Page 5 - Sample cover letter

It’s good to give some thought as to the company that you will buy your policy from and to
make a few calls to get current quotes. While it’s important to go with a company that has
relatively low premiums, you may also want to factor in a company’s financial strength and size.
As a rule, larger companies have slightly lower annual premium increases, according to a
government study a few years ago.

The premium comparisons in Appendix B1 is from the New Jersey Dept. of Insurance and were
last updated in September. These premiums are for a 65-year-old, and since you are a year
older, your premiums may be somewhat higher. The premiums shown in Appendices B2
through B5 are from CSG Actuarial. Some premiums in the CSG Actuarial comparisons may be
lower than you can get because the commissions may not be included (unfortunately, there’s
no way to filter these out or for me to know which ones they are).

Still, CSG Actuarial’s premiums can be helpful in a couple of ways. First, they can serve as a
starting point to identify the companies that have lower premiums; second, these quotes also
show the insurance companies’ financial ratings by A.M Best and (for the larger companies)
Standard & Poor. They do not show the companies’ phone numbers, which can be found in
Appendix B1.

Discounts

Insurance companies that sell Medigap policies offer discounts of various kinds. As an example,
some companies have discounts for automatic debit payments of monthly premiums or for
paying a year’s premiums in advance. The largest discounts are typically available when both
spouses buy their policies from the same company.

While not all companies offer these “household discounts,” the ones that do often have
substantially reduced premiums. If your wife eventually gets a Medigap policy, this is something
you might want to keep in mind.

The UnitedHealthcare/AARP Medigap policies have an early enrollment discount that in your
case is 27% below AARP’s standard rate. The discount is calculated by multiplying 3% by the
number of years that you are younger than 75. In your case, the discount equals 9 years x 3%,
or 27%, and that discount will be reduced by 3% each year until you turn 75.

That means that if you acquire an AARP policy, you may have two increases a year – one a 3%
increase associated with the reduced discount (until you turn 75) and the other an increase for
health care inflation. AARP policies can be good choices if they are attractively priced, but you
should be aware that because of the reduced discount each year until you are 75, your
premiums may rise more quickly than with many other insurers. After you turn 75, the AARP
premiums will likely increase more slowly.

In addition to discounts, some insurers provide extra non-medical benefits such as membership
in Silver Sneakers, which give you access to more than 12,000 gyms and health clubs nationally.

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