Buy insurance in the United States
In the United States, we often see and hear advertisements promoting insurance, and occasionally receive invitations to apply for insurance. Most people regard this insurance information as passing smoke and will not keep it in mind. For most Chinese immigrants, the first time they interact with insurance in the United States is at school or at work. Insurance is not a top priority, nor is it easy to understand. Most people tend to stay away from it.
Buying insurance is actually quite challenging. First of all, insurance does not meet current needs, but meets possible future needs. Such needs are mostly caused by unsatisfactory things, and we usually don't like to think about unsatisfactory things. Therefore, most people do not have a clear concept of insurance. Secondly, insurance is a kind of commitment contract, which is usually written in legal professional language, and it is difficult for ordinary people to understand its precise meaning. Without the help of honest and reliable professionals, it is often difficult to know what to buy.
There are usually two kinds of laments about insurance: one is that years of premiums have been wasted because they have never been used; the other is that if I had known better, I would have bought more, and now I would not be so worried and hard-working.
Insurance is a kind of collective mutual aid, a aftermath mechanism that helps deal with risks when they come true. In other words, it is pre-planning that allows the lucky many to help the unlucky few. In addition to fees, the underwriter's cost = risk probability × risk compensation - investment profit. Therefore, for many insurances, such as life insurance and long-term care insurance, the earlier you buy them, the cheaper the premiums will be.
Buying insurance in the United States usually goes through the following channels:
1. Schools and units
2. Insurance agents and salesmen
3. Insurance brokers and consultants
4. Financial Planner
5. Direct sales department of the underwriter (insurance company)
The first channel is usually a service channel. Consumers don’t have to worry too much. The key is to ask questions and listen well. Other channels are commercial, and with liability risks, we usually only introduce products from business relationships. Direct sales stores will only provide their own company's products. A horse is no longer fat without grass, and workers in the insurance industry need an income to continue providing services. As consumers, the key is to see whether they have enough professional knowledge to cogently envision our needs and provide appropriate plans.
"A prudent person sees trouble and hides it, but a fool goes to danger." (Proverbs 27:12) In the United States, the insurance that ordinary people need to buy includes life, health/medical, long-term care, pension, car insurance, and house insurance. Let’s take a look at how to choose these insurances. Please remember that buying insurance is mainly about buying peace of mind and responsibility. Insurance is not a way to make a fortune. If someone recommends that you buy insurance and make a fortune, you should be wary of fear and be very vigilant.
▲Insurance is a kind of collective mutual aid and a aftermath mechanism to help deal with risks when they come true.
life insurance
Life insurance can be roughly divided into two types: Term Life and Whole Life. As the name suggests, term life insurance has a term, and when the term expires, the insurance contract is terminated. For whole life insurance, as long as all premiums are paid, the insurance contract will remain in effect until the death of the insured and the underwriter will pay compensation to the beneficiary. For most term life insurance, the policy terminates without compensation, so premiums for term life insurance are much lower than for whole life insurance. Term life is relatively simple. The main considerations when purchasing are whether the insured amount is appropriate, whether the insurance period is appropriate, and whether the premium is relatively low and easy to afford. Whole life insurance is quite complex.
The premium of whole life is much higher than the possible average compensation payment in the early period, so the insurance law requires whole life to set up a savings account. If the policy holder surrenders the policy, he or she can get the amount in the savings account. As long as the policy holder pays the premium on time, the savings account has a minimum amount guaranteed by the insurance contract. The underwriter will also state the amount of the savings account under hypothetical or typical circumstances. The final settlement of the savings account amount is related to the investment recovery rate, some are linked to the indicated interest rate, and some are linked to some indexes in the investment market. Whole life has the function of saving and investing. When purchasing whole life insurance, you must consider the integrity and investment expertise of the underwriter, the asking price of various fees, whether the insured amount is too low, whether the premium can be afforded, etc. When purchasing whole life insurance, it is best to have the assistance of a trusted professional.
So who should buy life insurance? Generally speaking, they are the ones who make money to support their families. In this way, if they return to heaven early, the family members left behind on earth will not be under immediate financial pressure and have time to adjust their lives and cope with their new life. As Proverbs says, “A good man leaves an inheritance to his children.” (13:22)
People who are young, healthy, have a good quality of life, and have long-lived parents will have cheaper life insurance premiums. Therefore, it is best to buy life insurance while you are still young.
▲You don’t need to buy insurance if you can handle the risks yourself. Effective use of insurance can provide financial security for yourself and your family.
