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legal warning: The information here should not be understood legally as financial advice. If you believe anything on this site is in error, please contact me. I am always open to corrections, new ideas, and new opinions...

Using InfoMed to compare prices on insurance

As an American Jew, I have an aversion to paying retail; as an Israeli, my biggest fear is being a friar.  So I was particularly thrilled when I found infomed’s insurance price comparison tool.  One of the most common questions people ask when buying insurance is “how do I know I am getting a good deal?”  This tool allows you to compare various prices for insurance plans, listed according to the breakdown I offered in my last 2 posts about seudi insurance and the different kinds of health insurance in Israel.

The site is pretty close to perfect.  It obviously doesn’t include any extra you’d pay for a preexisting condition, nor does it update according to the CPI every month, but it’s a great reference to use before you buy insurance.  Unfortunately, this site is only in Hebrew, so if you don’t speak the language very well, you may need to knock on your neighbor’s door for some assistance.

Remember, you won’t get a discount unless you ask for it.  So next time your insurance agent shoots out a number, take a minute to find out what the retail price is and insist on paying less.

Speaking of which, if anyone needs health or seudi insurance, please feel free to contact me at jonnydegani@gmail.com for a quote.  I am not an agent (yet) but my boss works with just about everyone and gives a discount to whoever I send his way.

the different kinds of health insurance in Israel

The first time I was offered to buy health insurance in Israel, I pushed it aside.  Isn’t everyone covered for everything here?  Well, kind of, but not exactly.  This post seeks to explain the different levels of insurance in the country and what kind of coverage each layer provides.

Level One: Bituach Leumi (through your Kupat Cholim):  Thank God, Israel is a first rate western country that provides an extraordinary level of medical care for all of its citizens.  If an emergency comes up, you can go to the hospital and pay nothing.  When you need to see a doctor, you can just sign up online and the cost is very small co-pay.  Most medicines are subsidized, as are surgeries and other treatments.  But there are still some things that aren’t covered.  Instead, they are covered by the next two layers:

Level Two:  Additional Health Insurance through Kuppat Cholim:  If you have something like Magen Zahav of Meuhedet Adif, you have what is called shaban (שב”ן – שירותי בריאות נוספים).  Shaban covers you for additional medicines that affect quality of life (ie treating a kidney stones in a way that hurts much less).  Shaban cannot offer any additional protection for anything that can save your life.  For that, you’ll have to turn to…

Level Three: Private Health Insurance:  Almost all the insurance companies in Israel (not kuppot cholim) offer private health insurance.  There are usually three levels:  The lowest level of this insurance covers you for a certain amount towards transplants and surgeries abroad in the case of emergency.  The next level offers a slightly higher level that covers a wider range of emergencies not covered by kupat cholim, as well as certain quality of life treatments as well.  This level is usually called something like mashlim shaban – since it complements (להשלים) the insurance offered by the shaban – where the shaban pays for a part, the private insurance picks up the rest of the tab.  The highest level covers a large plethora of emergencies and illnesses and pays you irrespective of whatever is covered by kupat cholim and the shaban (in fact, sometimes it will pay you extra for having gone through something, even if the shaban paid for it as well).  Just to be clear, while almost all insurance company have the three kinds of programs above laid out above, there are variations; some cover more of X, some exclude Y, but the structure still holds.

In addition to the basic insurance laid out above, there are several kinds of “riders” or mini-policies which you can stick on your medical policy.  Below is an outline of the five most common types and which ones I think are worthwhile:

1)      Ambulatory – this covers preventative medicine, including check-ups, CTs and MRI.  Of all the riders, I consider this to be the most worthwhile.  It does cost a bit more, it does not cost nearly as much as…

2)      Alternative medicines – if you’re a naturalist or hippy, go for it.  If not, you can skip it.  Of all the riders, this is usually one of the most expensive (because the client will probably use it for every sickness).

3)      Personal doctor – this means that if you are suffering an illness, you have a personal case file and a doctor from the insurance company who monitors the progress so you know where you stand day or night.  Some people consider this worthwhile, while others do not.  It is a fairly inexpensive rider.

4)      Expedited medicine – this rider is a hypochondriac’s dream.  In the event of something wrong, you get to go to some facility or specific hospital where a team headed by someone like House MD finds what’s wrong with you and gets back to you within a few days.  This rider isn’t so expensive, but most people opt to skip it.

