Many clients have asked me
"what would you do? or what are you doing?"
In 2008, my wife quit working and her employer offered us a COBRA health plan for $1,500 per month. Below is a list of the non-group coverage we chose instead for the same cost, listed by importance, priority and value:
1) Disability Insurance $88/mo. - Pays me $5,000 per month for up to 5 years after 90 days if an illness or injury leaves me unable to work. If I do not have income, I cannot pay for any of the following benefits. Cheaper the younger and healthier you are. Benefits to retirement are best, but covering fixed expenses for at least the average length of a disability can really cut the cost. Something is better than nothing. Medical disability leads to nearly half of the bankruptcy filings and nearly 3,000 Americans become disabled every hour. Drop at retirement since you are no longer protecting earnings.
2) Term life Insurance $94/mo. - Pays $1,000,000 to my family if I die. Without income my family cannot pay for any of the following benefits. Cheaper the younger and healthier you are. Adding a zero to annual income is best, but covering fixed expenses is better than nothing. I have less than a 1% chance of using policy before retirement. Drop at retirement since you are no longer protecting earnings. Or convert to permanent Last to die or second to die policy if need for estate taxes.
3) Health Insurance $404/mo. - Pays any family member's hospital bill after $5,000 deductible and preventive before deductible. Deductible decreases 20% per year if we stay healthy. Cheaper if grandfathered before healthcare reform or receiving a low-income subsidy. High Deductible without office visit and prescription drug typically saves enough in premium to more than cover those expenses and the following riders. Average hospital stay is 4.6 days, with average charges of $30,665. Covert at age 65 to Medicare for $100/mo., Medicare supplement plan F with no deductible for $138/mo. and prescription drug plan for $15/mo. per person.
4) Supplemental Accident Insurance $43/mo. - Pays any family member up to $5,000 per non-auto or work related accident for uncovered medical bills including x-ray, MRI, surgery and physical therapy. Sometimes included in health plan to cover deductible. Guaranteed issue and same price at any age. Even with health insurance, the average hospital out-of-pocket cost is $9,173. Drop at age 65 since Medicare and supplement will cover 100% with no deductible.
5) Critical Illness Insurance $26/mo. - Pays wife and me $10,000 each Tax-Free for any qualifying serious illness (cancer, heart attack, stroke ect.). We can use the money for bills, living expenses or out-of-pocket medical costs. Cheaper the younger and healthier you are. In America, a heart attack occurs every 34 seconds, strokes are the leading cause of serious long-term disability, and medical bills contribute to 62% of all bankruptcies even though three-quarters of the families had medical insurance. Drop at age 70 per guidelines.
6) Long Term Care $52/mo. - Pays wife and me $75,000 to $700,000 each with inflation rider for nursing home and assisted living expenses. Medicare or supplement does not cover. Received 30% spousal discount and can pay premium from HSA Tax-free. On average, 3,000 per month for 3 years at age 80 is needed. Cheaper the younger and healthier you are. Something is better than nothing. 75% chance that one of us will need. Paid up at retirement
7) Health Savings Account (HSA) $200/mo. - Tax-free in and Tax-free out to pay for medical, dental, vision and HSA approved expenses not covered by insurance. Money can be invested and used for retirement like a 401k or IRA after age 65 without penalty. Annual contribution limit is $3,300 single, $6,550 family + $1,000 if over age 55. Stop funding at age 65 per guidelines.
8) Roth Individual Retirement Account $300/mo. - Taxable in and Tax-Free out after age 59 1/2. IRA, SEP and 401K are less attractive -Tax-Free in and Taxable out after age 59 1/2. Invested in the stock market. Convert at retirement to safe money. Guarantee of principal with the potential of market-linked growth and no risk of loss due to market down turns.
9) College fund $200/mo. ý State Tax-Free in and Tax-Free out. Invested in the stock market. Will cover an estimated $90,815 of education costs and save $13,000 in state taxes. Something is better than nothing. Paid up at age 59
10) Dental $141/mo. ý Pays preventive exam, x-ray and cleanings 100% every 6 months with no deductible or waiting period. Major services covered at 50% after deductible and waiting period. Works with in or out-of-network dentists. Continue with Medicare, supplement and drug past age 65 for $40/mo. per pesron.
The best decision I ever made was locking in the insurances above at age 41, before I became uninsurable with a bad back and stomach in 2009. The best recommendation I ever made was moving my father out of the stock market at retirement before it crashed in 2008. At a 6% return it would of taken 8.6 years to recover his losses and at a safer 3% return it would of taken 17 years.