Health/Medical Insurance
In the United States, medical treatment and medication are expensive, and hospitalization expenses are not something ordinary people can afford with their normal income. Therefore, everyone should have health/medical insurance. The United States does not have national, comprehensive health insurance. Fortunately, most office workers have the opportunity to participate in the health insurance provided by their employer; and people over 65 years old can also purchase the health insurance they need through Medicare; for the poor, the state government sponsors the poor and the federal government pays more than half. Medical insurance (Medicaid).
Let’s first look at how to choose personal health insurance for non-elderly people.
After former President Obama passed the "Affordable Care Act", the main way to purchase personal health insurance is through "The Market Place". The coverage of health insurance is comprehensive and quite standard. . The main considerations when purchasing are whether the doctor you often see is in the insured special medical system, whether the commonly used drugs are on the insured drug list, and the compromise arrangement of premium deductible - low premium/high deductible (bronze medal), medium premium/ Medium deductible (Silver), high premium/low deductible (Gold), or whichever is most suitable for your situation. The original idea of "affordable health care" was that multiple insurance companies would compete healthily in the health insurance market to provide high-quality and affordable health insurance. However, now there are only one or two companies operating in many health insurance markets, leaving policyholders with few options. The U.S. Republican Party and the current President Trump have always been opposed to Obamacare, so personal health insurance may be very different from the current situation in the next few years.
The problem with health insurance planning is that the medical expenses for seriously ill people are extremely high, while the medical expenses for the generally healthy and young people are very low. People who spend the most on medical expenses in the United States spend an average of more than $150,000 a year; while those who spend the least on medical expenses only spend an average of about $1600 a year; the average person in the country spends $10,000 a year.
What kind of health insurance can make people with or without illness afford the premiums and everyone thinks it is fair? You cannot find it by relying on worldly wisdom. Obama-style health insurance requires the same premiums for those with and without illness, and the premiums for older people should not be three times higher than those for younger people. The government levies special taxes to subsidize the burden of middle- and lower-income people, and if you don’t have insurance, you have to pay the tax. A semi-forced method that requires everyone to participate in insurance (Pay or Play). The Republican Party believes that raising taxes to provide health insurance and forcing everyone to buy insurance is a socialist path and goes against the founding spirit of the United States of individual freedom and autonomy, so they strongly oppose it. Whether the United States can find a balance between whether health care is a "human right" or a "personal responsibility" depends on the consensus of public opinion and the wisdom of those in power.
Elderly medical insurance in the United States can basically be divided into Part A (Part A), Part B (Part B), Part C (Part C), Part D (Part D), and Medigap/Medicare Supplement. Part A is hospital insurance; Part B is medical insurance, including doctor fees, examination fees and non-drug treatments; Part D is prescription drug insurance. Self-pay subsidized medical insurance subsidizes the out-of-pocket expenses of Part A and Part B. Part C is an insurance that combines Part A, Part B, Part D, and self-pay subsidized medical insurance.
Part C is also known as Medicare Advantage. Medical treatment and treatment are usually limited to their own medical system, and the premiums are relatively low. If you don’t need to see a specific doctor, stay in a specific hospital, or take specific medicines, you may want to consider Part C medical insurance.
Senior medical insurance is quite standardized. When purchasing insurance, you should consider the premium, out-of-pocket amount, out-of-pocket limit, and whether the insurer can provide the specific doctors and drugs you need. Every year from the third week of October to the first week of December, there is the Open Enrollment Period for the elderly medical insurance. During this period, most policyholders can re-purchase suitable insurance.
The premiums and coverage of medical insurance in the United States are fine-tuned almost every year, but this fine-tuning is for the general public and will not target policyholders with high compensation. This is very different from the car insurance and house insurance that will be discussed later.
Long term insurance
Due to advances in living conditions and medicine, the average life expectancy is now much higher than before. However, in older people, their ability to take care of themselves will gradually deteriorate, and sometimes they will be lost suddenly, such as when they unfortunately suffer a stroke. If you cannot take care of yourself, you need help from others. In the United States, it is expensive to hire someone to take care of you or live in a nursing home. Therefore, long-term care insurance is a hot topic for middle-aged and older people.
