Article Summary on Health Costs
Every month, U.S. citizens are required to pay Medicare premiums that go towards their medical expenses. Medicare has aided the access to health services to eligible U.S. citizens. Based on the income and prevailing situations, the government calculates an amount of premium for each employee. These calculations vary and, in some cases, there are adverse situations that may necessitate payment of a lower premium. The article on Kiplinger by Stewart (2021) addresses the issue of Medicare premiums. It has been declared that people can appeal a Medicare premium surcharge. The article begins by explaining that there could be chances that some people feel their Medicare part B and D premiums are unjustified. In such a case, one may file an appeal to the social security department.
The years 2019 and 2020 have present different challenges that may have left some people economically disadvantaged. As detailed in the article, premiums are calculated using the previous 2 years’ earnings. In this case, relying on 2019 earnings may fail to reflect the real situation of a person’s income. Stewart (2021) indicates that the government is ready to consider some situations that warrant a reduction of Medicare premiums for parts B and D. Although premium is based on income, those earning above the wage threshold pay a higher premium denoted by IRMAA (income-related monthly adjustment amount). The economic shocks witnessed in the past two years have affected people in various degrees. This initiative by the social security department is, therefore, a relief to many workers.
Seven events have been outlined as life-changing circumstances that warrant a premium reduction. According to Stewart (2021), these events include loss of income-generating property, death of a spouse, retirement or reduced hours of work, marriage, divorce, loss of pension, and lastly, employer settlement payments which could result from, company bankruptcy. However, the article has clarified that loss of income should not be caused by the owner for it to be considered a life-changing event (Stewart, 2021). Citizens are asked to fill the SSA-44 form for consideration attaching all relevant documents. In case of denied redetermination, premium owners can file for premium appeals giving any further details to enable the processing of their claims. Essentially, the article gives useful information to Medicare premium parts B and D owners which helps alleviate the costs of their healthcare.
Application of the Above Information
The issue of healthcare is crucial especially now that economic situations have worsened following the COVID-19 pandemic that hit many financial systems globally. The information provided by Stewart (2021) in the article described above is very crucial in reducing my healthcare costs. At a personal level, I will assess my financial situation to determine whether my premium reflects the income I get. If I need to file for a redetermination, I will gather the relevant evidence and fill the form.
I will also endeavor to educate my family members and friends on their health costs. I will pass this information to them and share Stewart’s (2021) article with them for further reading and comprehension. For those family members who cannot read for themselves, I will try to explain this information in the smartest and simplest way possible and help them fill the SSA-44 form. I believe most people have been financially affected by adverse events in the past two years and therefore sharing this information is crucial.
Estimating Insurance Needs Using the DINK Method
The DINK method is an essential tool in insurance needs estimation. DINK is an abbreviation for “dual income, no kids”. Using the DINK method to calculate the insurance needs requires that an individual adds half of all their debts to the funeral expenses (Lin et al., 2017). This method aims to ensure that future needs can be handled by the spouse. As depicted in the name, the DINK method has two main requirements: no additional kids and both partners are income-earners. Using this method to calculate the insurance need in the given case:
Half of mortgage= ½ *$80,000= $40,000
Half of car loan= ½ * $15,000=$7,500
Half of personal debt= ½ * $5,000=$2,500
Half of credit card loans = ½*$ 2,000=$1,000
Funeral expenses=$ 5,000
Total insurance need= $(40,000+7,500+2,500+1,000+5,000) =$56,000
Jake’s Life Insurance Needs
Death is an unavoidable event that has significant financial consequences on families. In some cases, the death of a parent leaves children in a tough financial situation, which worsens if the parent had no life insurance policy. In other cases, children have to take care of their old, ailing, or disabled parents and siblings which imposes a heavy financial burden on them. In Jake’s case, he is the sole provider in his family given that his parents cannot work and his sister has a disorder. In the event of Jake’s death, his parents and sister would suffer a significant loss.
Jake is a good candidate for life insurance because he has no pre-existing condition and he needs to insure his life for the benefit of his dependents. Also, in case of death without life insurance, Jake’s mortgage and car loan expenses would fall on his parents who are unable to work, making life much harder for them. Jake should therefore take a whole-life insurance policy because it guarantees that so loan as he pays a premium, the cover will remain. Whole-life insurance is better compared to term insurance that expires after the set number of years.
