Do You Need Insurance?
YES...But Not Too Much.

Insurance is a very important component of personal financial planning. It is used to protect you against the risk of loss. In using this vehicle, you are transfering the risk of loss to another party, usually a large corporation. If you buy too much of it, you'll end up comprimising your financial future because you're not able to save enough (you'll be lining the company's pocket instead of yours). But if you don't buy enough, you take the chance that a major loss could financially ruin you. In my opinion, you should buy it for the big things in life that you cannot afford to lose, and self-insure for the rest. By self-insure I mean that you take the risk of the losses upon yourself.

Click the links below to learn more about the different types of protection available, how much you really need to have, and what kind may be best for your situation.

Individual Health

Group Health

Medicare Advantage

Medicare Supplement

Life

Stroke

Here is a recent story from the Wall Street Journal about smaller businesses having to decide whether to keep their insurance coverage or lay off employees.

By DANA MATTIOLI
Accelerating health-care premiums and sharp revenue shortfalls due to the recession are forcing some small companies to choose between dropping health insurance or laying off workers -- or staying in business at all.

Sheryl Weldon, owner of Commerce Welding & Manufacturing Co., saw health-insurance payments increase to more than $800 monthly per employee from about $200 five years ago. With monthly revenue down 10% since December, Ms. Weldon stopped providing health coverage to employees, including one being treated for prostate cancer, for the first time in the 64-year-history of the Dallas sheet-metal company.

Ms. Weldon and several of her 14 employees are going uninsured and the third-generation business owner is struggling with the emotional toll of the decision.

"I have a terrible time handling that I can't give them that coverage," says Ms. Weldon, 52 years old. "How do you expect someone to be at their job everyday and perform if they can't be healthy?"

As the Obama administration wrestles with broader questions of health-care overhaul, tough economic times are forcing more businesses to grapple with stressful questions about discontinuing coverage. Health-insurance premiums for single workers rose 74% for small businesses from 2001 to 2008, the latest year data are available, according to nonprofit research group Kaiser Family Foundation.

About 10% of small businesses are considering eliminating coverage over the next year, up from 3% in 2005, according to a recent survey by National Small Business Association.

That follows earlier declines in coverage, with just 38% of small businesses providing health insurance last year compared to 61% in 1993, according to the trade group. In 2007, 41% offered coverage. A Hewitt Associates survey found that 19% of all companies plan to stop providing health-care benefits in the next three to five years.

In March, after losing a large client that accounted for more than 50% of revenue, Kelly Reeves canceled health insurance for her three employees. Ms. Reeves, president of seven-year-old public-relations firm KLR Communications, says she had to choose between that and laying off an employee.

Ms. Reeves says turnover is a concern even in this slack job market, but she has told her employees she understands if they leave for a job with medical benefits. Should business pick up, she plans to reinstate health insurance but provide less expensive coverage.

"You want to attract good talent and benefits are important for that," says Ms. Reeves.

Even small businesses that continue to provide benefits say the question of dropping medical insurance is one of the most difficult they face.

Shanahan Sound & Electronics Inc., a Lowell, Mass.-based sound- and video-design firm, has seen a 50% decrease in monthly revenue since last year. Health-insurance costs increased by 14% this year to approximately $7,000 per month. Catherine Shanahan, president of the 16-employee firm, refuses to cancel the plan. "I really believe it would be the worst thing in the world I can do for morale," she says.

Karen McLeese, vice president of employee benefit regulatory affairs at business services firm CBIZ, has been steering companies that consider dropping insurance to less costly high-deductible plans and cost sharing.

"In today's environment, health insurance is extremely costly and to shift that burden to individual employees when raises and bonuses are trimmed really makes it a double whammy," says Dennis J. Ceru, professor of entrepreneurship at the Babson College Graduate School of Business near Boston.

Many of the employees losing insurance are priced out of private plans. Mr. Ceru says the cost for a family on an private plan can exceed $20,000 a year.

Mr. Morgan has looked into private health insurance but says he can't afford it. At the same time, he understands Ms. Weldon's decision to eliminate coverage.

"We needed to cut health care," says Mr. Morgan. "It's the only thing left to cut." Still, the decision rarely sits easy with those making it. "If I think about it, I can't sleep," says Ms. Weldon, who says that her father and grandfather had always covered 100% of health-insurance expenses.

Dana Korey, president of San Diego organizing company Away With Clutter, eliminated health insurance for her 15 employees in January.

"It was incredibly painful, these people are like family to me and I felt like I let them down," says Ms. Korey.

Amid the recession, many of her clients could no longer justify organizing jobs, which typically range between $3,000 and $7,000. Now Ms. Korey is changing her business strategy and creating a DVD on organizing. She is using the savings from canceling health insurance, roughly $5,500 monthly, to fund the venture.

Alternatives to Eliminating Health Coverage

*Consider Cost Sharing: Companies that are paying 100% of employee health care may want to switch to a cost sharing model where employees help defray the cost. Switching from a 100% health plan to a 50/50 split can significantly free up funds.

*Increase Charges: Many companies are increasing employee co-payments and deductibles.

*Shop Around: If your current provider is charging you the maximum renewal rate each year, shop around for a new provider. A health insurance broker can help manage your search, or you can search for better rates online.

*Manage Your Prescription Drug Plan: Many employers don't realize the amount of money they can save by requiring employees to use generic versions of prescription drugs, says Tim Stentiford of Hewitt Associates.

*Consider Wellness Plans: Fostering healthy eating and exercising habits can save employers insurance money by creating a healthier workforce.Dennis Morgan, a driver at Commerce who's being treated for prostate cancer, worries about how he will pay for surgery should he need it. The 60-year-old's $500-a-week salary makes him eligible for a program at his hospital where he can receive prescriptions at a low cost and pay between $5 and $10 for doctors' visits. But he would be required to pay a percentage of the cost of any medical procedure.

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