Creating a Long-Range Insurance Plan
Here’s a case study illustrating how to apply all these programs to the life of a young-onset patient with PD and caregiver so that you will have a better idea how you can use the information provided here to do some insurance planning in your own lives thus not allowing Parkinson’s disease to keep you from getting the protection you need.
Larry and Mary’s Story
Their Current Situation
Larry and Mary, both ages 40, are professionals. Larry is a self-employed consultant; Mary is a CPA in a medium-size accounting firm. They have two children and a nice residence in St. Paul, Minnesota. Larry earns $50,000 a year; Mary earns $75,000.
Five years ago, Mary developed a small tremor in her left hand. Three years ago, she was diagnosed with Parkinson’s disease. Mary still works full time, but her efficiency and speed are dropping off.
Larry has the following insurance on himself:
- A $300 deductible major medical health policy for which he pays $250 a month, $3,000 a year.
- $50,000 of life insurance.
- No disability or long-term care insurance.
Mary has the following insurance on herself:
- A group health insurance policy at work to cover her and the two children.
- A group long-term disability policy covering 60% of her $75,000 salary to age 65.
- $50,000 of life insurance.
- No long-term care insurance.
The Problems and Recommended Solutions
Here are the problems with their current program in bold print, followed by the recommended changes and the reasons why.
Her life insurance amount of $50,000 is grossly inadequate. Increase life insurance coverage to $750,000 (Ten times income). Not all insurance companies will insure someone with Parkinson’s, but some will. The cost will be higher but affordable. She should also check for the availability of additional life insurance at work if she can’t find coverage in the open market. Private ownership is always better. It won't end with the job.
Her health insurance continuation is at risk if she ever has to leave the job and can't qualify for private coverage because of the Parkinson’s. Keep the group health insurance on yourself as long as you can. Know that if you have to leave your job for disability or any other reason, Federal COBRA law gives you the option to continue the group coverage for up to 18 months at your expense. If you aren’t eligible for COBRA or your 18 months COBRA option runs out, Federal HIPAA law guarantees you the right to continue coverage on a state-approved private health policy with no medical questions. Pre-existing health problems, like Parkinson’s, must be covered as long as you have had continuous coverage for the past 12 months with no uninterrupted coverage greater than 63 days. If you qualify for and receive benefits for two years for Social Security disability, apply for Medicare and buy a good Medicare Supplement policy.
The continuity of her children’s health insurance coverage and premiums are at risk because of her Parkinson’s. Move your two children, if healthy, off your policy now and either onto Larry’s policy as dependents or set them up on their own personal policies. Making this change now while they are healthy doesn’t limit their choices to just COBRA and HIPAA options later if their health worsens.
The continuation of her disability coverage is at risk if she ever loses her job.
Continue your disability coverage as long as you can. If you lose your coverage because of a work layoff or because the employer quits offering the coverage, find out if the group plan offers a conversion to an individual plan. If so, take the option. Coverage is guaranteed with no exclusions for pre-existing Parkinson’s.
She will certainly need long-term care with Parkinson's but cannot qualify for long-term care insurance. Unfortunately, long-term care insurance will probably not be available to you. However, Larry can provide care for you for quite awhile. His ability to do that is an asset to you. Protect that asset with substantial insurance coverage on him in all major areas. Then, if you lose his help due to his death, his long-term disability, or his own need for long-term care, you will receive substantial compensation to help offset your own long-term care costs and reduce the drain on your assets.
Finding the money to pay for all the added insurance coverage that Larry will need as a result of our planning. Significantly reduce your health insurance premiums to help offset the increased costs in other areas. Assuming good health, look into changing your health insurance to a high deductible health policy, combined with a Health Savings Account. Then take the HSA contribution as a deduction on your personal income tax return. Include the kids in the coverage if they are both healthy. This change should lower your health insurance costs by thousands of dollars per year for each year your claims are less than your deductible.
Finding the money to pay for long-term care for Mary if Larry as her sole care provider dies before she does and she has to buy the services Larry provided elsewhere?
Buy $1 million of life insurance—$500,000 (ten times income) to replace your income and another $500,000 to care for Mary.
Finding the money to pay for both household living expenses and Mary’s long term care if Larry cannot provide the care due to his own disability
Buy an individual long-term disability insurance policy for the maximum coverage your income qualifies you (a $50,000 salary should qualify you for about $3,000 a month tax free). Get coverage to at least age 65. Be sure to include these optional coverages:
- Residual disability – pays you a proportional or partial benefit when your disability causes you to lose 20% or more of your income.
- Cost of living adjustment – so your benefit, when disabled, keeps up with inflation.
- Future purchase options – so you have the right, every couple of years, to increase your disability coverage as your income increases -- regardless of the state of your health.
Larry’s own risk of at some point needing long-term care combined with Mary's inability to provide that care for him.
Buy long-term care insurance on yourself because Mary won’t be able to provide the care due to her own disability. Make sure it includes a compound interest annual benefit increase and full 100% home healthcare.
Content for this section provided by Jack Hungelmann, who has had PD since 1996.