You Can Protect Your Assets from Catastrophic Medical Expenses

It is a personal nightmare. You are sick, really sick and need time off to get well and whole again. You feel vulnerable, scared, ache and you are physically exhausted, unable to function. Your friends and family are really worried about you.

Money. You think about money. You need money for medical bills that keep mounting. You need living expenses and bills are getting past due. You wonder if you can afford to get well. Without looking tell me what is your maximum out of pocket limit on your health insurance for covered services including deductibles and co-pays in addition to your premiums? $2,000? $10,000? $20,000? Do you have it set aside or available somewhere for this medical need?

Where is your income coming from if you are not earning it to pay installment debts and living expenses? Did you ever put that disability coverage in place? Sadly, some of you will not have a job to go back to when you are well again. Nearly 48% of all personal mortgage foreclosures are income and health related.

Top 5 Steps to protect your Assets from catastrophic medical expenses:

1. Secure a Health Savings Account Qualified (HSA) medical plan
2. Fund the tax deductible HSA to the maximum allowed by law
3. Purchase a critical illness product
4. Purchase a Long Term Care (LTC) policy
5. Set aside an emergency cash cushion equal to your elimination period on your LTC plan.

You honestly do not want to think about this, because it only happens to ‘other’ people, not you, right? Wrong! Did you know that in the last ten minutes 390 Americans became disabled? 30% of all employees in the US between the ages of 35-65 will suffer a disability and will be out of work at least 90 days. 1 in 7 of all employees in the US will be disabled for 5 years at some point. These statistics are not meant to be used as scare tactics to be the catalyst for action on your part, merely factual information you need to know according to the Health Association of America. But if scare tactics are necessary, read this paragraph again.

CQ Healthbeat recently reported a ‘typical’ insured family of four in the US will spend about $13,382 this year on medical care. That figure represents only out of pocket costs and premiums. That was a 9.6% increase over last year. Overall, medical costs have increased an average of 10% annually the last five years, so it would appear that this inflationary trend will not likely decrease and you should plan for these kinds of budget increases going forward.

The difference between you and one of these sobering statistics above is a five part solution designed to control your out of pocket costs, limit your overall financial exposure, reduce your income taxes, provide an income stream for illness or injury and secure peace of mind on the issue millions of American’s are lacking, controlling catastrophic illness costs.

• Step one: Secure a Health Savings Account Qualified (HSA) medical plan that pays 100% of covered expenses after the deductible is met. For a single person this could limit your medical expense exposure to a maximum of only $2,650 annually, or an annual maximum for a family of only $5,250 regardless of the number of family members covered by the plan. The eligible deductible amounts are indexed annually for inflation.
• Step two: Fund the tax deductible HSA to the maximum allowed by law to have tax free monies ready to pay medical expense as needed, up to your maximum exposure. This will save you money by lowering your income tax bills.
• Step three: Purchase a critical illness product that is triggered to pay a $100,000 tax free cash lump sum benefit upon any one of 15-20 occurrences such as heart attack, cancer, blindness, etc.
• Step four: Purchase a Long Term Care (LTC) policy that pays benefits when you cannot perform two adult daily living activities, or have a cognitive, or Alzheimer’s loss. These differ from the older reimbursement plans in that receipts for every daily service, from every provider do not need to be submitted for reimbursement, a time consuming task for someone else if you cannot manage all this paperwork yourself. You either qualify or you don’t for payment based on the inability to perform two adult daily living activities to trigger benefits, a much simpler and less costly insurance plan to administrate, which results in significant premiums savings to you, the insured.Portions or all LTC premiums could be deductible to you if you meet tax guidelines. Most states give tax breaks to residents to who purchase LTC policies.Individual Disability plans could provide the income stream, although depending on your age and occupation may be more expensive than a similar monthly benefit provided by a LTC policy as an alternative. Disability premiums are not tax deductible.
• Step Five: Set aside an emergency cash cushion equal to your elimination period on your LTC plan. Some creative ways to help reach this goal while you build the actual cash reserve amount could be to earmark a portion of cash values in life insurance, ROTH IRA contributions (not earnings), identify an asset that could be sold quickly, etc.The next natural question: “Is this affordable”?. Most likely the answer will be Absolutely! Yes! If you work with a qualified agent who will search the market for the best fit for your needs, existing resources and preferences.

Here is a real life example. For a family with a Male aged 48, female aged 44 and four children, not the ‘typical’ family of four, a family of six with $5,250 HSA plan in place: