‘What if one of us gets sick?’: We have no health insurance, a stable business, and a tough choice between mortgage payoff or investing. What’s the safest move?

Hi Money Minder,

So here’s the deal: my wife and I run this small business in the service industry. We’ve got around 15 employees, no debt, and we’re pulling in about $100K a year. No car loans or messy credit debt either. We’re pretty thrifty, I guess.

We’ve got a $200K mortgage at like 3%, and we’re two years into it. Just sold our old house and ended up with $170K in our pockets.

I was all set to throw that cash into a 12-month CD at 5.2% this week. It seemed like the safest bet with decent returns, probably a once-in-a-lifetime kind of thing. We could also reinvest that cash back into our business.

But here’s the catch: we don’t have health insurance. We checked, and premiums for our family would be around $16K a year, plus a $15K deductible. We don’t really use healthcare that much—mostly just the odd antibiotics when the kids get strep. From a cost perspective, it seems like a waste.

My worry is, what if one of us gets seriously sick? It keeps me up at night sometimes. I had a bad case of COVID early on and had to go to the hospital. Thankfully, we didn’t have to pay out of pocket.

From what I understand, equity is pretty safe, while cash and investments can be at risk if something big happens, like a health emergency. I’d feel awful if we lost our savings because we wanted to make a small return.

Has anyone out there been through something like this? I could really use some advice or ideas!

Thanks!

— Worried Worker

Response from THE MONEY MINDER:

Hello There,

Congratulations on the stability and success of your small business. It sounds like you’ve taken admirable steps to manage your finances, keeping debt low and maintaining a healthy cash flow. With that said, I understand the concern about the lack of health insurance, especially with a family.

First, let’s address the idea of putting your $170k into a 12-month CD at 5.2%. Given the relatively high return rate and the security this option offers, it’s definitely an attractive choice, especially in the short term. But, understandably, the healthcare issue looms larger. Healthcare costs can be unpredictable and significant, and without insurance, you could potentially face financial hardship if an unforeseen medical emergency occurs.

You mentioned that your understanding is that equity in your home is fully protected in case of a health emergency. While it’s true that home equity is generally sheltered in many cases from creditors in a worst-case scenario, medical expenses can quickly become overwhelming, and relying solely on your home equity can be risky.

A more pragmatic approach might be to hedge some of your risk. Consider setting aside a portion of the $170k—perhaps $50k—as a ‘health emergency fund.’ This way, you can still take advantage of the CD’s high return without leaving yourself completely exposed to potential medical expenses. Additionally, explore other health insurance options. High-deductible health plans (HDHPs) coupled with a Health Savings Account (HSA) might be a viable option. While the premiums and deductibles may still be hefty, HSAs offer tax-advantaged savings that can be used for medical expenses.

Moreover, think about reinvestments in your business that can potentially offer more stability both financially and in terms of health benefits. For example, can you leverage your business’s stability to negotiate better group health insurance rates for you and your employees? Group plans often come with lower premiums and could offer the coverage you need without the steep individual plan costs.

Lastly, it might make sense to consult with a financial planner who specializes in healthcare-related financial planning. They could provide a personalized plan tailored to your unique financial situation and health risk profile.

It’s crucial to strike a balance between making prudent financial decisions and ensuring that your essential health needs are covered. Taking steps to protect your family’s health can provide some peace of mind and allow you to sleep more soundly at night.

Best of luck with your decision-making process.

Farewell,

THE MONEY MINDER