14 Jan Supplemental Insurance Policies: They are for more than just health care
“Only insure what you cannot afford to lose…”
“The best insurance is one you never have to use…”
Both of these statements are very true but unfortunately some people misunderstand concept of insurance and feel that if they do not get paid back more than they paid for the coverage, they made a bad purchase! The tricky thing about insurance is you have to have it in place before you need it. You can’t buy homeowner’s insurance after your house has burned down and file a claim. Or auto insurance after the car crash. So that means you may pay for an insurance policy for years and never file a claim. Does that make insurance a bad “investment?” Probably not, especially if you get sick or hurt and are unable to work for a period of time!
Over the past decade a new kind of insurance plan has been gaining attention: supplemental insurance. These are insurance policies are designed to protect your cash flow in the event that you get sick or hurt. The purpose of these plans is to help the policyholder pay the out-of-pocket expenses (medical and non-medical) that suddenly arise and to help pay the ongoing living expenses that do not go away just because someone is sick or hurt (e.g., rent/mortgage, credit cards, auto insurance, groceries, etc.). Unlike health insurance policies, supplemental plans do not pay doctors or hospitals but rather pay the policyholder directly. Thus the name—they “supplement” a person’s employee benefits or other types of insurance coverages. These voluntary insurance plans can be offered through an employer but many are also available for individuals to purchase on their own.
Supplemental plans are designed to address specific medical issues. There are accident plans, cancer plans, critical illness plans, hospitalization plans, sickness plans, and short term disability plans. Often an insurance company will also offer a variety of plan options with relatively easy application procedures. Supplemental plans are offered by a number of insurance companies and are generally very affordable — $3 to 10 per week for an individual will purchase most plans offered today for persons of any age.
You can start the process by comparing plans and the insurance companies online. Do your due diligence. Ask questions about requirements to enroll; how easy (or not!) it is to file a claim; how fast claims are paid; are the plans portable at the same price if you leave your employer; are any coverages “paid up” after paying premiums for a number of years and provided free for the rest of your life; do benefits reduce at age 65; can you continue the plans into Medicare years for your lifetime; and more.
Although supplemental plans are a great investment for many, they may not be for you. For example, if you have substantial personal or family wealth and easily have 6 to 9 months of savings to cover your medical care and daily living expenses, you may not need supplemental plan coverage. However, these plans could be an inexpensive way to preserve those savings! But for the rest of us, supplemental plans can be a strategic part of a comprehensive financial protection program for you or your family and may be worth a look!
After a 30 year career as an employee benefits leader at ARCO/BP, Cynthia Bengtson now helps small and mid-size companies and non-profits provide a financial safety net for their employees at no cost to the organization by offering voluntary supplemental plans to their employees. Cynthia also works with plans available to individuals and their families to help them financially plan for medical events. For more information, contact Cynthia at Cynthia.Bengtson@Combined.com or 818.606.5809.