Take Charge and
Reach Your Goals
Insurance
The PICPA
The Pennsylvania Institute of Certified Public
Accountants
The PICPA is a professional association of more
than 12,000 CPAs working together to improve
the profession and serve the public interest.
Insurance
Types
There are many types of insurance. It’s important to
understand each one and how they work
• Disability Insurance
• Life Insurance
• Long-Term Care
Insurance
• Health Insurance
• Homeowners
Insurance
• Auto Insurance
Insurance
Disability Insurance
Why do you need it?
• The chances of being disabled for more than 3
months are greater than dying prematurely
• Everyone who works should consider purchasing
disability insurance
• If something happens, how will you pay the bills?
Insurance
Disability Insurance
Why do you need it (continued)?
• Can your spouse carry the workload while you’re
out?
• Business owners should especially consider
purchasing this type of insurance.
– Your income will be protected, it can allow you to
purchase your partner’s side of the business in
case he or she becomes incapacitated.
Insurance
Disability Insurance
When do you need it?
• You can purchase disability insurance that
guarantees lifetime coverage, but those are
typically really expensive.
• The common approach is to buy two to five-year
policies up until age 65.
Insurance
Disability Insurance
How long will it take to receive benefits?
• It typically takes time to receive the benefits after a
disability.
– The waiting period for most private insurers is 90
days.
• If you are going through Social Security or a
government disability program, it could take as long as
five months.
Insurance
Disability Insurance
How long will it take to receive benefits (cont.)?
• If you are on a group plan, you will typically have
to wait no more than 8 days for short-term policies
to kick in and no more than 90 days for long-term
policies.
Insurance
Disability Insurance
Where do you get it?
• Usually two main places: Private insurer and
Social Security or governmental program
Insurance
Disability Insurance
Generally private insurers offer more
comprehensive disability benefits to individuals.
If you are not part of a group plan, you can get a
list of accredited insurance companies in
Pennsylvania at www.insurance.state.pa.us.
Insurance
Disability Insurance
• Generally government disability insurance
programs provide limited benefits under
restrictive terms and should not be relied upon
for your main source of income. These
programs are usually available for civil service
workers, military service members, or other
federal, state, or local government employees.
Insurance
Life Insurances
It’s many uses:
• Replace loss of income that would occur in the
event of your death
• Can pay down debts that you may leave behind
• Can pay final expenses and estate taxes
• Can create an estate for heirs
Insurance
Life Insurance
How much do you need?
• Depends on many things including whether you’re
married, size of your family, financial obligations,
career stage and goals
• When you’re young, probably not a great need for
life insurance.
• But if you have a family, the need for life insurance
increases.
Insurance
Life Insurance
How much do you need?
• Usually corresponds to questions such as: what immediate financial
expenses will need to be paid for upon my death?
• How much of your current salary is devoted to current expenses and
future needs?
• How long would your dependents need support after death?
• How much money do you want to leave for special situations such as
paying for a child’s college tuition or inheritance or charitable gifts?
• Re-evaluation of coverage is also essential
Insurance
Life Insurance
Types of polices: permanent and term
Insurance
Life Insurance
Permanent Life Insurance – Means you are
protected for life, providing you make the payments
• Whole
• Universal
• Variable
• Universal variable
Insurance
Life Insurance
Whole: means you make equal payments
throughout your life. Cash value and death benefit
are predetermined and guaranteed. The only action
is that the policy owner must pay the fixed
premium.
Insurance
Life Insurance
Universal: pay premiums at any time in any amount
as long as policy and cost of coverage is met.
Amount of insurance coverage can change and the
cash value, which grows at an interest rate, will vary
over time
Insurance
Life Insurance
Variable: premium is paid for life (just like Whole)
HOWEVER, the cash value and death benefit are
not predetermined or guaranteed. These fluctuate
depending on investment performance in
subaccounts. The policy owner selects the
subaccounts in which the cash value will be
invested.
Insurance
Life Insurance
Universal variable: as the name says, it’s a
combination of both variable and universal. Pay
premiums at an time in any amount as long as
expenses and cost of coverage are met. The
coverage can change as well as the cash value
based on performance of investments.
