Cover Your ASSets: 3 Critical Health Insurance Mistakes Most Young Entrepreneurs Make

361586663_8e04f6a1baA Note From Bradley: I recently sat down with a friend and client of mine, Butch Zemar.  Butch owns an insurance agency and I asked him to share some of the biggest mistakes young business owners make when it comes to insurance.  That turned into asking him to write a guest post because I just happened to be making these mistakes!

Health insurance is not a sexy topic for most young entrepreneurs. Most jump into things too fast, just to get some in place and they are ready to move on. In order to protect everything you are working for you need to take a small amount of time to plan ahead. Spending a little more time on planning can prevent something drastic from happening to you and your business.

Oblivious to What They Bought

The first mistake young entrepreneurs make is they have no idea what they just bought. They figured… “This is a very well known company, my parents had them when I was growing up so what can go wrong?” Some may recite a deductible and a co-pay but what they don’t realize that they may be over paying or under paying their coverage. During times of building a business the last thing we need is to spend more than we have to or spend too little and find out later it costs us more than we can chew.

Not all insurance plans are the same. There are internal limitations in a lot of plans that can be prevented so you are not vulnerable to 10’s of thousands of dollars in addition to your original out-of-pocket maximum. There are countless stories that people jump into a policy and at the time of claim find out how it really works. Be sure to consult with a health insurance expert when making a decision.

They Get TAXED!

The second mistake young entrepreneurs make they don’t look at the full tax advantages they have being self-employed. First off most can write off what they pay for health insurance premiums on their personal taxes and young entrepreneurs miss this boat! Check with a tax advisor to make sure you itemize it right for your situation. This will lower your cost of health insurance making it more affordable. On top of this, you can get what they call Health Savings Account plans to reduce your costs even further. This type of plan allows you to deposit money into a savings account that is qualified for medical expenses. You have control over this account as you would with any personal account. The money you put into this account can be deducted from your taxes. Depending on where you choose to open this account will determine what else you can do with this money.

Some accounts will only build interest like a savings account. Others will allow you to invest in mutual funds and other stock market portfolio items. Some other accounts that are HSA qualified will allow you to take the funds in the account and invest in Real Estate. Each account has its own restrictions and limitations. What makes it better is any growth in the account is tax deferred until you decide to take the money out of the account. In addition to this you can use the funds in the account for future medical expenses. You can either use the funds as the medical expenses come up or reimburse yourself for the medical expenses at any point in time in the future. I recommend reimbursing yourself in the future so you can allow your money to work harder for you.

Not Covering Your ASSets

The third mistake we make is not protecting our assets if we get too sick or hurt to work. You can have the best health insurance but if you need to take yourself away from the business most entrepreneurs don’t make any money. How will your business run? How will you pay your bills? What if you need to replace yourself until you get well enough to get back in the ‘game’ of things? You are probably thinking ‘I’m young, it’s less likely to happen’. The average couple has an 83% chance of getting cancer in their life time. Since critical illness doesn’t discriminate, it can happen to you at anytime. There are many young men and women who get cancer or some type of major heart disease in their 20’s. As entrepreneurs we need to protect everything we are working hard for. I’m not talking about disability insurance. Disability insurance is based off our income. If we are still in the start up of your company you may not be making much income. This won’t allow enough to come to the table when you need it the most.

What we need is what’s called Critical Illness Insurance. It pays out one lump sum upon diagnosis of a critical illness. You pick how much you want or how much you need not tied to how much you make. Some policies go up to $200,000 which is paid within two weeks of diagnosis. How will this impact your business? How will this impact you personally? The last thing any entrepreneur needs is to lose their business because they didn’t think it was wise to plan ahead.

{photo by: Subconsci Productions}

Butch_Portrait5This post was written by special guest expert Butch Zemar.

Butch Zemar is the Owner of Elite Benefits where he has been a leading health and life insurance expert for small business owners and entrepreneurs in the Chicagoland area.  Has a passion for scuba diving and has dove many exotic places around the world. You can find him at: