Life & Health Insurance Advisor Life Insurance July 2014 Volume 7 Number 7 If You Find Life Insurance Shopping Confusing, You re Not Alone A new study calls 19 million Americans stuck shoppers of life insurance, because they believe life insurance is valuable and necessary, but they find shopping for it confusing and overwhelming. The joint study, by insurance trade organization LIMRA and Maddock Douglas Research, lays the blame on insurers, saying their communications lack clarity and relevance for consumers. The study says that a key factor in the stuck shopper dilemma is communications that lack authenticity. It defined six elements that make up authentic communication, including use of everyday language, use of realistic images, interesting, warm and comforting messages, credible MRCT SmartBenefits is a comprehensive employee benefits, wellness and Human Resources consulting firm offering a variety of financial services to businesses and individuals 230 S. Bemiston; Suite 900 Clayton, MO 63105 (314)727-5522 FAX (314)727-5568 www.smartbenefitsplus.com www.mrctquote.com This Just In Consumers find insurance agents and brokers to be the most helpful source of information on plans in the health insurance exchanges, according to an issue brief by the Urban Institute s Health Policy Center. The Urban Institute found that about half of adults looked to websites only for information on marketplace health plans; 29 percent looked to websites and other sources; and 20 percent looked at other sources only. Other sources included insurance agents and brokers; navigators, community health workers or other program agencies; indirect or informal assistance, and call centers. Among people who used an agent or broker, 83.9 percent
Life Insurance sources and relevance to the audience. The majority of consumers surveyed said they did not know how to define several important terms life insurers often use in their marketing communications; others mis-identified these terms. Definitions of the most important of these terms follow. Premiums: The amount you pay for your insurance policy. Most insurers allow you to pay premiums on a yearly, quarterly or monthly basis. Death benefit: The amount a life insurance policy will pay to the beneficiary named in the policy if the person whose life is insured dies. Also known as the policy s face value. You can name a person, such as your spouse or child, or an institution, such as a favorite charity, as your policy s beneficiary. Permanent life insurance: There are two basic types of life insurance, term and permanent. Term insurance limits coverage to a specific term, such as five years, 20 years or a specific age. At the end of the term, the insurer can raise your rates or refuse to cover you if your health has changed. If you live beyond the term of your policy, your policy will pay no benefits. Permanent insurance provides lifelong protection. Premiums are generally higher than for term insurance, but they remain fixed for the life of the policy. Your coverage remains in place regardless of your health status, as long as you continue to pay your premiums. All permanent insurance has a face value (death benefit) and a cash value. Cash value: A portion of the premiums you pay for permanent life insurance goes Life & Health Insurance Advisor July 2014 This Just In toward paying for the death benefit, and another portion gets credited toward a savings component, the cash value. With a basic permanent life policy (whole life policy), your cash value grows at a rate of interest specified in the policy documents, called the guaranteed value. With universal life, your cash value grows according to an external index, such as Treasury bills. The cash value in your life insurance policy grows tax-free, and once your cash value reaches a certain amount, you can withdraw or borrow funds on a tax-free basis as well. This feature makes permanent life a useful tool for saving toward long-term goals, such as paying for a child s education or paying down a mortgage at retirement. Guarantees: When you buy a basic whole life permanent life policy, the insurer guarantees the premium payments and death benefits will remain level, and guarantees that your cash value will grow at a specified minimum interest rate. Underwriting: When you apply for life insurance, an insurance company employee called an underwriter calculates your risk of death, or mortality, based on your age, gender, health status and other factors. Using that information, he/she considers the risk your business would present, decides whether to offer you coverage, determines the appropriate premium, and writes a policy to cover you. Rider: An insurance policy rider is an attachment that modifies the coverage in your policy. A rider can add coverage (additional benefits) or take away coverage by excludrated the information as helpful or very helpful. Among people using navigators and other non-sales personnel for assistance, 77.3 percent rated the information as helpful or very helpful. Sixty-five percent of website users rated them as helpful or very helpful, while 58.1 percent rated call centers as helpful or very helpful. An independent insurance agent or broker offers the advantage of expertise in the field of health insurance. Every state requires agents and brokers to hold a license and complete extensive pre-licensing and continuing education. And that expertise comes at no extra cost to you. For information, please contact us. ing coverage for certain conditions or circumstances. Common riders include a living benefits rider (explained below) and a waiver of premium rider, which will waive all your premium payments if you become totally disabled. This allows you to continue your coverage at no cost when your medical condition would probably prevent you from obtaining coverage. Living benefits: Some life insurance policies will pay your policy s death benefit (full or partial) to you while you are still living, rather than to a beneficiary when you die. Living benefits arose out of the AIDS crisis of the 1980s, and allow terminally ill or chronically ill individuals to access the value of their policy. On the downside, using living benefits means your beneficiary/beneficiaries will not