Insurance
Life Insurance
Term Life Insurance
• Specific amount of time
• Ranges from 1-30+ years
• Will get nothing if you live past coverage
period
• Death beneficiary receives face of policy
upon death during term
Insurance
Life Insurance
Term Life Insurance
• If you die during the coverage period, the death
beneficiary gets the face amount of the policy
• If you outlive the term, you get NO money back. The
premiums you pay go toward administrative expenses,
company profit, and a reserve account in case you pass
during the term
• Most term insurance policies have a conversion feature,
allowing you to switch to something permanent without
answering health questions.
Insurance
Life Insurance
Where can you buy it?
• Your employer – through the group plan
• A broker or directly from an insurance company
• Check ratings services of insurer’s financial
strength at places like A.M. Best, Moody’s and
Standard & Poor’s to understand their financial
strength.
Insurance
Long-Term Care Insurance
Who needs it?
• Millions of senior citizens, according to a survey by
the Health Insurance Association of America
• Due to increasing life expectancies and uncertainty
surrounding Medicare and government
• Cost of living in a nursing home for one year are
estimated at about $70,000
Insurance
Long-Term Care Insurance
Types of policies:
• Skilled care
– Continuous, round-clock
– Medicare coverage
– Medigap’s coverage
– Long-Term Care’s coverage
Insurance
Long-Term Care Insurance
Types of policies:
• Medigap’s coverage
– supplemental health insurance sold by
private insurers
– Usually covers Medicare co-payment from
21st to 100th day of skilled care
Insurance
Long-Term Care Insurance
Types of policies:
• Long-Term Care
– pays a specified dollar amount for a
certain time period. You’ll need this if you
want coverage after 100 days
Insurance
Long-Term Care Insurance
Intermediate
• Needed occasionally
• Medicare’s coverage
• Medigap’s coverage
• Long-Term Care’s coverage
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Long-Term Care Insurance
Intermediate
• Less specialized than skilled care. Trained medical
workers under supervision of doctor
• Medicare may cover intermediate but only under certain
conditions
• Medigap policies provide additional money per at-home
visits for intermediate care, but only if a doctor orders
services as a follow-up to injury or illness
• Long-Term Care: provides coverage for home or facility
Insurance
Long-Term Care Insurance
Custodial
• Assist in performing activities of daily living
• Prof. medical skills not necessary
• Only Long-Term Care coverage
Insurance
Long-Term Care Insurance
Custodial
• Examples of custodial care include bathing, eating,
and dressing.
• Doctors orders not needed and the type of care can
be provided at home or in a facility
• Medicare and Medigap do not provide coverage
since these are non-medical services
• Long-Term Care: provides coverage for custodial. In
fact many policies include custodial care anyway.
Insurance
Long-Term Care Insurance
Where do you get it?
• Many private insurers have this
• Also good idea to check out
www.longtermcareinsurance.org for a list of
quotes and answers to frequently asked
questions.
Insurance
Health Insurance
Understanding your policy:
• You need to purchase your own plan, you should
know what’s out there.
• Be sure to read the contract to know what your
policy covers.
• Policies should mention pre-existing conditions,
deductible, co-payment, family coverage, out-ofpocket maximum, and more.
Insurance
Health Insurance
Several types of organizations:
• HMO
• PPO
• POS
• EPO
Insurance
Health Insurance
Health Maintenance Organizations (HMO):
• cover medical treatment provided by doctors and facilities
within a network. You must choose a primary care physician
who will either approve or deny requests to see a specialist. A
fixed monthly fee is usually included along with small copayments at visits.
Insurance
Health Insurance
Preferred Provider Organizations (PPO):
• does not require members to seek care from PPO doctors and
hospitals, though it’s usually recommended. A fixed monthly
fee is usually included along with small co-payments at visits.
Insurance
Health Insurance
Point of Service (POS):
• combine traits from HMOs and PPOs. Must choose a primary
care to be responsible for referrals within a POS network. You
can choose to go outside the network, but the health care will
be covered at a lower level.
Insurance
Health Insurance
Exclusive Provider Organizations (EPO):
• are essentially PPOs, however they WILL NOT provide
coverage to non-network care.
Insurance
Health Insurance
Saving for expenses:
• Flexible Spending
• Health Care Reimbursement
• Health Care Savings
Insurance
Health Insurance
Flexible Spending Accounts:
• you can set aside pre-tax dollars for health expenses and they
can be used with any type of plan. Either you or your employer
funds it AND the employer sets the minimum and maximum
annual contribution. The entire amount is available at the
beginning of the year, even if YOU haven’t funded it yet. The
items these are spent on are approved by employer and any
unused contributions are lost!
