Archive for the 'Insurance' Category
Wednesday, October 7th, 2009
You can get the SuzeOrman.com Will & Trust Kit for free if you enter the gift code 898989 on this page. Save the resulting activation code. Retail price is is $13.50.
Based on a question-and-answer format, this online software includes the ability to create a:
- Will
- Revocable Trust
- Financial Power of Attorney
- Advanced Directive / Durable Power of Attorney for Healthcare
I’m not sure how this compares to a more established legal service like LegalZoom which I had considered using up until now (I used them to incorporate my side business), but they charge about $70 for a basic will. I would think that this SuzeOrman option might be an acceptable temporary solution for those with very simple estates. However, for those who have enough assets to actually require a revocable trust, hiring an attorney would be worth the extra cost.
As for the advanced healthcare directive or power of attorney, I think that this could be useful at least to get the discussion started on what your wishes are with your family if you do become incapacitated.
Posted in Deals & Offers, Insurance | 11 Comments »
Friday, August 14th, 2009
With unemployment still at historic highs in many areas, a common concern is what to do about health insurance. A friend of mine was recently notified that he was going to be laid off, and so we talked about some of the options out there, and I told him I’d do some research about it since I had recently looked into an individual health plan.
About COBRA, Stimulus Bill Subsidy
COBRA gives people who lose their jobs the right to continue coverage under their group health plan. The catch is that workers must pay the entire premium themselves (plus a 2% administrative fee), which can be a lot higher than just the partial payment the employee usually pays. According to this WSJ article, the average cost of COBRA coverage for a family is $13,000 a year. In my friend’s case, he was surprised to see his corporate employer paid nearly $600 a month for his health insurance.
Keeping insurance continuity is important beyond immediate health concerns, because if you don’t have health insurance for more than 63 days, then even group health insurance plans can reject you later due to any pre-existing conditions. That can be a total disaster.
However, in February 2009 the “Stimulus bill” included a provision that would cover 65% of the COBRA premium for up to 9 months for people who qualify. You must have been involuntarily terminated between 9/1/08 and 12/31/09, and also not exceed an adjusted gross income over $125,000 for individuals ($250,000 for married couples filing jointly). According to this IRS page, there is no paperwork or extra tax return details to deal will; you just pay the 35% to your employer and let them handle it. In my friend’s case, this would lower his required payment about $210 a month for the next 9 months. That’s quite a discount!
Individual Health Plans
Still, if you are relatively young and in good health, you should be able to get a much cheaper health plan from many insurers. Group health insurance by definition has to cover everyone in the company, and may cover a lot more than you’d be willing to pay for yourself. However, you’ll have to familiarize yourself with some of the terminology. Here’s another quote from the WSJ article:
“My beef with Cobra is that it is the same gold-plated plan that my employer offered, when I would settle for copper or tin,” he says. Instead, he bought a catastrophic health plan, which covers only major hospitalizations, for $100 a month.
One of biggest comparison sites for individual plans is eHealthInsurance.com, which has a separate section on short-term health insurance plans. From their site:
Short-term health insurance plans provide you with coverage for a limited period of time, and may be an ideal solution for those between jobs or those waiting for other health insurance to start. Typically, short-term plans offer coverage up to six months, although some plans may offer coverage up to 12 months.
Indeed, I found basic 6-month plans starting at $50 a month, though they come with some hefty deductibles. As quote above, the idea here is just cover catastrophic events.
If you see the tab labeled “Help Me Choose”, I found the questionnaire there really helpful in narrowing down the choices. I figured I would want a temporary plan that would basically cover everything over, say $1,000-$2,000, but everything below that I would pay for, including doctor’s visits. The recommended plan ended up being a regular individual plan (not short term) that only cost $120 per month.
The annual deductible was $1,800, but I with 0% co-insurance (nothing above the deductible) as opposed to the 20-40% co-insurance on other plans. So the most I’d be out-of-pocket would be $1,800 a year. If there was no 65% subsidy, this $120/month insurance would beat out the $600/month COBRA option easily. Even now, it’s close. I could even add on a health savings account (HSA) and put more money away tax-deferred.
(The above is just an example. Your actual comparison results are dependent on age, sex, and location.)
Posted in Insurance | 61 Comments »
Thursday, August 6th, 2009
Do you know if your auto insurance company will cover you in an accident in a rental car? According to a survey by Progressive Insurance, only 25% bother to ask. We are looking into booking a rental car for a week, so I called State Farm to double-check what the current rules are. A week of loss-damage waiver (LDW) would cost well over $100, so it was definitely worth a phone call.
