Is Low-Cost Health Insurance Worth It?

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iCan's plans, Shatz says, are based on studies that found that 95% of people with major medical health plans did not have expenses that exceeded their deductible, and are geared for people who can't afford or get coverage. Shatz calls iCan's medical plans a "concierge service that gives you access to the medical community before you need it and when you need it, and holds your hand through it and helps you negotiate the pricing to what it should be."

"It's a very common-sense program for people who don't have another choice," Shatz says. "It beats the heck out of having nothing."

Pushy Marketing

Advisers recommend ignoring outfits that use such strong marketing-driven tactics as iCan and 123 Health Plan, both of which offer plans through enrollment in a nonprofit organization called Health Care Credit Union Assn. (HCCUA) The HCCUA's other membership benefits include entertainment, dining, movie and travel discounts, and roadside assistance.

Consumers should understand exactly what services a health plan covers and estimate what their out-of-pocket expenses will be. Steven Weydert, a financial adviser at Bowyer, Weydert Wealth Planning Partners in Park Ridge, Ill., says his No. 1 rule is to insure only things you absolutely can't afford to lose and to take as high a deductible as you can afford. A good place to compare health plans, he says, is eHealthInsurance.

If you lose your job during these tough economic times, you can sign up for your employer's COBRA health-care plan for the next 18 months. But some similar plans cost less. "COBRA might be more expensive than a policy that suits your needs," Kenison says. "Don't assume COBRA is the best way to go." Start shopping when you lose your job, as it usually takes two to four weeks to get a policy in place, he says.

Get Term Life

Amid the economic squeeze, it's vital to address other insurance needs, too. Consumers should make sure they have enough life insurance, which replaces income when you or a family member dies. Weydert recommends buying a term life policy covering 10 times your gross salary. If you want to be more conservative—and depending on your age—Kenison advises getting a term life policy that covers 20 times what you earn to keep your lifestyle going. So if you earn $10,000 per month, or $120,000 per year, you should have $2.4 million in term life. "This would be enough to generate $120,000 per year, using a 5% cash flow, and hopefully, you would never touch the principal," he says. That amount can be reduced, he points out, if a person can expect some other sources of income, from Social Security, say, or a pension.

Kenison also likes term life policies that are portable—that is, you can take the policy with you if you leave or lose your job. Most companies offer a $50,000 policy at no cost, and you should be able to buy an affordable policy with additional coverage on your own. Weydert compares life insurance policies and rates for his clients at Insure.com.

Individual disability insurance (BusinessWeek.com, 8/4/08) is also a good idea, advisers say. Large corporations usually offer an employee disability plan that covers 65% to 70% of your salary if you get hurt and can't work. But your net benefit after taxes, Weydert figures, will be closer to 45% of your gross income. "Your standard of living will go way down if you take a claim, so you need another policy to bring you back closer to whole," he says. Look for an individual disability policy that covers 65% to 70% of your gross income. Also, make sure the insurance provider has a liberal definition of disability—which will help you qualify as disabled and get benefits, Weydert says. And look for an insurer with high ratings, such as John Hancock, he says.

The loud pitch from Billy Mays might entice some consumers to buy insurance out of fear, without understanding the policy. After you shop around, find an agent who will take the time to explain the policy to you and don't buy until you understand it. Remember, says Marc Vorchheimer, an adviser at Integrated Financial Consulting in Spring Valley, N.Y.: "Your goal is to protect against catastrophe."

McCormack is senior producer for BusinessWeek.com's Investing channel .