Insurance. It’s one of those things we know we’re supposed to have and, hopefully, fortune enough to be able to afford. Not having it when you need it most can obviously cause financial issues. However, what about beyond financial impacts? Namely, the ability to sleep well at night.

Background

Recently, before year-end, I had a change in my employer-sponsored health insurance. While I had been attempting to receive a basic flu shot, I found out that my insurance had been rejected for the shot. While not ideal, paying $40 out-of-pocket for the shot wasn’t the concern.

When I asked the clinic why my insurance didn’t cover it, they said: “you don’t have insurance.” A few minutes later, I quickly realized I had a large gap not only financially but also emotionally. I didn’t have insurance coverage for nearly the last month, and I had no idea.

Fortunately, I managed to contact my employer’s HR benefit representatives to have it addressed. However, I had also engaged in a few other treatments that, at the time, I didn’t know would have been covered or at least partially reimbursed for the cost of those services. I’m still sorting through some of it.

What resulted from this was a defensive change in mindset to actually put my overall well-being on hold, temporarily, at the sake of understanding the financial and non-financial implications of the situation.

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That said, I’ve been very fortunate to be able to afford insurance. A number of individuals struggle with this on a regular basis.

Overview

Here today, I want to briefly explore some of the different types of insurance for consideration. Not only to emphasize the potential financial impacts of having, or not having, insurance but, just as importantly, the emotional and other impacts.

Overall, at least for me, having adequate coverage across different types of insurance really does help me sleep better at night. At a minimum, NOT having insurance literally did keep me up at night.

So besides worrying about what I could do about the situation at 3 am, I decided to write this post. I figured I’d be getting up to go to Orangetheory in about 90 minutes anyways, so I thought “what the hell – let’s start.”

Here are the three primary areas we’ll cover:

1. Health Insurance
2. Accounts Utilized with Insurance
3. Protection & Other Types of Insurance

Overall, take the time to consider options and to assess your respective needs. You just might be able to sleep better tonight.

1) Health Insurance

For simplicity, I break heath insurance into the following:

• Medical
• Dental
• Vision

Here is a quick look at each.

Medical

Whether through your employer or your own coverage that you purchase, medical insurance costs can vary significantly.

Generally, you’ll save money when you utilize in-network service providers. If you utilize a doctor or other provider out-of-network, you’ll pay more. In other words, your insurance will cover less.

If your employer offers different types of plans (or if you’re shopping for coverage through another means), deductibles and premiums can vary extensively.

Other considerations:

• Preventative care is generally covered at a higher percentage (potentially 100% depending on your plan) if you stay in-network.
• Generic drugs are almost always less expensive. If available, you should consider them.
• Brand-name drugs are likely available as well, but they’ll likely be more costly.

Obviously, shop around and consider additional variables.

Dental

Like medical coverage, dental insurance comes in different styles. For example, a Dental Health Maintenance Organization (DHMO).

This a version of a Dental PPO with higher or maximum levels of orthodontics coverage.

Common components of different coverage:

• Deductible
• Annual Benefit Maximum
• Preventive Care
• Basic Services
• In/Onlays, Crowns, etc.
• Braces

Similar to Health insurance options, benefit levels can vary in-network vs. out-of-network.

Vision

A few quick highlights:

• Eye Exam – generally, an annual exam with a co-pay.
• Frames – usually includes a set allowance or amount.
• Lenses – plans might be a single coverage; others might have itemized coverage for different types of lenses (single vision, bifocals, trifocals, etc.).
• Contacts

Cool Fact – depending on the plan, sunglasses may be covered.

Costs of Health Insurance

If you live in a country that provides universal healthcare, then insurance might not play the same role.

Regardless, where you live does have a significant impact on the cost of health care, in general.

2) Accounts Leveraged with Insurance

Over the last few years, more employers or service providers are starting to offer different types of account structures.

These can vary, but they, generally, are meant to – or at least try to – lessen the bite of out-of-pocket costs.

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Health Reimbursement Account (HRA)

Often paired with a standard employer-sponsored PPO Health Plan, these are a newer type of account. In some instances, HRAs are automatically opened when you enroll in an HRA-eligible plan.

A big difference from HSAs and FSAs (both defined below) is that you don’t make contributions to the HRA. In a HRA, you “earn” contributions from your employer for completing healthy, or well-being, activities.

For example, if you quit smoking (or already are not a smoker), you could be eligible to receive a contribution to your HRA. You can then utilize those dollars for eligible health expenses.

Another key difference from the HSA is that you don’t keep the balance; however, it can rollover from year-to-year (unlike a FSA).

Health Savings Account (HSA)

When you open a high-deductible plan, you might be eligible for a HSA. We’ll perhaps do a separate post on HSAs in the future, but they’re growing in popularity due to the potential “triple tax savings”.

Contributions, earnings, and withdrawals are all tax-free for qualified expenses.

Additionally, you can roll-over your balance from year-to-year and also bring it with you if you’re to switch employers.

Flexible Spending Account (FSA)

Perhaps more common than the HRAs and HSAs, even FSAs can come in different shapes and flavors.