Insurance
Health Insurance
Health Care Reimbursement Accounts:
• employer-funded and it can be used for current and retired
employees. Employers usually provide when using a PPO plan
with high deductible AND only employer can fund it. Entire
amount is available at the beginning of the year and eligible
items are approved by employer. The employer determines
whether unused funds can be carried over from year to year,
BUT you cannot take them with you to another employer.
Insurance
Health Insurance
Health Care Savings Accounts:
• Tax-free, interest bearing account for health care now and
future years.
• Can be used by employers, employees, and retirees with high
deductible plans AND you must have a high-deductible plan to
contribute.
• Anyone can contribute, which includes you, your employer,
and others.
Insurance
Health Insurance
Health Care Savings Accounts:
There is a maximum contribution limit: for 2010 it’s $3,050 for
individuals and $6,150 for family plans. People over age 55 can
fund additional money. You can only spend money contributed to
the plan and you can reimburse yourself for prior year expenses
incurred. Eligible items are on IRS list of approved expenses.
Unspent funds STAY in account and can be transferred if you
change employers. Can make withdraws on HSAs, without penalty
and for non-medical purposes, when you turn 65.
Insurance
Health Insurance
Save on expenses:
• Use network
• Generic drugs
• Use ER only for emergencies
• Ask about home testing
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Health Insurance
Use network:
• By using providers in your network, you should be getting
lower rates
Insurance
Health Insurance
Generic drugs:
• Don’t believe hype about brand-name drugs. Generics
equivalents often work just as well and are cheaper. Ask your
doctor when he writes out a prescription if generic equivalents
exist for the particular drug.
Insurance
Health Insurance
Use ER only for emergencies:
• Don’t just instinctively go to the ER. If you have a condition,
consider going to an urgent care center or your regular doctor.
Sometimes it can be a tough call, but if it’s not an emergency,
going to your doctor is cheaper than going to the ER.
Insurance
Health Insurance
Ask about home testing:
• Home tests for blood pressure, diabetes are cheaper than
going to the office for testing. Be sure to check with your
doctor on the process and report anything that is irregular.
Insurance
Homeowners Insurance
Homeowners insurance is often required by
mortgage lender, but even if it’s not, you will
still need some protection against the items
you can’t afford to lose.
Insurance
Homeowners Insurance
What’s commonly covered:
• Coverage pertains to the cost of damage and
often your living expenses while you wait for
your home to be repaired
• Most homeowners policies cover your
personal property both on and off premises
and they set specific dollar limits to certain
items
Insurance
Homeowners Insurance
What’s commonly covered:
• Coverage pertains to the cost of damage
and often your living expenses while you
wait for your home to be repaired
• Most homeowners policies cover your
personal property both on and off premises
and they set specific dollar limits to certain
items
Insurance
Homeowners Insurance
What’s commonly covered:
• Most policies cover fire and lightning
damage, windstorm and hail, explosions,
theft or vandalism, vehicles, smoke,
falling objects, weight of snow, ice, and
sleet, freezing of plumbing, heating, or
ac systems, riots
Insurance
Homeowners Insurance
What’s commonly covered:
• They will often NOT cover damage from
floods or earthquakes. An additional policy
may be needed to have coverage for those
• Liability coverage is also available, though
separate from your homeowners, that
covers damages caused by your negligence
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Homeowners Insurance
Ways to reduce cost:
• Depends on the amount of coverage you
want
• Shop around for the best price
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Auto Insurance
Pennsylvania requires insurance, but it is a low
minimum compared to many other states
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Auto Insurance
Pa. is also one of the largest no-fault states,
which means that in the event of an accident,
each individual insurance company pays for
the damage, regardless of who’s at fault. There
are exceptions – if a serious injury results with
high medical cost, the seriously-injured
motorist can seek recompense from the
person at fault for the accident.
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Auto Insurance
It’s not required that drivers purchase more
than the minimum liability, it is strongly
encouraged to do so.
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Auto Insurance
Understanding you policy:
• Collision covers your auto when it strikes an
object
• Comprehensive covers your car against physical
damage not caused by a collision such as fire and
theft
• Exclusions – be sure you read this section so you
understand what is not covered
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Auto Insurance
Ways to reduce cost:
• Insure your car with the same company that
insures your home
• Insure ALL your family’s vehicles through
one company
• Select highest deductible you can afford
Insurance
Questions?