Job at risk? Save your insurance

If your job is even slightly shaky, now's the time to schedule a medical checkup, get your teeth fixed and look into coverage alternatives.

By Liz Pulliam Weston

Americans are dependent on their jobs for more than income. Many of us get our health, life and disability coverage through our work.

So as the risk of job loss rises during a recession, so, too, does the risk of losing coverage that can protect us against catastrophic events.

In fact, 4.2 million people could lose their health insurance in the coming months, estimates the Center for Economic and Policy Research, on top of the 45 million the Census Bureau says already lack coverage.

Those without health insurance are one illness or accident away from financial devastation. What's more, as I detailed in "A survival guide for the uninsured," people without health insurance are more likely to die prematurely and suffer lower lifetime earnings as poorer health interferes with their ability to make money.

Losing life or disability coverage can be just as disastrous for a family's finances. Here's what to do to increase the odds you'll stay covered and solvent in a downturn.

Help with health insurance

Take advantage of your health coverage while you've got it. If you have a good health plan now, use it to catch up on any medical care you've deferred, such as physicals, health screenings (mammograms, colonoscopies, etc.), dental work and new glasses. If you're not sure what you need, talk to your physician.

This care will involve some out-of-pocket expenses at a time when you're probably trying to conserve cash, but you'll have to spend a lot more if you lose your job and have to purchase health care on your own. Speaking of which . . .

Use COBRA as a last resort. If you lose your job, federal law typically requires that your employer allow you to continue your health coverage under COBRA rules. The catch: You have to pay the full premium, which is much more than the discounted premiums employees usually pay, plus an administrative fee of up to 2%.

To give you some idea of the cost, the average worker paid $273 a month in 2007 for family coverage or $58 for single coverage, according to the Kaiser Family Foundation, which tracks health insurance trends. Yet the actual total premium for health insurance averaged more than $1,000 a month for family coverage and $373 a month for singles.

If you and your family are healthy with no pre-existing conditions, you probably would be better off buying a high-deductible policy on your own. You have some time to shop around -- you're allowed 60 days to decide whether to sign up for COBRA benefits, and the coverage is retroactive.

To find an individual policy, start with the Blue Cross-Blue Shield provider in your state. Career coach Nancy Collamer, the author of "The Layoff Survival Guide," also recommends checking out eHealthInsurance and DentalPlans.com.

If you can't qualify for a cheaper policy, you may be stuck with COBRA. If you can't swing the premiums because your income is too low, you may be able to get coverage at least for your children and perhaps for yourself. Start by checking InsureKidsNow.gov.

Reduce your out-of-pocket medical expenses. Regardless of the type of coverage you wind up with, you can ratchet down the costs of care. Readers who post on the Your Money message board recommend the following:

• Stay as healthy as possible. Eat right, exercise, get enough sleep, maintain a good weight, take a multivitamin, brush and floss your teeth, quit smoking, drink in moderation or not at all. "We believe that good health comes from a healthy lifestyle," wrote "lone banker," who along with his wife is covered by Medicare. "We will be 69 this year (and), except for our annual checkup, we have minimal medical expenses."

• Use your insurer's mail-order pharmacy. You could save one-third to one-half of the money you now pay for your prescriptions. Mail-order pharmacies affiliated with insurers typically provide a three-month supply of a drug for the price of two or even a two-month supply for the cost of one month. You also can buy many generic prescriptions at Target or Wal-Mart for just $4 a month.

• Use discount or online prescription-eyeglass stores. Buying glasses from your eye doctor is the most convenient way to go, but it's also among the most expensive. Poster "Robert26" buys glasses every two years from a discount place that also performs a basic eye exam. "If there is a problem with my eyes they tell me to go to (an ophthalmologist)," he wrote. "Glasses are about half of what they are at (an ophthalmologist's office) and the same quality. I also use coupons if they are sent to me or in the paper."

• Use "urgent care" clinics instead of emergency rooms. A phone consultation with a doctor is another way to reduce costs.

• Understand your coverage. Read the summary your insurer provides. If you're not sure whether something's covered, call your insurer and ask. Don't be afraid to question your doctor's recommendations for tests and screenings to find out what's really necessary and what it might cost you. "Some things are not considered part of a yearly physical," wrote poster "DramaQ1015," "and just because your doctor wants to do it then, don't assume that you won't be paying out the nose for it."