Life & Health Insurance Advisor July 2014 receive the financial protection of the policy s death benefit. Annuity: An annuity is a contract with a life insurer that guarantees to provide periodic payments for the term you select, whether it s your life or a specified number of years. Payments can begin immediately or at a future date. A fixed annuity provides equal payments for the term of the annuity contract. Earnings accumulate taxfree until you withdraw money. When you buy a variable annuity, your premiums go into subaccounts that are invested in stocks and bonds, as in a mutual fund. Payments vary depending on the performance of these stocks and bonds. With either type, your earnings accumulate tax-free until you withdraw them. Independent insurance agents and brokers can help you compare life insurance policies from many different companies, rather than just a single company. We also can take the time to explain coverage terms and options to you, and help you select the ones that best meet your needs. Please contact us if you need assistance in buying life insurance. Ten Things You Need to Know About the Affordable Care Act Unless you are one of a very small percentage of Americans, the law applies to you. Here s what you need to know. 1 The individual mandate probably applies to you. Legal residents of the U.S. must maintain minimum essential health insurance or pay a penalty. The individual mandate applies to people of all ages, including children. The law allows exemptions for certain reasons, including short gaps in coverage (less than three months/year); if you cannot afford coverage; if you re a member of a federally recognized tribe or recognized health care sharing ministry; if you belong to a recognized sect with religious objections to insurance, including Social Security and Medicare; and for hardships. Affordable Care Act 2 Some types of plans that cover health conditions do not count as minimum essential health insurance under the Affordable Care Act. Insurance plans that pay a set daily benefit (such as cancer or hospital indemnity plans) when you receive a diagnosis of an illness or become hospitalized do not count as acceptable health insurance under the Affordable Care Act. Neither do accident insurance plans. To qualify as acceptable coverage, a plan must cover essential health benefits, or items and services in these 10 categories: outpatient services; emergency services; hospitalization; maternity and
Affordable Care Act Life & Health Insurance Advisor July 2014 newborn care; mental health and substance use disorder services, including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and pediatric services, including oral and vision care. 3 Penalties will apply with your 2014 tax return. If you have a gap of three months or longer and no exemption (see Item #1) applies, you will have to pay a penalty. For 2014, the penalty will equal either 1 percent of your income, or $95 per adult and $47.50 per child, whichever is higher. In 2015, the penalty increases to $325 per adult and $162.50 per child (up to $975 for a family) or 2.0% of family income, whichever is higher. 4 You can only buy individual health coverage during open enrollment periods. The open enrollment period for coverage for 2014 ended on March 31. This means you cannot buy individual (non-employer) health coverage for the rest of 2014 unless you qualify for a special enrollment period. Special enrollment periods apply for people who experience a qualifying life event that affects their coverage needs. These include changes in family size (marriage, divorce, having/adopting a baby), moving to a new state or certain changes in income. Losing COBRA coverage also qualifies. You might also qualify if you faced a serious medical condition, natural disaster or domestic abuse that kept you from enrolling during the open enrollment period. Those who applied for coverage but failed to obtain it due to enrollment errors, system errors due to immigration status and certain other reasons might also qualify for special enrollment. The special enrollment period lasts 60 days from the triggering event. For example, if you lose coverage due to divorce, you must apply for new coverage within 60 days of the final divorce decree. 5 Bans on annual and lifetime limits apply only to essential health benefits. You might have heard that the Affordable Care Act prohibits insurers from putting annual and lifetime limits on what they spend for your health care. That s partially true the law prohibits plans from putting annual and lifetime limits on the essential health benefits listed in Item #2. However, they can put annual and lifetime limits on what they will spend on other covered benefits for you. 6 You should take advantage of your preventive services benefits. Plans opened after January 1, 2014 must cover certain preventive services, such as shots and screening tests, at no out-of-pocket cost to you. Although you ll pay no copayment (per-visit charge) or coinsurance (percentage of covered services charge) when you access these services, your insurance premiums likely increased to cover the cost of these additional benefits. You re paying for preventive benefits, so you might as well take advantage of them! 7 Using a network doctor can save you a lot of money. Although your plan might cover visits to healthcare providers who don t belong to your plan s network, you ll usually have to pay a higher percentage of costs. Before scheduling a visit for a routine health matter, make sure the doctor, hospital, imaging center or clinic is in your plan s network. You can find this information on your plan s website, in your plan s provider directory, or by calling the provider s billing office. Office staff should be able to tell you if they accept your health plan. 8 Using formulary drugs can also save you money. Health plans and other plans that offer prescription drug benefits have formularies, or lists of prescription drugs covered by the plan. Many plans use tiered formularies, which means they offer higher reimbursements for some drugs, such as generics or drugs that have a strong record of effectiveness, to encourage plan members to use these drugs. Check your plan s formulary to see whether any drugs you or covered family members regularly take are listed. If not, you can try to get your drug covered through an exceptions process. To do this, your doctor must explain to your insurer why you need this particular drug rather than alternatives listed on the formulary. Reasons can include effectiveness or side effects from alternative drugs. 9 The Affordable Care Act allows the use of
