FAQs - Insurance
Following are a series of frequently asked questions (FAQs) and answers in general
.
Q: How many participants does it take to purchase group health insurance?
A. Within certain participation guidelines, two participants is the minimum
number required to set up a group health policy.
Q: Can I be declined medical insurance because of my medical history?
A. The Health Insurance Portability and Accountability Act (HIPAA) 1996 provides eligible individuals who have recently lost their employer sponsored group health plan the opportunity to purchase health insurance coverage even if they have a preexisting health condition. If you meet the definition of an eligible individual, all health insurance companies who sell individual plans must offer you health insurance regardless of your medical history. This requirement to issue insurance is called "guaranteed issue." You may not be declined coverage based on medical reasons. In order to qualify as an eligible individual you must have "creditable coverage".
Q: What is a Pre-existing condition?
A. Under a medical insurance policy, a pre-existing condition is an illness or injury for which medical advice or treatment was recommended or received up to six months preceding the enrollment date (excluding pregnancy).
Q: What is meant by Creditable Coverage?
A. Creditable coverage generally includes the period of coverage under an individual or group health plan not followed by a break in coverage of 63 days. Examples of creditable coverage include group or individual health coverage including governmental or church plans, medicare, Medicaid, military-sponsored health coverage (CHAMPUS), state health insurance high risk pool, and COBRA.
Your last health care coverage must have been under an employer sponsored group health plan, which includes COBRA continuation coverage, for at least 12 months (18 months if you enroll late). Most health coverage can be used as creditable coverage, including participation in a group health plan, COBRA continuation coverage, Medicare and Medicaid, as well as coverage through an individual health insurance policy. This prior 12-month coverage is referred to as creditable coverage.
Q: How much life insurance do I need?
A. Before buying Life Insurance, you should assemble personal financial information
and review your family's needs. There are a number of factors to
consider when determining how much protection you should have. These
include:
- Any immediate needs at the time of death, such as final illness expenses,
burial costs and estate taxes;
- Funds for a readjustment period, to finance a move or to provide time
for family members to find a job; and
- Ongoing financial needs, such as monthly bills and expenses, day-care
costs, college tuition or retirement.
Although there is no substitute for a careful evaluation of the amount
of coverage needed to meet your needs, one rule of thumb is to buy life
insurance that is equal to five to seven times your annual gross income.
Q: What information is necessary to apply for individual life insurance?
When you apply for an individual life insurance policy, you will be asked a number
of questions. For example, you will be asked a number of demographic
questions such as your name, age, sex, address, etc. You will also be asked a number of medical questions which will be used to determine your risk level.
All of this information will be used for two purposes. First, based upon
the responses to these questions, the insurance company will decide whether
the profile of the applicant is consistent with the type of risks the
insurer is trying to attract. Once the insurer has
decided that your risk profile is consistent with the types of risks it
accepts, the answers to the questions will be used to determine which
rate to charge you. For example, the insurance company will decide whether
you should be offered insurance at a standard or preferred rating.
Collectively, this entire process is known as the underwriting process.
The primary function of the underwriting department in an insurance company
is to decide whether or not to offer insurance to a person who has completed
an application. If the answer is yes, then the underwriting department
seeks to determine the "quality" of that risk so that the proper
premium can be charged. That is, high risk people should pay more than
low risk people.
Q: Do I have to take a physical to get life insurance?
A. Many life insurance companies issue non-medical life insurance, where
you simply have to answer a series of questions in an application. However,
depending on your answers, the company might require you to take a physical
examination for any of seriously impaired health conditions, existence
of a terminal illness, or a request for an unusually large amount of
coverage. If you refuse to take an examination, then the company has
the right not to sell you a policy.
Q: How can I protect my family if I am disabled?
A. People in their prime working years are more likely to become disabled
than to die. Depending on your personal circumstances, one potentially
excellent way to protect you, your family, and even your business, is
to buy Disability Insurance. In essence, disability insurance provides a "backup" income
if you are temporarily out of work. Most disability plans are pretty flexible,
and you can buy coverage for a variety of illnesses or injuries, or exclude
specific injuries, such as a bad back.
Q: Can an insurance company rescind coverage?
A. All insurance companies thoroughly analyze risk through the underwriting process before they offer coverage. Enrollment questionnaires are written in simple, easy-to-understand, straightforward language so that people can accurately report their medical history. Customers are also provided with multiple opportunities to review their enrollment forms for accuracy and completeness.
However, in cases where an insurance company discovers that an applicant did not provide complete or accurate medical information, there is a thorough review process during which the consumer is given several opportunities to provide additional information. The decision to rescind is made only in cases where the undisclosed information would have made a material difference to the underwriting decision based on a company's guidelines.
Q: What is the financial strength of my insurance carrier?
Insurance is a product where the insurance company promises to make
future loss payments in return for a premium you pay today. It is therefore
important that you know the financial health of the insurer when you are
deciding how much you are willing to pay for the product. For example,
holding all other things equal, people should pay slightly more for a
life insurance policy from an insurance company with a higher financial
rating, or should pay slightly less for the same policy from a company
which is not as financially strong.
In order to make this kind of informed purchasing decision, a number
of private organizations, called rating agencies, rate the financial
stability of insurance companies. Major insurance rating agencies
include the A.M. Best Company, Standard & Poor's, Weiss Research,
Duff and Phelps, and Moody's. Each of these companies uses data obtained
from various sources to rate the financial strength of insurance companies.
It should be noted, however, that each organization has its own rating
standards and therefore the financial grades from two different rating
agencies may be different. The best advice usually given to insureds is
to check the financial rating of the insurer from as many rating agencies
as possible to determine the range of opinions of the financial health
of the company.
The monthly publication Best's Review (Life and Health Edition) periodically
contains information on assets, premium income and products sold by most
of the largest life insurance companies operating in the U.S. The sister
publication, Best's Review (Property and Casualty Edition) provides certain
statistical information on large property-casualty companies. Both magazines
are published by the A.M. Best Company in Oldewick, N.J. Public libraries
in cities of medium to large size frequently subscribe to one or both
of these magazines.
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