5)      A lump sum in case of contracting a specific kind of sickness (ie NIS 100,000 in case of cancer).  The cost depends on how much you want the sum to be.  When opting for this, and I recommend you do, opt for a sum that will allow you to get yourself and your family in order as the chaos of a sickness begins.  For example, NIS 100,000 is a good amount for making sure that you are covered until disability insurance kicks in and for your family to adjust as you go through a crisis.  To be clear, this money will not cover the cost of treatments abroad, as they usually cost much more than what is provided by these policies; you need to make sure the insurance covers the medical need and that this ride only covers the transition period for you and your family.  If you’re wondering, this is a kind of teunot ishiyot – personal injury – insurance.  In fact, the reason I am very critical of personal injury insurance generally (see last post) is that I think it should be bought in a policy like this rather than as a standalone.  Buying it with this puts it in the specific context which helps the client choose the proper coverage he or she needs and doesn’t buy any unnecessary insurance.

There are dozens of other riders.  Some are simple add ons, like a rider that provides a personal doctor for cancer, or a rider that ensures that all of your medical files are on a disc-on-key for immediate use when going to the hospital.  There are also elaborate riders such as one that pay for a TV in the hospital, allows the sick person to order take away once a day, have his or her spouse stay at a nearby hotel and even pay for a temporary secretary to reschedule all of the person’s meeting while he or she is in the hospital.  Every insurance company has its own specific riders and can choose to only allow certain riders with certain policies. 

A final word on this subject.  Some of you have the option of opting for additional health coverage through your work.  This is usually a great idea and the cheapest way to get a good policy at a fraction of the price.  A group policy includes at least 50 people at a single workplace – so you can’t just make a group out of you and your neighbours.  The only downside to a group insurance policy is that you can’t add any riders that aren’t in it – you either take or leave the package.

If you have any questions about the various policies or are interested in getting some insurance for your family or a group policy for your business, feel free to contact me at jonnydegani@gmail.com.

Seudi (long term care) and Teunot Ishiyot (personal injury)

If I were to die tomorrow, my family would suffer financially; it is therefore imperative that I ensure that my salary could be replaced and my family could continue to live the kind of life we live today.  But if I were disabled, things would be much tougher.  Not only would my family have to replace my salary, but they would have to pay more to have someone take care of me.  This is where seudi insurance comes in.

A person becomes “seudi” (in need of long term care) in one of three ways:

1 – A person has a mental affliction (ie alzheimers)

2 – A person cannot control his or her ability to go to the bathroom, plus he or she cannot do one of the following five things: (a) eat and drink (b) get up and lay down (c) be mobile (d) shower and (e) dress and undress

3 – A person cannot do three of the following five things: (a) eat and drink (b) get up and lay down (c) be mobile (d) shower and (e) dress and undress

The insurance guarantees that if you qualify as seudi, you’ll get a certain amount of money (ie NIS 5,000) every month for 3 years, 5 years or life (FYI like disability insurance, this usually kicks in after a few months).  I personally do not understand why anyone would buy it for 3 or 5 years; if you’re disabled as outlined above, you need a caretaker for life.

Some of you are probably already saying “hey, don’t I have that from my Kupat Cholim?”  Well, yes and no.  Kupat Cholim offers its members to sign up for a collective policy with a different insurance company, which keeps the person insured for 5 years and insures the member in case of disability above for payments for 5 years (usually, as always, some exclusions apply).

The other option is to buy this insurance privately.  And here there are two options.  You can choose to buy it at a rate that will change every year (start out cheaper and pay more as you age) or buy it at a fixed rate (that only rises with the CPI, not due to your age).  The fixed rate also allows you to have a reserve amount set up, so if you stop paying in one day, you’ll still be covered, but not as much.  For example, if you’ve been paying in from ages 30 to 50 and then stop paying, but get injured at 51, you’ll still be covered, but instead of getting NIS 5,000 a month, you’d get NIS 4,000 (this is an example, not exact).

If you have the kupat cholim policy, you can buy a private policy that complements it.  For example, kupat cholim will pay you for 5 years; you can buy a policy that pays you every month for life after 5 years.

A similar insurance with very important differences is teunot ishiyot.

Teunot Ishiyot offers the insured a sum of money in the case of an accident.  There are five types:  K1: a certain amount of money for death from an accident (from an accident means within 12 months).  K2 allows for the sum in case of disability as well.  K3 gives a weekly amount for disability for up to 2 years.  K4 expands accident to include a particular list of sicknesses (ie cancer).  K5 expands the list to include all illnesses unless stated otherwise (ie all illnesses except Lou Gherig’s Disease.)

Personally, I don’t see why I’d need to insure myself in the case of an accident any more than in the case of any other kind of death.  Does my family suffer less financially if I drop dead than if I get hit by a car?  And the same goes for disability and sickness (I’ll get to the other kinds of health care soon for extenuating circumstances). 

Those who sell this will tell you that that this insurance offers you a big payoff in the case of an accident and illness, which you may like.  But insurance isn’t roulette; insurance is about covering you in the case of financial threat; you shouldn’t be playing it to hit the lottery as you, God forbid, get cancer.  There may be some cases when this is necessary, but your agent better have a very good reason specific to your case.

