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

Managing Health Expenses & Life Insurance Planning Group I Managing Health Expenses Introduction There are three finance burdens related to health issue: Direct medical care costs Long-term rehabilitative and custodial care costs Lost Income when you cannot work due to illness or injury Identify ways that people can manage the financial burdens resulting from illness or injury Types of expenses Provider of coverage • • • Services provided Long-term care Direct health care Health maintenance organizations (HMO) Medicare for those aged 65 or more Medicaid for lowincome • • • Traditional health insurance Medicare Medicaid • Consumerdriven health insurance plans • • Long-term care insurance Medicaid • • Disability income insurance Social Security for eligible workers and their families 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 fee and prepaid basis Monthly premiums on Monthly premiums on Monthly and annual Monthly premium L.O.1 Types of protection from health-related cost Payment mode Lost income Types of protection from healthrelated cost Types of expenses Long-term care Direct health care Lost income Payment mode Monthly fee and prepaid basis Monthly premiums on the insurance coverage 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 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 ❄ 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 probability of high-cost treatment 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 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 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? ❄ Final ❄ Income- expenses: replacement One-time needs ❄ Readjustment -period needs expenses just ❄ occurring Debtprior to or repayment after a death needs ❄ College expense ❄ Other special needs needs 27 What Needs Must Be Met? ❄ Existin ❄ Government ❄ Life ❄ Benefici g benefits can insurance : ary: The insuran reduce the can close person ce and level of need any named in assets ☆ Social remaining the reduce Security gap in policy to the survivor needs receive level of ’s the need benefits funds ☆ Social Security 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) ❄ Cash-Value Life Insurance ☆ Face amount ☆ Time period ☆ With term-life insurance, you pay Value: premiums for a specific period of Represe time When you die during that nts the time, your beneficiary will receive value of a face amount When you not die, the the insurance expires and you have to investm renew it with higher premiums ent Premium goes up with each renewal as element you get older in the ☆ ☆ Cash- life 32 Term Life Insurance o Guaranteed Renewable Term Insurance o o Level-Premium Term Insurance o o Protects you against the possibility of becoming uninsurable Covers for five, ten or more years with the annual premiums set at the average over that time span 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 selected o Group insurance is best for those who due to health reasons cannot find affordable life insurance individually o Credit Term Life Insurance/ Mortgage Term Life Insurance 33 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 Insurance ❄ Overtime, while the amount of benefit remains the same, the amount of actual life insurance reduces and the amount of cashvalue 36 Cash-Value Life Insurance ☆ Limited- ☆ Ad ☆ Mo ☆ Endowment life Pay ju difi insurance: allows Whole st ed you or your Life ab Lif beneficiary to Insuranc le e receive the benefit e: allows Lif Ins either on a the e ura specific date or on insured In nc the date you die to pay su e (whichever is higher premium nc 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 Step-byStep Strategy for Buying Life Insurance 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 ! ... affordable life insurance individually o Credit Term Life Insurance/ Mortgage Term Life Insurance 33 Figure 12-1: Comparison of Premium Dollars for Life Insurance 34 Cash-Value Life Insurance. .. 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... 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 Insurance ❄ Overtime,