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When Is COBRA a Good Choice?

A friend of mine recently quit his job. The
position was a contract position, and the
insurance would not become effective for sixYou cannot alter the amount of coverage you
months. Since he has diabetes, he reallyreceive. If you were covered for the works
wanted to know what his options were. Howbefore you left, then you'll have to be
could he continue to receive health carecovered for the works until you cancel COBRA
without spending a small fortune in thecoverage.
interim?Of course, he began asking us about
these things, and we had to be honest withIf you leave the policy for any reason,
him. First of all, COBRA is a very usefulyou're done. Don't miss a payment! and don't
legal tool, if you have no better options.release yourself from the program until you
However, it is best to do some homework andare completely covered by another policy and
find a reasonable insurance company. You canthat  policy  is  in  effect.
then purchase a short-term policy for
yourself during the time that you will notYou only have a very small window of thirty
otherwise be covered. COBRA can be verydays from your last day to elect COBRA
expensive, and since you cannot reduce thecoverage.
amount of coverage you have with COBRA, you
may end up paying for items in your policyWhile COBRA coverage is offered to you, it
that you don't need simply to maintaindoes not take effect until you sign up for
healthcare coverage.Why do you need toit,  in  writing.
maintain healthcare coverage? Because most
policies have a clause about pre-existingAnd the final catch: You pay 100% of the
conditions. The terms for "pre-existing"monthly  premiums.
differ from policy to policy, so read your
current policy very carefully, and your newIn most places, the employer graciously
policy very carefully before making anypicks up a portion of the monthly premiums,
decisions.For pre-existing conditions, theusually from 40% to 75%. In very very rare
general rule of thumb is : If you've beencases, an employer will actually pay 90% or
without insurance for 30 days, any illness ormore of the monthly premiums. But if you
condition at the time you sign your newelect COBRA coverage, you agree to take on
policy is considered "pre-existing", and thusthe full monthly premiums, at your own cost.
is not covered by your current policy. WhichAnd don't be late with your monthly payment.
means, that any life-long condition -- suchIf you are, they can cancel you immediately,
as diabetes or epilepsy -- can be consideredand there is no second chance to sign up
pre-existing. Once your condition is labeledagain.Just because COBRA must be offered to
pre-existing, it can be excluded from youryou, doesn't mean you get it automatically.
healthcare coverage under the current policy,You must choose (in writing) to accept the
even if you pay your monthly premiums.BecauseCOBRA coverage, and fill out the necessary
of his medical condition, he found thatpaperwork. Speak with your HR department for
getting private insurance was going to costwhat paperwork your particular insurance
him a small fortune each month. Normally werequires.After all of this information, he
suggest that a person use a work policy fromchose to keep his COBRA insurance for the six
their spouse. Leaving your job constitutes amonths until his next insurance policy took
"Life Change", and can bypass most policies'effect. He payed over $1000/month for
once-per-year change of coverage clause.himself, wife and four children. It sounds
However, his wife does not work. He is thelike alot, but in order to prevent any
sole income provider for his household."pre-existing condition" clauses, and to be
Taking all of this into consideration, weprepared should something happen during the
definitely suggested that he take advantagesix-month window, he chose to pay the price
of the COBRA coverage.What is COBRA? It is aninstead of rolling the dice.If you find
acronym for Consolidated Omnibus Budgetyourself looking for a new position, or just
Reconciliation Act. But that usually meansan exit of your current job, be aware that
nothing to laymen like us. In short, it is aCOBRA exists to help you. In many cases you
continuation of benefits federal act. Thecan find alternate forms of insurance, such
part that effects us states, in short: If youas a spouse's policy or a less expensive
are insured at work and there are more thanprivate label. But in some cases, COBRA
20 employees, they must offer the samereally is a good alternative. It can cost you
insurance coverage you were getting undera little in the short-term, but saves your
their policy for up to 18 months after yourinsurance history in the long term.Jerry
last  day.  Here  are  the  catches, though:Hanel is co-owner and Technical Advisor to
InsuranceQNA.



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