Allworth Advice: How does Medigap insurance work?
Question: Robert in Hamilton: I’m struggling to understand how Medigap insurance works? And is it something I have to buy once I sign up for Medicare?
A: No, Medigap insurance is not required to buy once you’re enrolled in Medicare. But it can be a helpful tool. First, though, let’s step back and explain the idea behind a Medigap policy.
Medigap, also known as Medicare Supplement Insurance, is a type of insurance policy sold by private insurance companies that helps fill in the expense ‘gaps’ that Original Medicare (Parts A & B) doesn’t cover. Because here’s something many people don’t realize: Original Medicare only covers about 80% of health costs for the average enrollee. A Medigap policy can help pay for some of the remaining costs, such as co-pays, co-insurance, and deductibles.
Medigap policies are standardized, and there are typically about eight different plans from which a new Medicare enrollee can choose (denoted by letter of the alphabet), all with varying benefits and costs. You pay a monthly premium, which is in addition to your Part B premium. This year, the average monthly premium will be $155 according to the financial website ValuePenguin.
(Two important notes: A Medigap policy only covers one person, so spouses need to buy separate policies; if you’re enrolled in a Medicare Advantage Plan, a Medigap policy is not available to you.)
If you decide to buy a Medigap policy, the best time to do so is during your six-month Medigap Open Enrollment Period which begins the month you turn 65 and are enrolled in Medicare Part B. During this time frame, you are guaranteed to be approved for any Medigap policy sold in your state, regardless of your health. If you miss this window, there’s no guarantee you’ll qualify for a policy.
Here’s The Allworth Advice: If you can afford the additional cost, a Medigap policy can be a smart way to supplement your Original Medicare costs. Just be sure you look at all the options carefully. You can compare plans at Medicare.gov.
Q: K.C. from Ludlow: My son’s credit score is about 690. But he told me he’s recently missed a few credit card payments. Do you have any idea how badly this might hurt his score?
A: We can’t give you an exact answer because credit agencies are pretty tight-lipped about how they calculate credit scores. But we can give you a general idea. And, unfortunately for your son, it could be a pretty significant drop depending on how late he was with the payments.
According to the website Credit Karma, someone with a credit score similar to your son’s will see anywhere from a 25 to 85-point drop if a credit card payment is more than 30 days late. And once a payment is more than 90 days late, the score will fall even more. The situation will just get worse if this type of delinquency occurs multiple times.
The Allworth Advice is that if your son thinks he’s going to be late with a payment again, he needs to try to settle it ASAP. That’s because, in most cases, a credit score won’t be affected if a payment is just a few days late. But a lot of damage has likely already been done. The only way to claw his way back to around 690 is to start making payments on time (and, ideally, in full), as well as only using about 10 to 30 % of his available credit each month. And he needs to be patient: Credit score recovery time from missed payments typically takes about 18 months.
Every week, Allworth Financial’s Amy Wagner and Steve Sprovach answer your questions. If you, a friend, or someone in your family has a money issue or problem, feel free to send those questions to yourmoney@enquirer.com.
Responses are for informational purposes only and individuals should consider whether any general recommendation in these responses is suitable for their particular circumstances based on investment objectives, financial situation and needs. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional adviser of his/her choosing, including a tax adviser and/or attorney. Retirement planning services offered through Allworth Financial, an SEC Registered Investment Advisor. Securities offered through AW Securities, a Registered Broker/Dealer, member FINRA/SIPC. Visit allworthfinancial.com or call 513-469-7500.
This article originally appeared on Cincinnati Enquirer: Allworth Advice: How does Medigap insurance work?