The primary advantage this insurance offers over others is that unlike seudi and disability, which generally carry a three month waiting period, this insurance kicks in after 7 days (14 if only K1 and K2).  So in short, if you have three months expenses on hand (which is an important goal), then you can save money and skip this insurance.  If not, then it may be worth to buy this insurance until you compile the money.

In summary, this insurance isn’t like health, life, disability or seudi.  This is the one kind where you really have to look with a good eye and ask yourself if you need this kind of coverage.  For many people, this coverage is superfluous and sold in place of seudi, which provides support the real support needed in the case of a long term disaster.  For others, particularly those without any savings, this may be helpful.

Life and Disability Insurance

A while ago, I posted about the insurance in your pension, discussing how much insurance you’re already paying for, and therefore do not need to purchase.  In this post I plan to review the common misconceptions that people have about insurance and what is and is not necessary to buy in addition to the insurance in your pension:

Life insurance:  Before I even discuss how much life insurance you need, one thing must be made clear.  Life insurance allows the insured to take care of his dependents in the case of his or her demise: no dependents  no need for life insurance.  If you have no children, parent, spouse, sibling etc. that would suffer financially in the event of your death, there is no need for insurance.  If you set up your pension correctly, you should have your spouse getting 60% of your salary and each child getting 20% until age 21 or 18.  You only need to purchase additional life insurance if this will not be enough.  Similarly, if you do not make a full time salary (for example, a housewife), then you would need to get life insurance.  I want to stress this, because most people think the opposite is true.  If Dad makes the bucks and Mom stays at home with the kids – Dad doesn’t need additional life insurance but Mom does.

When you buy life insurance, you usually buy a set amount (ie 500,000) that the beneficiaries will receive upon death.  The best way to decide how much you need it to purchase insurance for the amount of money you’re going to need for 10 years.  For example, let’s say a housewife allows the kids not to be in tzaharon (saving 2,000 a month) and watches the kids while the husband is at work and prepares dinner (another 5,000 a month).  This means that you’d need 7,000 x 12 x 10 = 840,000 to replace her in the event of death.  I obviously oversimplified this, but as a general rule, writing out the cash flow you would need will help you determine how much you need to buy.

If a spouse works part time or only pays in a pension from some of his salary, then insurance should be bought to cover the rest.  For example, let’s say I make 10,000 but only pay a pension on 6,000 (the rest is a bonus that I get every month).  Or let’s say I only work a 60% job and earn 6,000.  Either way, I’d need to get additional insurance for 4,000 x 12 x 10 = 600,000.

Disability:  Your insurance can cover up to 75% of your salary, which is probably enough to get by.  Like life insurance, your pension should cover this if you set it up right, and like life insurance, it is the stay at home spouse who will need an arrangement made to cover her in the case of disability.  When setting this up in your pension it is called nechut (נכות).  When purchasing it on your own it is called ovdan kosher avodah (it is also called that if you have bituach menhalim).  Usually, this insurance only kicks in after three months, so you should still have three months expenses put away in case something happens.

In my next post I’ll cover probably the most important insurance you don’t have, seudi, and the much less useful that too many Israelis are sold, teunot ishiyot.

Initial Results of Billing Companies Poll

A few weeks ago, I posted up a link to a polldaddy poll I created asking people about different billing companies in Israel.  Despite my best efforts including 25 linkedin groups and a front page spot on Janglo, I only got 13 responses.  Nonetheless, 14 is better than 0 and I actually found the results to be surprising – so without further ado. 

5 of the 14 responses were from people who worked with Sveram.  The reviews were mostly lukewarm to cold.  While Sveram pays on time and is easy to use, there seem to be issues with customer service.

4 of the 14 responses were for Yeul Sachir.  2 people loved them, one was lukewarm and one hated them.  Yeul Sachir is the most Anglo friendly, but some have issues with being paid correctly.

4 of the 14 responses were for Taxpay.  This was a shock to me; I didn’t know many Anglos used Taxpay, but according to these responses, they do and they love it.  Taxpay had the best feedback with the only criticism being that one person though the system was a bit complicated.

1 of the 14 responses was for Atzmai Sachir giving it a lukewarm to positive review and not much detail.

Do you know anyone else who worked with a billing company?  Ask them to fill out this simple 3-question questionnaire.  I’ll post more results when we get to 30.

Poll: Billing Companies in Israel

A while ago, I published a post about billing companies and freelancing in Israel.  Since publishing this post, I have received dozens of e-mails asking me which service I preferred.  Since I only worked with one company, I clearly cannot give any personal recommendations and opinions about all the companies. 

If you worked with any billing company, or know someone who has, please fill out or ask him/her to fill out the poll at this site  (http://jonnydegani.polldaddy.com/s/billing-company).  If you worked with more than one company, please fill it out once for each company.  I will publish the results and analysis next week.