Long-term care insurance generally starts paying out a period of time after the compensation conditions are met. This period of time is usually called the waiting period. There is usually a daily cap on compensation benefits, as well as a cap on the compensation period. Long-term care insurance without an upper limit on the compensation period is usually much more expensive than one with a term of two or three years. The daily benefit limit usually has the option of increasing or not increasing every year. If it is increased every year, it will be much more expensive than if it is not increased. It is best to start taking out long-term care insurance when you are middle-aged. It is quite expensive to take out the policy when you reach retirement age, because the probability of compensation is high at that time, and the date of payment may be close, and the time for the insured to invest and make money is short.
▲In the United States, retirement planning relies on three pillars: social security retirement annuity, employer or union retirement annuity, and personal assets.
pension
In the United States, retirement planning has been accomplished through three pillars for many years: Social Security retirement annuities, employer or union retirement annuities, and personal assets.
Generally speaking, if the Social Security retirement annuity plus the employer or union retirement annuity are enough to cover most daily expenses, retired people do not need to worry too much about living as long as they have some savings. However, in the past one to two decades, most retirement annuity benefits have been gradually replaced by retirement savings benefits. Today, most office workers, except those employed in government departments, rarely receive retirement annuities from their employers.
The main function of annuity insurance is to ensure that as long as a person is alive, he will receive money regularly. Using annuity insurance, you can avoid the risk of poor investment or running out of capital if you live too long. What you need to consider when purchasing annuity insurance is: the level of the annuity conversion rate, the professional investment performance of the underwriter, the price of investment risk hedging, etc.
Generally speaking, the benefits of long-term care insurance and annuity insurance are complementary. People who need long-term care benefits will not be alive for long, so the annuity benefit period will not be too long; it should be more economical to combine the two insurances than to purchase them separately.
Annuity insurance is different from the life insurance, medicine, and long-term care mentioned above in that it does not need to pass the risk assessment process. As long as you have money, you can buy insurance at any time.
In the U.S. federal income tax, life, medicine, long-term care, and annuities all enjoy specific discounts. This is a policy measure adopted by the United States to encourage private leadership, cluster mutual assistance, and social security.
▲Car insurance mainly covers liability compensation after an accident and car-related financial losses. Many car insurance also covers compensation for car rental or emergency roadside service fees after an accident.
Car and home insurance
Almost everyone who owns a car or a house in the United States has car insurance and house insurance. In many states, it is illegal to own a car without auto insurance. Auto insurance mainly covers liability compensation after an accident and financial losses related to the car. Many auto insurance policies also include compensation for renting a car or emergency roadside services after an accident.
The biggest difference between auto insurance, house insurance, and life, medical, and long-term care insurance is that the underwriter can re-assess the risk every year based on the compensation record. Insurers may increase premiums or even have their insurance surrendered. If your policy is surrendered, you won’t have many options when it comes to finding insurance, and the premiums will most likely be much higher than before the policy was surrendered.
Home insurance mainly covers financial losses after an accident, followed by liability compensation. The scope and upper limit of home insurance coverage are listed one by one, and the non-insurable items (Exclusions) and optional coverages for Additional Premiums (Optional Coverages for Additional Premiums) are also marked. Common insured matters include earthquakes, floods, and high-value property such as personal jewelry.
The main considerations when purchasing car insurance and house insurance are premiums, coverage, upper limits of insured items and deductibles (deductibles), reputation of compensation services, and post-accident risk assessment practices, etc. It's usually a good idea to shop around again every few years to see if you can find a more suitable insurance policy. Sometimes, because of shopping around, an insurance agent will try to find a more suitable policy for you.
Buying car insurance and house insurance is mainly for peace of mind and convenience. In the event of an accident, there are underwriters available to deal with the issue, especially regarding liability compensation. Premium is an important consideration, but it shouldn't be the only one.
The insurance mentioned above, except annuity insurance, I hope you will be prepared and be a member of the lucky majority to help the unfortunate minority. Insurance is not gambling, and it is not the most effective way to make a fortune. If you can handle the risk yourself, you don’t need to buy insurance. May you effectively use insurance as a tool to gain financial security and be a good steward of the wealth given by your Heavenly Father.
Yi Longyang graduated from the Department of Mathematics of National Taiwan University and received a PhD in Mathematics from Washington University in the United States. He has been employed in the U.S. actuarial industry since 1975; became a Fellow of the Society of Actuaries in 1979; and became an Enrolled Actuary with the U.S. federal government in 1980. I have been directly or indirectly involved in the internal work of the insurance business, including marketing, products, operations, investment, finance, accounting, etc. He believed in the Lord through grace in 1990 and now lives in Maryland, USA.