Life & Health Insurance Advisor July 2014 Health Savings Accountbased (HSA) plans. To open and contribute to an HSA, you must have health insurance coverage through a qualifying highdeductible health plan and no other health insurance coverage. Contributions you make to an HSA have triple tax advantages. You can contribute pre-tax dollars, reducing your current income tax liability. Your savings accumulate tax-free. And when you make withdrawals to pay for qualified health expenses, withdrawals do not count toward your taxable income. If you have a high-deductible health plan but no health savings account, please contact us for more information. 10 The open enrollment period for coverage beginning on January 1, 2015 or later begins in November 2014. We can help you navigate the complex waters of enrolling an individual, family or small business. Please contact us for more information. Staying Healthy Overseas: Things to Know Before You Go If your summer travel plans include a trip overseas, check this list before you check your bags! 1 Country-specific health conditions. The U.S. Centers for Disease Control offers information on health concerns by country, including infectious diseases, recommended vaccines, malaria information (if pertinent), list of medications to bring and cautions on food and water. www.cdc.gov/ travel/destinationlist.aspx. 2 Individual-specific health information. If you have a pre-existing medical condition; allergies; reactions to certain medications, foods or insect bites or other medical problems, consider wearing a medical alert bracelet. You may also carry a letter from your physician explaining required treatment should you become ill. 3 Information on hospitals and physicians. U.S. embassies and consulates abroad maintain lists of hospitals and physicians, many of which are posted on the embassy or consulate Web site. See http://usembassy.state.gov. 4 Prescription drugs. Keep any necessary medications in your carryon baggage in their original containers with legible labels. Check with the foreign embassy of the country you are visiting to make sure it does not consider any medications you require to be illegal narcotics. Information on filling a prescription abroad and other health issues may be found at http://travel.state.gov/con tent/passports/english/go/checklist.html. 5 Eyeglasses and contact lenses. Bring an extra pair Health Insurance and a copy of your prescription in your carryon. 6 Insurance coverage. Hospitals and other medical providers outside the United States generally do not accept U.S. health insurance coverage. Even if your policy covers emergency care you need outside the U.S., you often must pay upfront and apply for reimbursement. Many plans reimburse as little as 50 percent of covered charges, after deductibles, when you use non-network providers. Further, most domestic health insurance plans do not cover medical evacuations, which can cost $50,000 or more.
Life & Health Insurance Advisor July 2014 Social Security, Medicare and Medicaid do not cover hospital or medical costs outside the United States. (However, some Medigap policies do provide coverage.) If your policy does not cover you while traveling abroad, you can buy a short-term travel health insurance policy to cover urgent and emergency services and medical evacuations. For more information, please contact us. Do You Need Mortgage Insurance? If you ve recently taken out a mortgage, refinance loan or home equity loan, you have probably received a solicitation for a mortgage insurance. Do you need it? About 22 percent of people who take out a consumer loan, such as mortgage or credit card, buy mortgage or credit insurance. This is a form of life insurance, which will pay off your loan if you die before paying it off. Credit life differs from other life insurance in an important way. When you buy a life insurance policy, you select the beneficiary, who can use the benefits for any purpose. When you buy credit insurance, however, the policy benefit goes directly to the lender. Before deciding to buy credit insurance from a lender, think about your needs, your options, and the rates you re going to pay. Credit insurance can be an expensive form of insurance. A term or permanent life policy may cost you less and give your beneficiary greater flexibility. Before you sign any loan papers, ask the lender whether the loan includes any charges for voluntary credit insurance. And review your loan papers carefully to be sure they have been drawn up correctly. Lenders can t deny you credit if you don t buy optional credit insurance and if you don t buy it directly from them. If a lender tells you that you ll only get the loan if you buy the optional credit insurance, report the lender to the state attorney general, state insurance commissioner or the Federal Trade Commission (FTC). SmartsPro MARKETING The information presented and conclusions within are based upon our best judgment and analysis. It is not guaranteed information and does not necessarily reflect all available data. Web addresses are current at time of publication but subject to change. SmartsPro Marketing does not engage in the solicitation, sale or management of securities or investments, nor does it make any recommendations on securities or investments. This material may not be quoted or reproduced in any form without publisher s permission. All rights reserved. 2014 SmartsPro Marketing. Tel. 877-762-7877. www.smartspromarketing.com