The purpose of this article is to clear describe the reasons why health insurance and life insurance may be of benefit to you, what the risks are of not carrying them, and how you can make sure you have adequate coverage at the very best price for any budget.
FIRST, WHY INSURANCE?
No matter what kind of insurance we are talking about, the purpose of insurance is to protect you from risk. Insurance transfers the financial hazards and liabilities that can occur by accident away from you and transfers them to someone else. In this case it is usually transferred to a company that is willing to accept these risks of damage or loss in exchange for your money.
Life contains risk. That’s just a fact. Bad things happen. There are accidents, storms, unanticipated misfortune and catastrophes every day. We use insurance as way to manage these risks.
When you purchase insurance, you are transferring your risk of damage or loss to an insurance company. The insurance company accepts the risk and charges a premium to do so. This is the cost of your insurance policy. This is the cost of your protection.
For many people, insurance has negative connotations. Maybe it feels like just an added expense with no upside for you. Many consumers feel obligated to buy a policy that they “they don’t really need” or “will never use.”
But when you realize you have transferred all your risk for any possible catastrophe or problem to someone else, you can quickly see that these safeguards might be the best money you spend. As you use insurance to manage your risks, it becomes an investment in the protection of your assets and a huge factor in your peace of mind
A lot of comfort comes with the knowledge that you have financial arrangements in place if the worst happened. When it comes to your health, having that safety net is very important. Who will provide for your loved ones if you aren’t here to do it? How will you pay the medical expenses of a serious illness or chronic condition? Since we cannot predict the future, we simply need to be prepared for whatever it might bring. One of the best way to prepare is by having adequate insurance.
INSURANCE COVERAGE – THE WORRYING FIGURES
Most people in the United States are aware of the importance of having both health insurance and life insurance. However, many people still have no kind of coverage in place. Surveys have shown that more than 40 percent of citizens have no life insurance.
This leaves their families completely unprotected if something happens to them.
Meanwhile, when it comes to health-care coverage, the statistics are especially sobering. The numbers of uninsured is rising year on year. In March 2018, the figures for uninsured adults in the U.S. stood at 15.5 percent.
Around four million people lost their individual coverage between 2016 and 2018. When it comes to lower income families, the statistics are even worse. In March 2018, 25.7 percent of people with incomes under $30,000 had no medical insurance.
The figures for 2019 are not out yet, however, the federal government has eliminated the penalties for those who don’t get coverage. With this change, it is anticipated that another five percent of the population will drop their insurance. A couple of years ago, there were 27 million people in the United States with no health insurance. As these numbers go up, it doesn’t bode well for the nation’s well-being.
Sources of health insurance coverage in 2016 (Millions of Persons)
*Note: Due to multiple source of coverage for some individuals there is some double-counting in the components. The actual U.S. population in December 2016 was approximately 324m.
**Other: The 10m was reduced to tie to the total for “Other Coverage” of 90m. “Other” includes 23m persons (9m non-ACA marketplaces, 9m disabled in Medicare, 5m other)
Source Data: CBO “Federal Subsidies for Health Insurance Coverage for People Under Age 65: 2016 to 2026* (March 2016) Census Bureau ”Health insurance Coverage in the United States: 2015 (September 2016)
U.S Health Insurance Coverage (2008-2026)
The real problem with not carrying adequate health insurance is that the cost of health care is high in the United States. Evidence shows that Americans spend almost double the world average on medical treatments.
AMERICA SPEND MORE ON HEALTHCARE THAN ANY OTHER OECD
NATION – NEARLY DOUBLE THE WORLD AVERAGE
NATIONAL HEALTH EXPENDITURES AS SHARE OF GROSS DOMESTIC PRODUCT (GDP)
With such high costs, it is vital to have some form of insurance protection. According to the Commonwealth Fund, 79 million people in America have medical bill debts. With the news that the numbers of uninsured could rise to 35 million by 2026, these debts will surely increase.
With these statistics in mind, let’s look at why each of these different types of insurance may be of benefit to you.
WHY HEALTH INSURANCE?
