For most people, COBRA coverage and state-mandated plans are not best health plan option because of their high cost. Chances are that your current group medical coverage contains many expensive features that you do not need now. If you are usually a healthy person with small medical expenses then it is usually best to switch to a short-term medical insurance plan. These plans cost less because they are not designed to pick up cost of any expensive pre-existing conditions. They offer more liberal coverage than most group plans because there is no reason to manage claims as tightly as in an employer-sponsored health plan.

For more information, see article title “Understanding Your Health Plan Options” at www.MedSave.com or www.FreedomBenefits.com in resources and publications section.

CASH FLOW It always makes sense to take a conservative view of cash flow when making plans prior to a layoff. If your credit cards, 401(k) loans and other personal debt can be refinanced at more favorable terms, now is time to do it. There is no legal obligation to tell a lender that you suspect that you may be laid off in future. But once layoff happens it is nearly impossible to restructure your debt.

If you are not currently monitoring your cash flow on a monthly basis, this is probably an excellent time to start. Use a commercial software program like Quicken to help monitor personal accounting as well as improve personal financial planning.

A special note of caution if you have a 401(k) plan - if you terminate your 401(k) plan participation while you have an outstanding plan loan, full amount of loan immediately becomes taxable income and will probably be subject to additional penalty taxes as well. You could wind up owing IRS almost half of loan balance. You should make every effort to refinance loan prior to terminating in 401(k) plan.

CONSIDER THE TAX EFFECTS With an interruption in your income, your tax situation is likely to be entirely different this year. Low and moderate-income taxpayers are more likely to qualify for refundable tax credits in a year when there is a period of unemployment. This can ease financial bite. Although you avoid adding additional expenses at this time, it makes sense to hire a tax adviser for a couple of hours to rework your tax situation. Finding a tax adviser for first time may not be easy, but you can improve your chances of getting good advice by looking for an accountant with credential letters “MT” (Masters of Taxation) or an attorney with credential “LLM”. This allows you tap directly into experience of someone with training specifically in field of tax planning (in contrast with tax return preparation, auditing or public accounting). It may cost a few hundred dollars for this professional help now but could easily wind up saving you thousands in future.

If you are in a lower or moderate-income bracket, you might find that a layoff actually benefits you financially by placing you in position to receive one or more federal tax credits available. For example, suppose your salary is normally $37,000 but you only worked about half of this year. During that half year of employment you contributed $3,000 to your company 401(k) plan. Now you may qualify for a $1500 tax credit on your income taxes that might not have been available if you had worked whole year. Since many different types of tax credits and allowable deductions are dependent on overall level of income, having a lower total income this year might have a significant tax-saving effect.

OTHER EMPLOYEE BENFITS Group life insurance terminates with your employment. If your recent medical exams indicate any health risk factors (elevated cholesterol or high blood pressure) then it makes sense to consider converting your group term insurance plan to an individual insurance plan. Term life insurance plans are inexpensive but like all term insurance, coverage will likely expire before you do. If you need permanent insurance then it makes sense to consider asking about a permanent plan at this point. Converting to permanent plans might be a better deal than converting to term insurance because insurer is more likely to offer their best rates. These “best rates’ are typically not offered to people simply converting from group term insurance to individual term insurance.

When converting any type of insurance plan from a group plan to an individual plan, you can use any qualified insurance agent of your choice. You are not obligated to use agent who handled your company’s group insurance plan.

Dental plans and other ancillary health plan benefits are typically not included in COBRA coverage or other private conversion plans, so it makes sense to consider impact of losing these coverages. If you expect to be working for another employer soon then it usually makes sense to “do without” for a few months. But if you will be without group benefits for many months or longer, then you can replace group benefits with privately purchased benefit plans. Usually PPO discount plans are more cost effective than insurance plans for ancillary benefits like dental, Rx, vision and alternative care.

If you have a Medical Savings Account (MSA) plan, consider that you may not make additional contributions or take qualified tax-free withdrawals for period of time where MSA-qualified insurance is not in place. Most people can work around these tax issues to avoid unnecessary taxes and withdrawal penalties, but only if you are aware of them and plan accordingly. MSA account balances can be rolled over, tax-free, into a new account in a procedure similar to a retirement plan rollover.

There may be good news with regard to other benefit plans like medical reimbursement plans, education assistance and dependent care assistance where you have a “use it or lose it” account balance. These are not required to terminate immediately when your employment ends, so you may be able to continue to draw on these for remainder of plan year. See your benefit plan description or speak with your company’s benefits officer.

§Most policies may be continued year after year until you retire. But average life of a disability insurance policy is about 5 years.

§The average time required for an insurer to review an application is about 3 weeks. The insurer may request copies of medical and financial records.

§Applications are still submitted on paper; no online enrollment system is available.

§Expect premium cost to be about 2% of your salary if you have a “desk job” and about 4% of your salary if you work with your hands. Of course, this is a very rough guideline, and actual cost will depend on a greater number of individual factors.

§When a policy is issued, you have at least 10 days to review all of details and cancel coverage if you are not completely satisfied. It may be useful to have an independent financial adviser review new policy during this period.

§Assuming that you keep disability insurance for balance of your working career, probability of suffering a loss of income due to accident or illness sufficient to trigger a claim under your policy is about 1 in 4.

§If you become disabled, you should consult with an attorney who specialized in disability insurance claims before filing a claim with insurer. This may help avoid delays and disputes regarding claim.