Now that the health insurance reform bill has become law, it’s a good time for a quick check-up: Do you have enough coverage? Your own health care isn’t the only area that deserves a second look. Many Americans fail to take out enough life insurance but end up taking out too much insurance for their pets, for example. Here are five tips for making sure you have the right amount of coverage and maximizing the benefits that you already have.
Find out what your insurer covers in advance. This advice doesn’t apply to anyone in need of emergency care, but if you’re planning to have a skin biopsy or molar removed, then it can pay to call your insurer ahead of time to find out whether or not it will pay for the procedure. In some cases, you can save money by going to a different provider or making sure your doctor gives a specific code to the insurance company.
If your insurer rejects an expense, fight back. You can often find details about what your policy covers and what it doesn’t on your insurance provider’s website. That way, you can do some research before making a call to customer service to fight a claim rejection. It’s not uncommon for doctors to make mistakes when they submit information, so it’s worth checking for errors. "If you think it's something that should be covered, you need to call, and not take 'No' for an answer, and keep going until you find out what the answer is," says Aetna spokeswoman Wendy Morphew. If speaking with the insurer and doctor’s office doesn’t yield results, then you can consider filing an appeal.
Skip insurance for Fido. Just because you can take out health insurance for your pet doesn’t mean it’s a good idea from a financial perspective. The American Pet Products Association estimates that Americans will spend about $12.2 billion at vets' offices this year on treatments ranging from cancer surgery to organ transplants. Pet health insurance usually starts at a couple hundred dollars a year. While pet lovers who would spend thousands on treatments might benefit from taking out a policy, financial experts say it can be a smarter – and more humane – decision to prepare to say goodbye if serious illness strikes.
Take out travel insurance for special occasions only. If you get sick before a big vacation, then you might have to cancel your plans and reschedule. Some forms of travel insurance reimburse you for cancelled or interrupted trips, but that doesn’t mean taking out the insurance is always a good idea. According to travel expert Peter Greenberg, such policies can add up to 10 percent of the cost to your trip. He says it’s only a good buy when it comes to expensive vacations and recommends skipping it for short getaways. If you’re going to buy a policy, be sure to compare different rates online first and take note of the exclusions – interruptions caused by acts of war, for example, are usually not covered.
Don’t skimp on life insurance, especially if you have kids. Most people don’t take out enough life insurance, partly because the topic is such an uncomfortable one to discuss. No one likes thinking about death, after all. That might explain why one-third of adults lack life insurance altogether. But anyone with dependents, such as children or a stay-at-home spouse, should consider getting a policy that would replace their income or cover the expenses for which they are currently responsible. “What I've come to realize is that the biggest mistake folks make with regard to risk management is that they don't even address the topic. It's very emotional and forces you think about your own mortality and what would happen to your family if something tragic were to occur,” Michael Bonevento, a senior financial advisor at Ameriprise Financial Services, Inc.
Traditionally, people relied on a standard "seven times income" rule to calculate how much insurance they need. But that's not a useful measure, says Matt Easley, vice president for Allstate Financial, because people's situations are so different. A single person with no dependents will probably need much less insurance than someone with five young children, for example. Instead, Easley recommends sitting down and thinking about "the things you want to protect." How much would it cost to support your children in the way you want? To pay for their college, or pay off the mortgage?
Bonevento also recommends making a "human life value" calculation, which looks at the economic loss that would come from a breadwinner passing away. For example, if he earns $100,000 per year and has 20 years left until retirement, then the value is $2 million. (Taxes then get subtracted out along with the amount the breadwinner consumes himself, and other benefits such as health insurance are added. Finally, the present value of that number is calculated.) The human life value is usually a higher number than what people come up with after considering what they'd like to be able to pay for if they were to die. Bonevento recommends purchasing insurance for somewhere in between those two amounts.