Questions

General

What is the difference between group and individual medical insurance?

Life Insurance

Who needs life insurance?

How much insurance do I need?

Which type of life insurance policy should I buy?

Answers

A: Group medical insurance is defined by the following:

• The employer must pay at least 50% of the employee premium (although some carriers require 75%) but the employer is not required to pay any of the dependent premium
• Eligible employees are those who work a minimum of 30 hours per week for the employer. Contract (1099) workers can be eligible if the employer elects to make ALL contract employees who work a minimum of 30 hours per week eligible
• If the employer pays 100% of the employee premium, 100% of the employees must enroll
• At least 75% of the eligible employees, not covered by another GROUP plan, must enroll
• Insurance companies require a copy of the most recent Texas Workforce Commission report that lists all employees, and the insurance companies will want an accounting of all those listed who are not applying for the group insurance or proof of employment for those not listed who are applying. If the business is too new for a TWC report, the insuring company will want to see payroll records or other documents.
• Group plans normally exclude work-related injuries. This is significant for those employers who have opted not to cover themselves on their Workers' Comp plans.
  
• Groups of 2-50 cannot be turned down by a company for medical conditions but premiums for the entire group can increase as much as 67% based on the medical condition of the employees and covered dependents in the group.
  
• Employees with prior 18 months of "credible coverage" and who have not had a lapse of coverage of more than 63 days will normally be covered for pre-existing conditions.
  
• Employees and eligible dependents must enroll within 30 days of their eligibility date to be on the plan or they might not be accepted until the next "Open Enrollment" period.
  
• Group benefits are usually much better and more extensive than individual plans resulting in much higher premiums.
  
• State Continuation laws, allowing an employee to continue coverage at the employee's expense for up to 6 months following termination, applies to all groups in Texas. COBRA laws, allowing continuation of health and dental insurance following loss of coverage, apply to groups with 20 or more employees.

Individual Insurance

• Employers CANNOT pay any portion of an employee's individual medical insurance plan since the 1996 and later "Small Group Reform" acts were passed in Texas.
  
• Individuals with 18 months of prior "Credible Coverage" with no more than a 63-day lapse before the effective date of their new individual plan will be covered for pre-existing conditions. HOWEVER, such individuals can still be declined for coverage or have specific conditions excluded from coverage.
  
• Individual coverage is NOT guaranteed to be issued. If an applicant has certain serious conditions listed on the THIRP forms, is declined for individual insurance or has an exclusion rider added to an individual policy, that person might be eligible for the Texas Health Insurance Risk Pool. For information about THIRP, contact them at 888.398.3927 or www.txhealthpool.com. .
  
• All individual plans cover medically diagnosed complications of pregnancy, but most offer no coverage or only very limited coverage for normal childbirth expenses.
  
• Individual policies generally cover work-related eligible expenses if there is no Worker's Compensation in place.
  
• Individual policies are available for a child only.
  
• Policy benefits are usually lesser than the group benefits but the premiums are much less also.

Q: Who needs life insurance?

A: You do, if:

• You have a spouse, children or other dependents (an elderly parent, for example) who rely on you for financial support.
• Your death would disrupt someone’s life preventing that person from working or functioning normally for a period of time.
• You want to leave a legacy to your alma mater, a favorite charity, or a political cause.
• You want a safe savings account for your retirement.
• You want a reliable source of funds to borrow or use as you see fit . . . your own “bank.”
• You might do any of the above in the future . . . buy now to guarantee access later in the event of a change in your health.

Q: How much insurance do I need?

A: That depends.

It depends on when you die and why you needed the insurance in the first place. If you need help with this decision, please contact us. We’ll ask questions and help you decide on the right options for you and your family.

Q: Which type of life insurance policy should I buy?

A: Buying life insurance, like any other financial purchase, is an individual decision based on your particular needs.

For example, term insurance may be suitable if you are young and want to make sure a spouse and young children would be taken care of if you were to die unexpectedly. For the older, more established family, the fixed premium and the build-up of cash value in whole-life policies might be more attractive.

If you purchase whole-life insurance, ensure that the policy is needed and maintained over a long period. It can be quite expensive if you allow it to lapse in the early years.

The basic types of life insurance are:

Term Insurance

Term insurance provides for payment of the death benefit only if the person insured should die during the term of the policy. If the insured survives the “term” or period of time covered by the policy, there will be no coverage. Features include:

• Low premium initially or for a guaranteed period (5, 10, 15 or 20 year term)
• Protection for a specific period of time
• May be renewable and/or convertible
• Premium increases with each new term
  

Whole-Life Insurance

The whole-life insurance policy provides for a death benefit for the insured for his or her “whole life.” Premiums are normally paid throughout the life of the insured, although cash values can sometimes be used to offset the premiums.
Features include:

• Protection until the end of the life of the insured
• Fixed premium, usually for the life of the insured
• Cash value accumulation
• Higher initial premium than term
• Should be purchased with the intention of keeping for life or for a long period of time.

This, of course, is only a summary of what is available. The main issue is, "do you need to protect yourself and your family?"