In determining the amount of life insurance to take, Jake should consider his income and debts. According to the information given, Jake has a $50,000 mortgage and a car loan. In this case, Jake should take a life insurance cover worth at least $100,000 to ensure that in the event of death, all his debts will be paid and a little amount left to cover extra expenses. With such an insurance cover, he will protect his parents and sister from untold suffering in the event of his death.
Insurance Comparison
From my observation, I would opt for whole life insurance with a mutual life insurance company. Although the premium required is higher, it pays a significant amount of interest upon maturity or annually.
Renters’ Insurance
Tenants do not own any of the property they have rented. However, they need to insure their personal property in the houses. Renters insurance is important because it secures tenants’ property. It also insures anybody who would be harmed by the renter’s property. The house owner needs to insure the houses they are renting out. Owner’s insurance covers only their houses and not the tenant’s belongings at any time (Lin et al., 2017). Therefore, both the renter and the house owner need to have separate insurance policies.
Replacement value and actual cash value are common terms used by insurance companies when compensating clients for damaged property. As the name suggests, replacement value implies that the insurance company compensates the insured by the full cost of replacing the damaged or lost item (Lin et al., 2017). The actual cash value (ACV) differs from replacement cost on the consideration of depreciation. In ACV, the insured gets the market value of the damaged or lost property after deducting depreciation (Lin et al., 2017). Therefore, replacement cost is more favorable to the insured than the ACV.
When choosing a renters insurance policy, there are several factors one should focus on to ensure that they get the best cover. First, the amount of coverage should be considered to cover all the property (Lin et al., 2017). Second, one should carefully study the policy to understand what is covered and what is omitted. Third, comprehending the different coverage options available is essential for a renter. The fourth element worth considering is the amount deductible. A renter should go for a policy with higher deductibles as it implies a lower premium.
Survey Results
I surveyed two of my friends and one cousin to understand their insurance policies. Both of my friends have term life insurance for 10 years with no property insurance. My cousin has both property insurance and a whole life insurance policy. In terms of their decisions, my friends felt that term life insurance was cheaper and since they own only a few inexpensive things, they did not consider property insurance. My cousin chose whole life insurance after analyzing the benefits compared to term insurance. I talked to one financial insurer who informed me that many people without auto and home insurance normally sustain significant losses in the event of loss or damage. According to him, many people ignore life insurance and identity theft insurance.
After conducting my survey on several homeowners, I realized that many people do not accurately keep their home inventories. Three out of the five people I surveyed confirmed that in case of loss, they would only prove some of the most expensive items. In Florida, the most common natural disasters are storms, wildfires, and hurricanes. A renter can protect themselves from losses attributed to these disasters by insuring their property and life. Renters insurance and term or whole life insurance are crucial.
Health Insurance Evaluation
In the case of Ronald Roth:
- Annual medical costs = Annual premiums + Deductible + Coinsurance cost = (Monthly premium × 12) + Deductible + (Coinsurance percent × Coinsurance expenses) = ($42.32 × 12) + $500 + (0.20 × $154) = $1,038.64
- Total costs in case of HMO plan= Physician expenses + Pharmacy expenses = (Physician visits × Physician co-pay) + (Number of prescriptions × Prescription co-pay)= (4 × $10) + (2 × $5) = $50
- Annual medical cost in case of POS= Annual medical costs = Annual premiums + In-network costs + Out-of-network costs = ($24.44 × 12) + (2 × $5) + {Min [(4 × $125), $500] + (0.20 × $0)} = $803.28
In the case of Jeff and Ann, they need an additional insurance policy to cater to the needs of their young children in the event of Jeff’s death. My recommendation for them would be a whole life insurance policy. They have no medical condition and therefore they may live for many years. Whole life insurance guarantees that in case of death, the children will be taken care of.
References
Lin, C., Hsiao, Y., & Yeh, C. (2017). Financial literacy, financial advisors, and information sources on demand for life insurance. Pacific-Basin Finance Journal, 43, 218-237. Web.
Stewart, J. (2021). You can appeal a Medicare premium surcharge. Kiplinger. Web.