The FDIC: Insurance onYour Bank Deposits
The Federal Deposit Insurance Corporation (FDIC) protects against loss of deposits in any FDIC-insured bank or savings association — in other words, if you have money in a bank and that bank goes under, you’re protected.
The insurance covers both regular and IRA funds in checking, savings, CDs
and money-market accounts. The FDIC does not cover other financial products (like stocks, bonds, mutual funds, or insurance annuities). The FDIC insures accounts up to $250,000 per owner; $500,000 for joint accounts.
Insurance on Insurance:State Guaranty Funds
Most states have a guaranty fund to protect you if an insurance company fails and you lose your insurance coverage at the time of a claim. In order to pay claims after an insurer is declared insolvent, the fund assesses the other insurance companies doing business in the state. In other words, the other insurance companies have to pay to cover the claims of the company that failed.
To find out more about your particular state’s guaranty fund, go to www.ncigf.org/public-guarantyfunds.asp and look up your state’s contact information. Most states have two guaranty funds — one for propertycasualty companies and the other for life and health companies.
COBRA: For When You Lose YourGroup Medical Insurance
There are many reasons why you may be losing your group medical insurance coverage: You or your spouse may be quitting your job, you or your spouse may be retiring, you may be divorcing your spouse under whose insurance you were covered.
Regardless of the reason that you’re losing your group medical insurance, employers with 20 or more employees are required by federal COBRA law to offer you the right to continue the group coverage at your expense for up to 18 months (29 months if you’re disabled, 36 months if you’re retiring or if you’re a child forced to come off a parent’s policy).
HIPAA: For When COBRA EndsThe Health Insurance Portability and Accountability Act (HIPAA) was created to give people who are losing their group coverage and who have preexisting medical conditions the right to continued health coverage without preexisting-condition exclusions applying to their replacement policy. The intent ofthe law is to prevent “job lock,” where an employee is stuck in a dead-end job in order to keep the health coverage, because he or a family member has a preexisting medical condition (defined by HIPAA as any condition treated by doctors or medication in the last six months).
HIPAA makes it possible for an employee leave a job and take a new job with group medical coverage, with
the assurance that the health issues of everyone in the family are immediately covered under the new group policy. HIPAA also makes it possible for an individual to leave the group policy and buy a private policy without preexisting-condition limitations or having to qualify medically, providing that your COBRA option, if any, has been exercised and the time frame exhausted (in other words, you’ve stuck with COBRA as long as it was available to you).
Social Security Long-Term DisabilityWhen you think Social Security, you probably think retirement program. You may think survivor benefits for children. But few people realize that Social Security also includes disability benefits that start after 5 months of total disability if that disability is expected to last 12 months or more or result in death. Benefits are payable to your normal retirement age.
If you’ve been paying into the Social Security system, every year you get a statement of estimated benefits. That statement includes your estimated retirement benefits, as well as your estimated long-term disability benefits.
State Health Insurance PoolsWhenever you apply for an individual health policy, there are four possible outcomes:
✓ Your application is approved.
✓ Your application is denied.
✓ Your application is approved at higher rates because of preexisting conditions (such as diabetes).
✓ Your application is approved, but an exclusionary rider is attached to the policy excluding coverage for a preexisting condition (such as a bad back, bad knees, and so on).
Many states have created health insurance pools that ensure people with preexisting health conditions who can’t get health insurance or can’t get it without surcharged pricing or exclusionary riders.
National Flood InsuranceHomeowner’s policies have always excluded coverage for any kind of ground or below-ground water entering the house. So, the national flood insurance program was created years ago to address this risk.
Most people think that flood insurance is only needed if you live near a river or other body of water. But, according to the Federal Emergency Management Authority (FEMA), which oversees the national flood insurance program, about one-third of all flood losses occur to homes nowhere near any body of water.
Why? Because flooding from torrential rains can overwhelm an area with water. Few people realize that the flood policy covers that type of loss (in addition to loss from flooded rivers or other bodies of water). If your home is not in a high-risk flood area, you can buy a flood policy for a little more than $100 a year.
MedicaidBacked by the federal government and administered by the states, Medicaid is a health insurance program that provides medical assistance to those in need — people at or near poverty levels. Medicaid also provides long-term care for those with little or no assets. It is of particular interest to middleclass Americans who need long-term care but don’t have insurance coverage for that. In that case, they end up spending down all their assets to near poverty levels, at which point Medicaid will pick up the costs of any ongoing
care for the rest of their lives. The tragedy is that, by spending down all your assets, little (if anything) is left for your surviving spouse or children.
MedicareOtherwise known as national health insurance for seniors, Medicare provides a base level of hospital and medical benefits. In 2003, optional prescription drug coverage (known as Part D) was added. Medicare is funded by a combination of premium payments from seniors and payroll taxes from nonseniors.
In addition to the three parts of Medicare — Part A (hospital), Part B (medical), and Part D (drugs) — most seniors will want a good Medicare supplement policy to pay most of what Medicare doesn’t cover or disallow.
Find out more about Medicare and my specific bottom-line advice for seniors in Chapter 20. For more information on Medicare, go to www.medicare.gov. For more on Part D, check out Medicare Prescription Drug Coverage For Dummies, by Patricia Barry (Wiley).
Hurricane Windstorm PoolsThere has been a dramatic increase in recent years in coastal hurricanes —both in terms of the frequency with which they occur and in terms of thefinancial devastation they cause. This has led to the insurance industry nolonger insuring homes located in the east and southern coastal areas
In order for insurance to work, enough homes have to not be damaged, andthose homeowners’ insurance premiums pay the claims of those homes thatare damaged. This just isn’t true with hurricanes — hence, the insurance companies’ unwillingness to insure homes against hurricane damage.