Limited Purpose Health Care

This is usually available for High Deductible Health Plans. However, once you’ve met your deductible, this particular account is utilized for out-of-pocket medical and pharmacy expenses.

Standard (“Traditional”) Health Care FSA

Pre-tax dollars can be utilized for qualified medical expenses. One of the big known limitations is the “lose it or use it” requirement – if you don’t spend it within the coverage year (or sometimes within a few additional months), you can’t carry it over. It’s gone.

Dependent Care FSA

This type of account can cover dependent care expenses. Day care or after school programs for children of certain ages might be covered.

As mentioned, a common consideration for FSAs is that your balances (1) do not roll over if you switch employers and (2) do not remain if you have leftover balances at the end of each year.

Plan accordingly!

Commuter Account

With pre-tax dollars, you might be eligible to cover part or all (depending on the amount) of the cost related to commuting to work. This can include public transit, such as commuter railroads, subways, buses, ferries, and other forms of public transportation. Parking and pooled transit is also often covered.

Alas, Lyft and Uber will likely not be covered any time soon.

3) Income Protection

For the purposes of this article, I categorize income protection insurance as coverage that would provide you or your designated beneficiaries income. Whether a lump sum or ongoing payments, protecting your income is key.

Life Insurance

Perhaps the first to come to mind, life insurance is more like death insurance.  If you die, you can’t work and earn an income.

Here are the two basic types of life insurance.

Term Life

Coverage is set for a certain period of time.

If you die during this period (or the term), your beneficiaries receive the payout.

Whole Life

Generally, more expensive than Term Life.

Whole Life provides lifelong coverage.

Both Term and Whole Life policies might include coverage for:

• Spouse/Domestic Partner
• Child
• Self

We’ll perhaps do a future post on the amount and type of coverage to consider, but variables include (among others) your age, your income, your savings, and the needs of the beneficiaries.

Disability Insurance

Similar to life insurance (with the key exception that you’re living and not dead), disability insurance provides income replacement if you’re no longer able to work (think of an injury and/or illness).

Disability insurance comes in two general types.

Short-Term

Depending on your coverage (like any insurance), you might have to meet certain requirements to receive benefits.

There might also be a waiting period. In some instances, you’re required to use your vacation / sick days first. This can obviously vary be country, state / province, and/or your job & industry.

Long-Term

Long-Term Buy-Up

Depending on your policy, you might be eligible for a “buy-up” for an additional premium. For example, let’s say your coverage from your employer covers 60% of your base pay.

Assuming you make $100,000, you’d receive $60,000 in coverage for the period you’re unable to work.

However, if you purchased the “buy-up” coverage which might be an additional 10%, you’d receive $70,000.

With any insurance policy, consider your respective needs.

4) Other Types of Insurance

While these could have been considered with the different insurance types covered already, I wanted to call these out separately.

In many locations, it’s required to carry some type of basic version of these policies.

Home Owners / Renters Insurance

With adequate owners or renters insurance, your possessions should be covered for certain unforeseen events. Liability and personal accident insurance are often wrapped into this type of coverage, too.

Be sure to read the policy carefully though to clearly understand what events are covered by your policy.

Car / Vehicle Insurance

I haven’t owned a vehicle in over 10 years. Whether you have car, motorcycle, or another type of vehicle, it’s likely required by law that you have some type of minimal coverage.

Components of this insurance, and across those discussed above, can include personal, liability, and specific instances (collusion, theft, etc.).

Additionally, like the different types already covered, factors utilized to determine the cost of your potential coverage can vary.

Pet Insurance

Perhaps gloomy, I called my dog’s policy doggie “doomsday” coverage after learning what it covered and didn’t cover. In general, it’s easier to explain what’s not covered: exam fees and wellness & preventative care.

Other plans focus more on preventative care and general well-being.

Key Takeaways

We covered a lot of different areas; we’ll look to do a deep-dive of different types in the future. Until then, here are a few things to remember:

*Peace of Mind – as with any type of insurance, you’re playing defense to protect your financial well-being and – more importantly – the actual underlying asset you’re insuring.

*Hedge Against Inflation / Rising Costs of Care – while premiums can and do increase, the costs of health care are increasing.

*Less is Not Always More – the minimum coverage, while certainly better than nothing, is not always enough or the best coverage.

*Browse Before You Buy – shop around to compare different services.

*Consider Insurance Defense – hopefully, you don’t have to utilize your insurance. It’s meant to be a safety net.

Remember – less expensive might not be better. On the flip side, don’t overpay.

Looking Back and – More Importantly – Ahead

In the last few months, I ended up lowering my insurance premiums by simplifying. This is a rebuilding time.

If given the opportunity, especially when unexpected, take a moment to reflect.

The important question to ask: What’s really important in life to me? What makes me happy?

I’m using this opportunity to find that out. That said, I do know that buying a bunch of crap each month doesn’t really do anything for me. But to each his or her own.

Readers, what types of insurance do you utilize? Are there any that you would add to this list? How do you feel about insurance?

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Related:

5 Ways to Balance Account Types To Balance Life’s (Un)known Milestones

Conducting You Own Risk Control Self-Assessment (RCSA) – Part 1

15 Years Later: 5 Things I Wish I Knew Sooner

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