Personal Financial Planning Study Set 5
Quiz 9 :
Insuring Your Health
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The price of medical treatment has risen dramatically in the recent years. A serious illness or accident may cause physical pain from sickness and injury and also economic hurt. The intent for including health insurance in personal financial plan is, health insurance financially assists to pay the expenses of routine and major medical care so, that it does not seriously affect the plans and financial accomplishments. If it is not included in personal financial plan many people remain uninsured or underinsured. Fee-for-service procedure is also sometimes called indemnity plans. In these types of plans, the insurance companies forfeit fees for the services provided. Health insurance is insurance in opposition to the risk of incurring medical day-by-day expenditure among persons. By estimating the general risk of health care and health system operating expenditure among a targeted collection, an insurer can build up a routine finance formation. When you have physical circumstance insurance, the premium costs you are paying will be a part of the total premium in a big plan. Even you can get your medical treatments anywhere you wish without getting any suggestion or earlier approvals. Health insurance is a very important part of good financial planning protection is the outmost important aspect of individual finance. The improvement is administered by a central association such as a government agency, private business, or not-for-profit entity.
Person ZC is self-employed , and was recently injured in a fall while working. He needed surgery and was hospitalized for several months. Person ZC does have an insurance policy through MB Corporation but was responsible for a portion of the bills. 1. Following are explanations of several terms used in the policy provisions : • Deductibles : A deductible represents an initial amount of medical expenses that are not covered by the insurance policy. In Person ZC's case, it means that he is responsible for the first $3,000 of eligible expenses for his accident. • Co - insurance : This is an insurance provision that states that the policyholder is responsible for a portion (usually expressed as a percentage) of the covered expenses that are in excess of the deductible. For Person ZC, he is responsible for 80% of the covered losses after his deductible is reached. • Internal limits : An insurance provision that limits the amounts that are covered for certain medical expenses, even if the claim is not in excess of the overall policy limits. Person ZC's policy will only cover $180/day for hospital room and board, and a maximum of $1,500 for surgical fees. 2. To determine how much Person ZC should recover from the insurance company and the amount of out-of-pocket expenses he is responsible for , we can use a table to list the expense items and their amounts: From the above table, we can observe that Person ZC should recover a total of $12,620 from the insurance company. This is after the deductible, co-insurance, and excess charges are deducted from the expense sub-total. Person ZC will need to pay for the deductible, co-insurance, and excess charges out-of-pocket - a total of $8,280. 3. There are a number of policy provisions that would have provided Person ZC with additional protection , including policies with no (or smaller) deductibles; no (or a smaller percentage) co-insurance, and no (or higher) internal limits. These three provisions included in his policy make up the $8,280 that Person ZC is responsible for out-of-pocket. However, policies with these kinds of provisions will also have higher premiums. Because he is self-employed, Person ZC is solely responsible for the cost of his health insurance, unlike others who have portions of their coverage paid for by their employers. In addition, Person ZC should definitely consider purchasing a disability insurance policy. He was unable to work while recovering from his accident, which means that he did not earn any income during this time. Disability insurance would give him regular payments to tide him over while he recovers. 4. Based on the information presented, it does not seem as if Person ZC's health insurance coverage is adequate. The total expenses for his accident totaled $20,900 and he was responsible for $8,280 of that amount - roughly 40%. Person ZC should further analyze the cost/benefit of paying higher premiums for health insurance with provisions that equal less out-of-pocket expenses. In addition, as noted above Person ZC has no individual disability insurance beyond Social Security (which do not begin until a worker is totally disable for five months). Because he is self-employed, disability insurance coverage is imperative so that he can keep earning an income if he becomes hurt and unable to work.
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