Below is what I got from my agent, but I’m sure that auto insurance laws vary by state, so don’t assume the following extends to you. Call yourself! If you’re really serious, you’ll get them to show you where all this is written out in your insurance policy. I know I kept mine somewhere.
Liability Coverage. Your existing limits extends to the rental car.
Comprehensive Coverage. This extends to the rental car. Your same deductible applies.
Collision Coverage. This extends to the rental car. Your same deductible applies.
Other Possible Charges
This could be good news for some, but perhaps not quite so good if you have high deductibles. In addition, she did point out that there are certain things that State Farm will not cover from the rental car companies.
- Claims Processing Fees or “Administrative” Charges - If you get in an accident, it sounds like they can charge you a fee just to deal with it. Blech.
- Loss-of-Use Charges - The rental car company will claim that for every day the car was being fixed, they could have rented it out. They don’t even have to prove that they were out of cars at the time.
Secondary Rental Car Insurance
This is where the secondary rental car insurance from credit cards can come in handy. Details can still vary depending on the specific card, so look for specific wording in the paperwork that they mail you with the tiny print on amazingly thin paper. Here’s some sample info from Visa:
Visa Auto Rental CDW reimburses you for the deductible portion of your personal automobile insurance, valid administrative and loss-of-use charges imposed by the rental car company, as well as reasonable towing charges resulting from covered damage or theft of the rental vehicle while it is your responsibility.
This seems to plug in the remaining holes in coverage, besides the vague usage of the word “valid”.
Unlimited Non-Owned Car Coverage (UNOC)
Another option is to purchase an additional rider on your auto insurance, which State Farm calls UNOC. She quoted me about $30 per 6-month period. However, you can simply add it on and take it off for something as short as a month, which on a pro-rated basis would cost only $5.
Posted in Insurance | 19 Comments »
Monday, April 6th, 2009
Suze Orman is giving away her stuff again!
Insurance Kit
I’m not 100% sure of what all this kit provides you, but it appears to be some sort of questionnaire which helps determine your insurance needs. I’ll try it out myself shortly. From the site:
This one-of-a-kind program provides you and your family with an instant, on-line evaluation of your insurance needs. Suze’s Insurance Kit provides easy to understand, step-by-step advice to help you determine if you have the right coverage in place for all the important areas of your life.
It also includes a disaster simulator and a online home inventory tracker which can store photos and receipts in case of an insurance claim.
To get your free activation code, visit this page and enter the following gift code: “people first“.
Will and Trust Kit
Based on a question-and-answer format, this software includes the ability to create a will, a revocable trust, Financial Power of Attorney, and an Advanced Directive / Durable Power of Attorney for Healthcare. I’m not sure how this compares to a more established legal service like LegalZoom which I had considered using up until now (I used them to incorporate my home business), but they charge about $100 for a basic will.
I would think that it would at least be an acceptable stopgap solution for those with simple estates, but for those who have lots of assets or complex issues, hiring an attorney would be worth the extra cost. I think having an advanced healthcare directive is an even better idea. Remember, it’s your family that will have to deal with all this! Do them a favor.
To get your free activation code, visit this page and enter the same gift code: “people first“.
Posted in Deals & Offers, Insurance | 5 Comments »
Friday, December 5th, 2008
Part of estimating your needs in retirement and also in buying life insurance is to know your likely life expectancy. Although kind of morbid, one calculator to help you do this is The Longevity Game by Northwestern Mutual. You just answer a few questions about your lifestyle and family history, and it gives you a number based on their actuarial tables. Fun animations too!
It turns out my median life expectancy is 85, while my wife’s is 95. Not sure how she plans on enjoying a decade without me, but I have been working out more this week as a result. 
This site was found inside one of the 18 books I am trying to read simultaneously, Worry-Free Investing. The books uses it to show that for couples, there is a very good chance at least one of you will reach 95 or 100. So if you want to retire early, you basically need a portfolio that you can live off the income essentially forever while also having the principal keep up with inflation.
