In this series I am covering the 24 tell-tale signs that you could be in financial trouble. Over the next few weeks I will be presenting these signs, how to identify them and tips on how to address the issue.
Insurance is an aspect of our finances that are not very exciting but extremely important. One of the most devastating events that can happen to an individual or family is when someone suffers a severe and unexpected medical problem. What do you do when you are faced with a $500,000 medical bill from the hospital?
If you have health coverage either through your employer or with an individual plan you will probably simply look over the bill to check for accuracy and then pass it on to your insurance carrier. If you don’t have any or insufficient coverage you will look at the bill in shock. You will then come to a realization that this bill is unpayable. Where will this money come from? This situation is all too real and it is something you hope to never have to experience.
Why is Health Insurance Important?
The need for fairly significant health insurance for the typical healthy adult doesn’t come up all that often. How long has it been since you had an operation or overnight stay in a hospital? A few months ago? A few years ago? Never? Like most types of insurance you hate dishing out that premium every month when it feels like you never need the insurance. This is the kind of thinking that gets many people into trouble.
While it is true that you can go decades without ever needing more than a checkup with your family doctor, it is the unexpected accident or illness that can bankrupt even those with solid finances. Even a fairly minor medical ordeal can cost thousands of dollars. For example, a normal uncomplicated pregnancy will easily cost over $5,000. If this money has to come out of your pocket it will deplete your savings in the blink of an eye. If the bills are more severe you could be left to emptying your retirement accounts or selling off assets to pay the bills. And if that isn’t enough you could be faced with garnished wages, losing your home or even bankruptcy.
What Can I Do to Make Sure This Doesn’t Happen to Me?
As you are probably aware, health care is not cheap. Luckily most employers provide group plans that you can participate in, but even this may not be all that affordable. If you are employed and your employer does provide health benefits it is important you take a look at your options. If you have a spouse and they also are eligible to participate in their employer’s plan be sure to understand both plans very well. Determine what coverage is offered and how much it costs. Regardless, an employer group health plan will almost always be the cheapest way to obtain full health coverage.
What happens if you are self-employed or your employer does not offer a group plan? Unfortunately in situations like this it is up to you to foot the full premium. One of the most highly-acclaimed resources for checking into health insurance and comparing quotes is eHealthInsurance.com. This site is recommended by Money Magazine, Kiplinger, and even though I hate to say it, Suze Orman. While you will still probably be shocked to see what some of these policies cost it makes finding the best coverage that much more important.
Don’t Underestimate Your Employer’s Benefits
People are quick to change jobs in search of a little bit higher pay and most pay very little attention to the other benefits that are provided. When looking for a job or evaluating whether or not to leave your current job take extra care in examining your “total compensation package.” There is more to compensation than your salary. Consider what types of insurance is provided and what the premiums are. It wouldn’t make a whole lot of sense to jump to another job for an extra $5,000 a year if they didn’t offer health insurance or premiums for the same amount of coverage was double what you are currently paying.
It is easy to put a value on what your salary is, how much paid time off you receive and even retirement plan options. But quantifying the value of insurance is not as easy. Unfortunately we don’t completely understand the value of insurance until we need it, and by then it is too late to make changes. Be proactive and establish coverage before you need it.
Author: Jeremy Vohwinkle
My name is Jeremy Vohwinkle, and I’ve spent a number of years working in the finance industry providing financial advice to regular investors and those participating in employer-sponsored retirement plans.