BT nhóm Tài chính cá nhân chapter 11,12 Managing Health Expenses Life Insurance Planning

Types of protection from health-related cost• Medicare for those aged 65 or more • Medicaid for income low-• Traditional health insurance Consumer-driven health insurance plans care insu

Managing

Health Expenses &

Life Insurance

Planning

Group 4

I Managing Health

Expenses

1

There are three finance burdens related to

health issue:

1 Direct medical care costs

2 Long-term rehabilitative and custodial

Identify ways that

L.O.1 Types of protection from health-related cost

• Medicare for those aged 65 or more

• Medicaid for income

low-• Traditional health insurance

Consumer-driven health insurance plans

care insurance

• Disability income insurance

• Social Security for eligible workers and their families Services

provided

Hospital, surgical, medical services directly through their own hospital and physicians or under contract with such providers

Reimburses or pay for

hospital, surgical, medical, and other health care costs

Reimburses

or pay for hospital, surgical, medical, and other health care costs that exceed a high

deductibles

Reimburseme nts for costs associated with custodial care (not

direct medical care)

Provides a monthly income to replace that lost when the insured is unable to work due to

accident or injury

Monthly premiums on the insurance coveage

Monthly and annual

premiums

Monthly premium

Purchase

d by Individual or employers as

employee benefits

Individual or employers as employee benefits

Individual or employers as employee benefits

employers as employee benefits

Monthly premiums on the

insurance coverage

Monthly and annual premiums

Monthly premium

Purchased

by Individual or employers as

employee benefits

Individual or employers as employee benefits

Individual or employers as employee benefits

Individual Individual

or employers

as employee benefits

Types of protection from

health-related cost

5

PROTECTING FROM DIRECT HEALTH CARE COST

❄ Health care plan: a generic name

for any program that pays or

provides reimbursement for direct

health care costs

6

HEALTH MAINTENANCE

ORGANIZATIONS

❄ Health maintenance organizations (HMO): health

insurance plans that provide a broad range of

health care services for a set monthly fee on a

prepaid basis

❄ HMO subscribers are assigned/ choose a primary

physicians within HMO  choose health service providers

within HMO

☆  it helps to identify any health problems early,

which helps keep overall costs low by reducing the

TRADITIONAL HEALTH INSURANCE

❄ Traditional Health insurance is based on the concept of

reimbursement for losses, with the patient choosing the type

of care based on the advice of his/her physician

indemnity plan / fee-for-service plan

❄ Preferred provider organization (PPO): a group of health

care providers who contract with a health insurance company to

provide services at a discount

 If choosing PPO, Policy holder received the discount in the form

of reductions or eliminations of deductibles, coinsurance

8

CONSUMER-DRIVEN HEALTH CARE PLANS

❄Consumer-driven health care: an approach to health

care protection where the customer selects a health care

plan with a high deductible and high overall policy

limits.

 Consumers will be more careful in spending money

 Give the consumers the opportunity and

responsibility to manage their health care costs.

9

CONSUMER-DRIVEN HEALTH CARE PLANS

Types of Consumer-driven health care:

❄High-deductible health care plan: a tax-exempt account

created to pay for qualified medical expenses of the account

holder and their dependents

Lower premiums, Higher deductible, higher out-of-pocket

expenses, Higher policy limit

☆  to cover the high deductibles, holders of high-deductible

health care plan are allowed to open Health Savings

Account (HSA)

☆ HSA is a tax-deductible savings account in which account

holder or their employers can deposit pretax income to use for

health services later

10

CONSUMER-DRIVEN HEALTH CARE PLANS

Types of Consumer-driven health care:

❄Health Reimbursement Arrangements: funds set aside by

employers to reimburse employees for qualified medical

expenses

❄Flexible spending arrangements: an employer-sponsored

account that allows employee-paid expenses for medical or

dependent care to be paid with an employee’s pretax dollars

rather than after-tax income

11

Explain the basics

of planning for

long-term custodial care.

12

 Injuries, severe illnesses and certain conditions often require

a long period of custodial care in a nursing home or at home

Because this care is custodial and not directly medical in

nature it is not covered by health care plans

 Long-term care cost can be reimbursed by long-term care

insurance or Medicaid (for low income)

 Long-term care insurance provides reimbursement for

costs associated with custodial care in a nursing facility or at

Planning for Long-Term

Custodial Care

There are some factors to consider when buying

long-term care insurance

1 The degree of impairment required for benefits

to begin

☆ Activities of Daily Living (ADLs)

2 The level of care covered

☆ Skilled nursing care

☆ Intermediate care

☆ Custodial care

14

Planning for Long-Term

Custodial Care

3 The person’s age

4 The benefit amount

5 The benefit period: the time period you will receive

benefit

6 The waiting period: the time you have to wait/pay

by yourself before the insurance company pay for you

7 Inflation protection

You will also want to trade-off the benefit period and the

waiting period Selecting a longer waiting period will

allow you to pay lower premium and afford a longer

benefit period

15

Develop a plan for

protecting your

income when you

cannot work due to

disability.

