Personal Finance, Part 4 — Health and Disability Insurance

With health insurance, the main idea is that you should be covered in the event of a catastrophe.  First dollar coverage is nice if your employer is a sugar daddy (be sure and thank him, but not too effusively, lest he realize how much he is paying…), but insurance is not really effective at claims management; it is far more effective at risk-bearing.

To that end, high deductible plans can be effective for those that have to buy insurance privately.  Just make sure that you fund the deductible. Health Savings Accounts are triple tax free, and can be a particularly sweet deal.

Though this also applies to health insurance, with disability insurance, consider the claims-paying record of the insurer.  This is not a coverage where lowest premium payment wins.  Good companies do their underwriting on the front end, and pay legitimate claims.  Bad companies don’t do their underwriting on the front end, and deny legitimate claims.  This usually shows up in the complaint statistics at you state insurance department, so review those before buying disability insurance.

Also, with disability insurance, note the distinctions between “own occupation” and “any occupation” coverage.  With “own occ,” a surgeon who loses his steady hand could make a claim, but could not under “any occ.”  He could go flip burgers.  Also, note total and partial disability terms.  Under what conditions will they pay, and how much?

If you do become disabled, the insurance company may attempt to buy out your claim with a lump sum.  Don’t take the lump sum; they typically lowball the offers; claimants would receive a lot more over time if they were patient and took the payments gradually.

Now, not everyone needs disability insurance.  If you’re in a low-risk occupation, like me, odds are that you won’t be disabled to where you can’t earn money.  Analyze your own willingness to take risk in this area if you decide not to buy disability insurance.  Some risks are best self-insured.