Understanding Health Insurance

By: Lee Ann Obringer & Melissa Jeffries

Hospital Indemnity and Disability Insurance

  • Hospital Indemnity Insurance: Rather than paying the hospital or a physician group, this type of policy sends payments directly to you. They pay a designated amount of money each day you're in the hospital, for up to a designated number of days. These policies are useful for paying other bills and out of pocket expenses while illness prevents you from working.
  • Disability Insurance: Disability policies typically pay you 45 to 60 percent of your income on a tax-free basis if you're disabled due to an injury or illness and can't work. The benefits enjoyed from these policies vary widely depending on what you pay. They'll pay only for the length of time you specify when you sign up for the policy (commonly five, 10 or 15 years, but it can go up to age 65).These policies may have a period of time after your disability occurs and before the benefits kick in. This period of time is usually referred to as an elimination period and typically range from 30 to 90 days but can be as long as a year or more.
  • Dental and Vision Insurance: Individual check ups for vision or dental care aren't that expensive, but if you have problems related to your teeth or eyes, the bills can get costly. Some health insurance plans do offer coverage for these, but special coverage can also be purchased separately for those that don't.

Flexible Spending Account

While not a supplemental insurance, a flexible spending account (FSA) can be used along with your employer-sponsored health plan. An FSA is an account set up by an employer in which employees can automatically deposit a portion of their pre-tax paycheck into a tax-advantaged financial account that can be used to pay for qualified medical expenses not covered by insurance. These types of accounts can be beneficial to both employers and employees. Employers can tout an FSA as a great benefit in an effort to attract and keep employees, while both employer and employee can save money on payroll and social security taxes. In addition, if used correctly, an FSA can help to greatly offset an employee's out-of-pocket medical expenses and help pay for the monthly health insurance premiums. Different types of FSAs can even be used to pay for an employee's day-to-day expenses of caring for a dependent or to cover adoption expenses. The big down side to these accounts is that the money you don't use in your health insurance year can't be rolled over into next year's FSA. So basically, if you don't use it, you lose it.