How Much Life Insurance Do I Need?

How Much Life Insurance Do I Need?

What's the reason for life insurance?

The purpose of life insurance is to provide for the financial needs of your dependents in the event of your death. We often know why we need life insurance, but what is often unclear is how much? Life is so unpredictable and complex that it is impossible to know exactly how much you will need and when. Amidst all of the "what ifs", what can we do to find a coverage amount that allows us to sleep well at night knowing that our family is covered?

Navigating Health Insurance Open Enrollment 2017

Where are you getting your health insurance? Where should you be getting your health insurance?

In 2015, a study by the Department of Health and Human services found that 8 in 10 people enrolled in a marketplace plan could find a plan with a lower premium that offers the same coverage if they switched policies.

In navigating the open enrollment cycle, it is important to weigh all of the options available to you. You would be surprised at the premium differences amongst different sources for the same coverage. The process below is a great place to start your search for the best coverage for you and your family.

1. Are you eligible through your employer or your spouse's employer?

There are varying degrees of employer coverage. In some instances, the employer pays all of the premiums, in others, they may only pay a portion. This is always the first place to start in your health insurance search, as larger group coverage rates are typically lower than rates that you can get on your own.

If offered, look into getting added to your spouse’s employer plan. Often, this route is much cheaper than it would be if you tried to get insurance outside of their group plan. If both employed and covered by insurance, compare the costs of switching one or both of you to one plan, or if it’s better for you both to stay separate.

2. Are you eligible for government assistance?

Generally, if your individual income is less than $48,000 ($97,000 for a family of 4), you may be eligible for assistance from the government for your health insurance costs. The eligibility for assistance is based on a percentage of the Federal Poverty Level (FPL), which is $11,880 for an individual in 2017. There are 3 types of cost assistance under the Affordable Care Act (ACA):

  1. Premium Tax Credits: Available to individuals between 100% and 400% of the FPL ($11,880 - $47,520 for 2017). These are credits that can either be paid by the government directly to the insurance provider or taken as a credit on your tax return (form 8962). These credits effectively lower your premiums.
  2. Cost-Sharing Reduction (CSR) Subsidies: Available to individuals between 100% and 250% of the FPL ($11,880 - $29,700 for 2017). CSR Subsidies reduce out-of-pocket insurance costs, including deductibles, coinsurance, copayments, and maximum out-of-pocket costs. They reduce costs by raising the actuarial value of your plan, which in layman's terms is the amount the insurer is willing to pay on a particular plan. You can think of it as being able to be in a 'silver' or 'gold' level plan when you could only previously afford a 'bronze' plan.
  3. Medicaid: Available to individuals below 138% of the FPL ($11,880 for 2017). Medicaid is essentially free or extremely low-cost coverage. This is only available in states that have expanded Medicaid.

If you are eligible for government assistance, the best place to start is

3. Can you get coverage through an organization you or a family member belong to?

There are many national and state-wide organizations that offer health insurance to their members. These can include professional and trade organizations, unions, or basically any organization that you have to pay a fee to be a member of. It is important to look closely and compare the premiums offered through these organizations, as some can be quite cost-effective, while others are not. The availability of these plans varies by state.

4. The open marketplace.

For people that are not eligible for coverage through their or their spouse's employer, through government assistance, nor through any other organizations, this is the route to go. This is coverage directly through a healthcare provider.

For many, this is often the easiest way to get coverage during open enrollment. In some states there are quite a few options in providers to choose from and in some states there may only be a couple. At any other time during the year you must have a qualifying event in order to apply for coverage directly with a provider.

It often helps to have an independent broker or agent walk you through some different quotes and options, as they can look amongst the different providers and find the best policy for you.