• Negotiate. Ask for discounts if you pay cash or have a substantial deductible.

Employer life insurance isn't a great deal

Life insurance is another key coverage for many families. If anyone depends on you or would suffer financially should you die, then life insurance is a must. To determine how much coverage you should have, use MSN Money's Life Insurance Needs Estimator. If you need insurance, you may need a lot: A family with young children may need coverage that's 10 times the parents' annual income.

Even though your employer may offer coverage, life insurance at work is generally a bad deal all around. This kind of coverage is:

• Inadequate. Most employers that provide coverage as part of your benefit package give you $50,000 or the amount of your annual salary. If you need life insurance, you likely need a lot more.

• Not portable. Coverage typically ends when you lose your job.

• Expensive. If you can buy more than the basic coverage through your employer, you'll probably overpay, particularly if you're younger and healthier than your company's average employee, because you're being charged more to cover their risk. "The people who are left in the group coverage pool," said Byron Udell, the CEO of insurance-comparison site Accuquote, "are those who are too sick or too lazy to shop around."

• Variable. Group life insurance is typically offered in age "bands," Udell said, with the price increasing each time you pass a benchmark: 35, 40, 45, etc. By contrast, you can lock in a low payment for 10, 20 or 30 years if you buy your own level term insurance policy. ("Level" means the premium stays the same for that 10-, 20- or 30-year period; "term insurance" is pure insurance with no investment component.)

The solution: Buy policies on your own if you can. Now is a great time to buy, Udell said: Term life insurance prices have never been lower. (See "Suddenly, life insurance is cheap".)

"In 1994, a 40-year-old male who bought a $500,000, 20-year level term policy would have paid $995 a year," Udell said. "Today that policy is $350."

Prices have fallen so far that many people can buy a cheaper policy to replace one they already have, even though they're older, Udell said. (Read "Refinance your life insurance" for tips.)

Anybody who bought life insurance 10 years ago, he said, should be looking to replace it.

Some guidelines:

• Buy enough coverage. Life insurance agents love to tout the investment returns and other features of so-called cash-value life insurance, but such coverage is expensive. The premiums can be 10 times as much as term life insurance. Consider such policies only if you can afford enough coverage; otherwise, stick with term life.

• When in doubt, go long. Udell likes 30-year policies for their flexibility. The rates are somewhat higher, but you've locked the premiums in for longer. You can always let a 30-year policy lapse after 20 or so years, he said, if you no longer need the coverage. But if you buy a 20-year policy and it turns out you need coverage longer, you'll pay through the nose. Rates typically skyrocket after your term expires.

• Shop around. You can get quotes from Accuquote and Insure.com, among other sites. Chose a financially strong company; A.M. Best, Standard & Poor's and Moody's all rate companies' financial strength.

Forgotten but crucial: Disability insurance

The last piece of your insurance coverage is the one that's often missing: disability insurance.

You're actually more likely to be disabled than to die during your working years. In fact, nearly one out of three Americans age 35 to 65 will suffer a disability lasting at least three months, according to the Health Insurance Association of America. But most Americans don't have sufficient disability coverage.

If you're still working, you're probably covered by worker's compensation insurance, which can pay medical costs and provide some income, but only if you're injured on the job. Your employer may offer coverage that covers disabilities suffered off the job, but this coverage is usually tied to your employment. Lose your job and you'll probably lose your coverage.

Buying coverage on your own is an expensive proposition, and it may be impossible to get if you have health problems.

So here's an approach to consider:

• Opt for long-term-disability coverage if your employer offers it. This is generally the least expensive way to go.

• Try to supplement the coverage with an individual long-term-disability policy. Insurers that offer this coverage include Unum, Cigna and MetLife.

• If you lose your work coverage, try to expand your individual coverage. You may be able to boost your monthly benefit for an additional premium.

• If you're buying a policy on your own, buy smart. Get the highest monthly benefit and longest payout period you can, but keep costs down by choosing a longer waiting period before benefits kick in. For more information, read "Disability insurance can save your life."

Liz Pulliam Weston's new book, "Easy Money: How to Simplify Your Finances and Get What You Want Out of Life," is now available. Columns by Weston, the Web's most-read personal-finance writer and winner of the 2007 Clarion Award for online journalism, appear every Monday and Thursday, exclusively on MSN Money. She also answers reader questions on the Your Money message board.