16

Protecting Your Income During

Disability

❄ Disability income insurance

❄ Social Security disability insurance

17

Photo · CC-License: CC BY ·

What is your level of need?

Long-term care policies will typically only cover

about 60-80 percent of the insured’s after-tax

income.

18

What is your level of need?

Calculation of needs starts with current after-tax income

and then subtracts Social Security disability benefits,

employer-based disability benefits, and any other existing

disability insurance.

19

Protecting Your Income During Disability

❄ Important disability income

insurance policy provisions:

 A longer waiting period will help you afford a

longer benefit period.

20

Protecting Your Income During Disability

❄ Consider the degree of disability.

 An own-occupation policy will provide benefits if

you can no longer perform the occupation you

had before becoming disabled.

 A residual clause allows for reduced benefits

when a partial disability occurs.

21

Protecting Your Income During Disability

 An any-occupation policy will provide full

benefits only if you cannot perform any occupation Typically, it will provide the difference in income between your prior and

after-disability occupation

22

Protecting Your Income During Disability

❄ Important disability income insurance

policy provisions:

 Social Security rider

 Cost-of-living adjustments

23

II Life Insurance Planning

Introduction

❄ There are two primary risks related to longevity

and finances:

☆ Risk of dying too soon

☆ Risk of living too long

24

Understand why you might

need life insurance and calculate

the appropriate amount of

coverage.

25

How Much Life Insurance Do You Need?

• The primary reason for buying life insurance is to allow the

family members of the deceased to continue with their lives

free from the financial burdens that death can bring.

• Needs are high for a parent with young children

• Young, single professionals may need little life

insurance

26

What Needs Must Be Met?

Income-❄ Readjustment -period needs

❄

Debt-repayment

needs

❄ College expense needs

❄ Other special needs

27

What Needs Must Be Met?

☆ Social

Security survivor

’s benefits

☆ Social

Security blackout period

❄ Benefici

ary: The

person named in the policy

to receive the funds

❄ Life insurance :

can close any

remaining gap in needs.

28

What Dollar Amount

Do You Need?

❄ The Multiple-of-Earnings Approach: easy but flawed.

❄ The Needs-Based Approach: a better method

29

❄ Distinguish between the dying-too-son problem and the

living-too-long problem and the best ways to address

each.

❄ List five types of needs that can be addressed through

life insurance.

❄ Explain why the multiple-of-earnings approach is less

accurate than a needs-based approach to life insurance

planning.

❄ Identify two periods in a typical person’s life cycle when

the need for life insurance is low and one when it is high

30

Distinguish

among the types

of life insurance.

31

There Are Only Two Basic Types of Life Insurance

❄ Term Life Insurance (or Pure

Protection)

☆ Face amount

☆ Time period

☆ With term-life insurance, you pay

premiums for a specific period of

time When you die during that time,

your beneficiary will receive a face

amount When you do not die, the

insurance expires and you have to

renew it with higher premiums.

☆ Premium goes up with each renewal as

you get older

❄ Cash-Value Life

Insurance

☆ Value:

Cash-Represe nts the value of the investm ent element

in the life insuranc

e policy.

32

Term Life Insurance

o Guaranteed Renewable Term Insurance

o Protects you against the possibility of becoming uninsurable.

o Level-Premium Term Insurance

o Covers for five, ten or more years with the annual premiums set at the average

over that time span

o Decreasing Term Insurance:

o the premium stays the same each year and the amount of coverage declines to reflect the age

of the insured

o Convertible Term Insurance:

o allows the insured to convert a term policy to a cash-value policy with a commensurate

increase in the annual premium.

o Group Term Life Insurance:

o is sold through a group with the individual insured being covered based on the amount

Figure 12-1: Comparison of Premium Dollars for Life Insurance

34

Cash-Value Life Insurance

Some forms of cash-value life insurance

pay a fixed return:

Permanent Insurance

Whole (or Straight) Life Insurance

35

Figure 12-2: The Fundamental Nature of Cash-Value Life

Cash-Value Life Insurance

le Lif

e In su ra nc e

☆ Mo

difi

ed Lif

e Ins ura nc e

☆ Endowment life

insurance: allows

you or your beneficiary to receive the benefit

either on a specific date or on the date you die (whichever is sooner )

37

❄ Distinguish between term life insurance and cash-value life

insurance.

❄ Explain why the premiums for term insurance are so much

lower than those of cash-value life insurance.

❄ Describe the benefit of buying guaranteed renewable term

insurance.

❄ Explain why the amount of “insurance” declines over time

under a cash-value life insurance policy.

❄ Distinguish between cash-value life insurance with a fixed

return and with a variable return.

38

Buy term and invest the rest.

The best way to buy life insurance is to buy term and invest the rest

This means that you buy term life insurance for the major portion of your needed life insurance and take the money you would have spent buying cash-value life insurance and invest

it through a tax-sheltered retirement plan at work or an IRA

This is the most economical and effective way to protect financially against dying too soon and living too long.

• The term insurance solves the dying too soon problem most efficiently

• The investment program will be your retirement accounts

• These will generate a much higher return than cash-value life insurance thereby helping you solve the living too long problem

39

Thanks For Wathching !