Thanks,

Jon

Pensions Part Two: The 5 Types of Pension Plans

Some introduction:  Until the mid 90′s, Israeli pension plans were defined benefits plans, where one would pay into the pension plan based on his or her salary, and would receive an annuity (monthly amount received) upon retirement as well as a certain level of insurance.  The amount of the monthly annuity was based on the amount of years paid into the pension and the last salary received by the employee (or in some cases, your average salary).  Back then it was easy to choose a pension; one would compare the benefits of the plans and pick the one he or she felt best suited his or her needs.

In the mid 90′s the investment companies complained to the Israeli government about having to take responsibility for their own work and successfully lobbied for a defined contributions system, a system where the annuity one gets upon retirement is based on how much money is in the fund.  Okay, now in English.  The money I deposit into my pension fund is invested for me.  When I begin to retire, the pension fund manager looks at how much is in my fund and based on that (and a few other factors) decides how much I get as an annuity (if you’re wondering, you can get some as a lump sum, but that just affects the amount you’ll get for an annuity afterwards.)

There are five types of Pension Plans

(1)  – קרן פנסיה מקיפה חדשה  – also called זכאיות

קרנות חדשות are the most common type of pension fund and will be the major focus of this series.  קרנות חדשות are defined contributions plans that also include some level of life and disability insurance, earning them the label as a comprehensive (מקיפה) retirement plan.  These funds are entitled (זכאי) to invest up to 30% of the assets in government subsidized bonds that pay a dividend of 4.86%.  Due to the government subsidy included in the fund, workers may only invest up to 20.5% times twice the average wage into these funds each month.  Any additional money set aside for retirement must be invested in one of the following funds.

(2)  – קרן פנסיה כללית

קרנות כלליות pension fund that do not include any insurance and is not entitled to government subsidized bonds.  These are typically used by three groups (1) someone who wants to invest in a particular כללית fund and has no need for insurance and (2) upper middle class and wealthy individuals who make more than twice the average wage and therefore cannot put all of their money into חדשות and (3) people who want to put their money in a fund by themselves from money they earn other than the regular money put into ther pension (ie from commissions).  In the past, people would also invest in these funds to avoid paying fees on deposits, although the new fee laws of 2013 made this mostly irrelevant (see the upcoming post about fees)

(3) – ביטוח מנהלים

ביטוח מנהלים, manager’s insurance, is an alternative arrangement where money is put aside for a salaried worker’s pension in a direct contract with an insurance company.  Practically, this means that there is more room for variety when it comes to insurance and the money can be invested in a different way than the other קרנות פנסיה.

To understand the primary appeal ביטוח מנהלים, one must understand its most important feature in the past, a fixed מקדם המרה.  The מקדם המרה is the number by which the pension is divided in order to figure out an annuity.  For example, if my pension has one million shekels and I have a מקדם המרה or 200, I’ll get an annuity of ₪ 5,000 a month.  If it is 250, I’d get a pension of ₪ 4,000 a month.  In a regular קרן פנסיה, the מקדם is set upon one’s entering retirement and is based on the life expectancy of the worker, his or her spouse and the interest rate.  ביטוח מנהלים offered a fixed מקדם המרה where one did not have to worry about the rise in life expectancy.  Unfortunately, in order to do this, many insurance agents used predatory marketing to convince people to pay five or six times the fee they would pay for a similar קרן פנסיה in order to avoid a rise in life expectancy that has been deemed unrealistic by mainstream science.  Thank God, the government passed a law banning the sale of ביטוח מנהלים with a fixed מקדם המרה as of 2013, while also slashing the ridiculous amount that ביטוח מנהלים was charging in fees (see the upcoming post about fees).  Practically this turned ביטוח מנהלים into an alternative to קרנות פנסיה with only slightly higher fees, although more variety when it comes to insurance and more flexible bequeathing rights.

(4) – קרן פנסיה ותיקות

These are the old defined benefits pensions from before 1995.  Either you’re already signed up for this or you’re never going to be.  Like the current חדשות and כלליות, some had insurance and others did not.  Also, about half of the ותיקות were on the verge of bankruptcy and had to be bailed out by the government in 2003.  Those companies that were bailed out were done so with the agreement that they must pay less to their clients than had been promised during all the years that the clients paid into the fund.  If you have an elderly Israeli relative complaining about the government screwing him out of his pension, this is what he’s talking about.

(5) – קרן פנסיה תקציבית

These are similar to ותיקות, only these are only for government and university employees.  I’d tell you about all the perks they had, but it would probably make you cry with jealousy.  Suffice it to say, people with these made out like bandits.

My primary series will only deal with the first three types of pension plans, as these are the only ones from which one can choose from today.