Medicare Options Explained by an Expert
Health insurance provides protection against exorbitant medical bills. It helps to offset the cost of emergency treatments, hospital stays, and doctor’s visits.
During the different stages of life, insurance needs often change dramatically. Young singles have very different needs compared to a parent with young children.
Retirees and aging adults have completely different needs again. But, illness can occur at any age and having health insurance gives you protection against large medical bills.
1. Do Young People Really Need Health Insurance?
Young people are often fit and healthy and rarely need to use the healthcare system and so they often believe they don’t need health insurance. While it’s true they might not need as comprehensive a policy as someone older, it’s still good to have protection from major medical bills.
When my sister-in-law was just a baby my in-laws found out she had cancer. They were students at the time and didn’t have health insurance, thinking they were young and healthy and could pay for any visits to the pediatrician out of pocket. They paid the resulting bills for their daughter’s surgery, chemotherapy, radiation, and doctor visits for more than a decade after her care was completed.
Before the Affordable Care Act (ACA) rolled out in 2014, lots of young people chose not to have health insurance. They assumed their youth and general good health would protect them from high medical bills. Sometimes, however, this was a strategy that failed to pay off. When these “young invincibles” developed an illness, they struggled to pay. This led to long-term financial difficulties.
The ACA imposed penalties on those who were uninsured, and this was a powerful incentive for young people to get coverage. Now that the government has removed those penalties, “young invincibles” may be tempted to drop their insurance.
Yet, as I illustrated, there are many benefits to having medical coverage that make it worth the money they spend. There are different levels of coverage that may suit the needs of young people. Catastrophic insurance, for example, will protect against a major health-care problem and would have helped my in-laws immensely. For anyone in reasonably good health, this low level of coverage is sufficient.
2. The Importance of Medical Coverage for Growing Families
Once children come along, health-care insurance becomes even more important.
Childhood accidents and illnesses are common, and it makes good financial sense for families to carry some type of healthcare coverage.
At one time, many employees could often benefit from their employer’s medical coverage. More people today have to arrange their own health-care coverage. Even those who still have employer coverage have to pay a larger amount out of pocket, but again having coverage can offer a measure of financial protection peace of mind in an emergency situation, especially when dealing with children who are ill.
3. Aging Adults – Insurance is Vital
With age comes more chronic conditions that require ongoing care and treatment. Older people need a much more comprehensive healthcare insurance policy than many others. You may need to take a look at your current coverage level and upgrade to get the benefits you need.
Around 92 percent of all seniors have one chronic health problem. Seventy-seven percent have two or more. Therefore, it’s important to ensure that older people have coverage for common problems, such as diabetes, hypertension, and cancer.
Paying for treatment for these conditions can be extremely costly, especially on fixed incomes. Having a good insurance policy will protect from excessive expenses if you develop an age-related problem. The Medicare program allows anyone in this age group to find affordable coverage.
When reviewing healthcare insurance coverage over your lifespan, it is important to choose the right level for your life stage.
WHY LIFE INSURANCE – DO I REALLY NEED IT?
In 1965, there were 27 million life insurance policies sold in the United States. However, in 2016, the number of policies stayed constant at 27 million.
This, despite the fact that the U.S. population is 50 percent larger. In 1989, 77 percent of citizens had life insurance. Today, under 60 percent of people are protected.
Despite our best efforts, we are all going to die. That’s part of the deal. Life insurance is there to protect those who depend on you financially, by providing a contracted sum of money when you die in exchange for your premium. Anyone, therefore, who has someone who depends on them for financial support, should consider having a life insurance policy to provide for their dependents in the case of their death. Life insurance is primarily used to provide money if the insured cannot.
This insurance provides liquidity to pay the mortgage and the bills. It covers funeral expenses. It protects the remaining family members from financial hardship. A quick look at these benefits makes it clear why life insurance coverage is so vital if you have people who are counting on you financially.
Don’t Wait to Purchase Life Insurance
1. Do Young People Really Need Health Insurance?
Life insurance offers valuable protection to many. However, for some, it may not be necessary at their current stage of life. For anyone without a partner or children or someone who depends on them for financial suppor, it may not yet be necessary.
