service) option. POS gives you the
flexibility of going outside the HMO network for medical treatment;
however, the insurance company will only reimburse you for a portion
of the expenses subject to co-insurance. HMOs are the most restrictive
type of health plans available but are also among the least expensive
types of health insurance.
PPOs are types of managed care plans that gives you
financial incentive to use specified or preferred healthcare providers.
If you visit a preferred healthcare provider the insurance company
will usually pay for all of the medical expenses after you pay a
small co-payment which is usually $10-$20. PPOs also give you the
flexibility of using doctors or hospitals out of the PPO network;
however, you will be responsible for co-insurance payments similar
to those in fee-for-service health insurance plans. PPOs differ
from HMOs in that you have the freedom to choose any healthcare
provider at anytime.
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