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Insurance

The PICPAThe Pennsylvania Institute of Certified Public Accountants

The PICPA is a professional association of more than 19,000 CPAs working together to improve the profession and serve the public interest.

Insurance

TypesThere 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 InsuranceWhy 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?

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Disability InsuranceWhen 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.

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Disability InsuranceWhere do you get it?• Usually two main places: Private insurer and

Social Security or governmental program

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Life InsurancesIt’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

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Life InsuranceHow 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.

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Life InsuranceTypes of polices: permanent and term

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Life InsurancePermanent Life Insurance• Whole• Universal• Variable• Universal variable

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Life InsuranceTerm 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

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Life InsuranceWhere 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.

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Long-Term Care InsuranceWho 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

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Long-Term Care InsuranceTypes of policies:• Skilled care– Continuous, round-clock– Medicare coverage– Medigap’s coverage– Long-Term Care’s coverage

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Long-Term Care InsuranceIntermediate• Needed occasionally• Medicare’s coverage• Medigap’s coverage• Long-Term Care’s coverage

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Long-Term Care InsuranceCustodial• Assist in performing activities of daily living• Prof. medical skills not necessary• Only Long-Term Care coverage

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Long-Term Care InsuranceWhere 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.

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Health InsuranceUnderstanding 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-of-pocket maximum, and more.

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Health InsuranceSeveral types of organizations: • HMO• PPO• POS• EPO

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Health InsuranceSaving for expenses:• Flexible Spending• Health Care Reimbursement• Health Care Savings

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Health InsuranceSave on expenses:• Use network• Generic drugs• Use ER only for emergencies• Ask about home testing

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Homeowners InsuranceHomeowners 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.

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Homeowners InsuranceWhat’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

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Homeowners InsuranceWays to reduce cost:• Depends on the amount of coverage you

want• Shop around for the best price

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Auto InsurancePennsylvania requires insurance, but it is a low minimum compared to many other states

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Auto InsuranceUnderstanding 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 InsuranceWays 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

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Questions?