Some young people also choose to take out a small policy to cover funeral expenses should the worst happen. People of this age usually only require a no-frills policy if any at all.
2. Life Insurance – Paramount for Families
As soon as you have children, you need to seriously consider taking out a life insurance policy.
This will protect your loved ones from financial hardship should the unthinkable happen.
While nobody ever wants to think about what might happen when they die, it’s important to give it some thought. What would happen to your partner or children without you around? Could they pay the rent or mortgage? Could they support themselves? Could they afford your funeral arrangements?
Not all types of life insurance coverage are expensive, but they can still offer a safety net for families. You can work out the amount of coverage you need by performing a few simple calculations.
Add up the expenses your partner would incur should something happen to you. Remember to keep everything in mind. Your rent or mortgage payments are obvious expenses, however, there are many that people forget. Consider car payments, grocery bills, child-care fees, educational fees and tuition, and all other ongoing costs.
Once you have the total, subtract the amount you have in total investment accounts and savings. You need an insurance policy that covers the difference between the two figures. Term life insurance policies are relatively inexpensive and offer the protection you need.
So, what happens if you can’t afford the level of coverage that would be ideal? The fact remains that any form of life insurance is better than having none. This is especially true when you have children or other dependents. Therefore, it is vital to invest in at least some form of life insurance at this life stage.
3. Changing Life Insurance Needs for Older Adults
As you age, you may not need such a comprehensive life insurance policy. After your children have reached financial independence, it is possible to reduce your coverage.
Of course, that doesn’t necessarily mean dropping your coverage completely.
If you still have a spouse you should consider your financial situation. For example, if you both depend on a pension that has no survivor benefits, you may want a policy to cover your spouse in this case. Each individual circumstance will vary.
HEALTH AND LIFE INSURANCE COVERAGE – THE TAKEAWAYS
So, what can you take away from this? Do you really need both health and life insurance policies? Do you really need either?
The answer depends very much on your individual circumstances, your stage of life, and your ability and willingness to manage your risks.
Of course, it makes sense that everyone should have both life and health insurance. This will, after all, offer the highest level of protection in any eventuality. However, this may not be necessary in every case and different amounts of coverage will apply to different people.
For example, if you are a young, single person who is in good overall health, you may consider limiting your costs and only carrying a health insurance policy with catastrophic coverage and opting to forgo a life insurance policy at this time. All of that makes sense given your age and your financial responsibilities to others
If you have a family and dependents, you really should have both health and life insurance to manage your risks and protect you and your family from financial hardship. This will guarantee that every member of your family has coverage should the unthinkable happen. You’ll have the peace of mind that comes with knowing your loved ones will be protected and that you have safeguards in place.
If you’re approaching retirement and your children are financially independent, you may be able to save on insurance costs. You may not need such a high level of life insurance. However, you’ll certainly need a good medical insurance policy. You need to guarantee you are cushioned from a major financial burden should you develop a long-term condition.
INSURANCE PROFESSIONALS OF ARIZONA
Every person and every family has their own health and life insurance needs that are unique to them.
At Insurance Professionals of Arizona we get to know our clients on a personal level so that we can understand their risks and minimize them as much as possible.
We offer insurance products from over forty different carriers and we have the flexibility to customize a health or life insurance policy that gives you the right amount of coverage and still fits in your budget. There are so many options available and we can help you navigate your many insurance alternatives to find what’s right for you and your situation.
Don’t leave your life or your family’s financial well-being up to chance. Manage your risks in a smart way and acquire the insurance you need to protect yourself. Insurance Professionals of Arizona can offer you all the advice you need about the coverage you really need and then help you choose the right policy to get it. You never need insurance until you need it—be sure you’re ready when you do.
NOW IT’S YOUR TURN
I hope this guide showed you whether you need health insurance or life insurance or you need both insurance.
And now I’d like to turn it over to you:
Did you learn something new from this guide?
Or maybe you have a question.
Either way, leave a comment below right now.