Posted in Insurance | 11 Comments »
Tuesday, July 29th, 2008
Personal Umbrella insurance is additional liability insurance, designed to pay out on top of your existing auto and homeowner’s/renter’s insurance policies. For example, you may only have $300,000 in liability coverage on your car insurance. If you are hit with a claim of $1,000,000, you would be on the hook for $700,000 yourself unless you had an adequate umbrella insurance policy. Here is a diagram explaining this from MSN Money:
In addition, an umbrella policy can also “fill in the gaps” by providing coverage for other incidents like liability for rental properties or being sued for slander or libel. Imagine working and saving for decades, only to have all of it taken away with one incident. Here are my reasons for buying an umbrella policy:
#1. Unlikely, But Actual Scenarios
These days, there are many scenarios where one might be sued for more than $100,000 or even $1,000,000. In my mind, the most likely event is to be found at fault in a car accident. Medical costs alone can exceed $100,000 per person easily. Now imagine if there were 2, 4, or even 6 people in the car. Imagine if some of them were children. Here is one example from a NY Times article on umbrella policies:
One of Mr. Cox’s clients crashed into the rear of a car on a slick highway. A woman and a child were critically injured. After two years of litigation, his client settled the lawsuit for more than $5 million. The client had $15 million in umbrella coverage. The policy paid for the settlement and all legal costs. “Without the umbrella,” Mr. Cox said, “they would have been completely wiped out.”
More recently, I read about a parent chaperone during a field trip being hit with a $700,000 verdict for negligence:
Lauren Crossan, of Randolph, N.J., had traveled to Hawaii in 2004 with Susanne Sadler, Sadler’s daughter, and another New Jersey cheerleader to perform in the halftime show of the Hula Bowl. Within hours of her arrival at the Hyatt Regency Maui Resort, Crossan was seen drinking alcohol. Her body was found the next day on the hotel grounds.
An arbitrator determined last month that Sadler was partially responsible for Crossan’s death and ordered her to pay $690,000 to Crossan’s parents and her estate.
More:
- A blogger writes something bad about a company and gets sued for defamation.
- A man was asked to cut down a tree from his own yard. He refused, and later a hurricane blew the tree down and injured someone in the neighboring house.
- Your child gets in a fight at school, and injures another student.
- Your dog bites someone.
- You have a pool, and a visitor hurts themselves.
- A handyman or contractor hurts themselves on your property.
#2. Have the Insurance Company Lawyers Take Your Side
Forget even getting a large jury verdict against you. If someone simply sues you for a frivolous reason, you’ll have to pay for a $400/hour lawyer to defend yourself. With an adequate umbrella policy, the money at risk will be the insurance companies instead of your own. That means the big corporate lawyers will be on your side, and your defense costs will be covered as part of the umbrella policy.
#3. It’s Cheap, and Easy To Buy
It cost us about $250 a year for $1 million in coverage for the both of us, including 2 cars and a house. That’s basically $10 per month per person. However, we did have to raise the liability limits of our auto and homeowner’s policies slightly to $500,000 each. So if you are only carrying the bare minimum required by law (not a good idea for most people), your actual additional costs may be higher.
It was really simple to get as well; we had an umbrella policy added to our existing policies with just one phone call. No long application or additional fees. But the low cost also means you may have to look out for your own interests. I guarantee that if you mention that you want whole life insurance to your local agent, they will get really excited (big commission) and get you quotes within 24 hours. They’ll even follow up if you forget. On the other hand, selling you an umbrella policy for $200 a year results in a tiny commission. All I got was a “yeah, I suppose that might be a good idea…” They’ll still sell it to you, but it won’t be heavily promoted like other products.
#4. One Less Thing To Worry About
Some people believe that you may be a bigger target for lawsuits if someone finds out you have a $1 million umbrella policy. Here’s how I look at it. If I really wanted to premeditate a lawsuit against someone, I’d pick someone who is worth a lot more than $1M. More like $10 million and up. In a big metro area like mine, multi-millionaires are a dime a dozen. Even if I was frivolously sued, again the whole point is that I’m still covered. To me, this argument is like saying you shouldn’t earn more money because someone will sue you for it.
In the end, we have a $1 million umbrella insurance policy because this is exactly what insurance is for - to protect me from unlikely yet possibly catastrophic events. The likelihood is low, but so is the cost. We chose $1M somewhat arbitrarily because it covers our net worth and also what I feel is a reasonable amount of likely claims. As inflation (and especially medical costs) rises, I could see upping it to $2M since the additional cost is only about another $100/year.
Now, if you have a low or negative net worth, then perhaps there would be less incentive in getting such coverage. I certainly had no idea what umbrella insurance was in college. I would imagine lawyers are less likely to go after those with “nothing to lose”.
Posted in Insurance | 39 Comments »
Sunday, June 29th, 2008
On a recent episode of the Suze Orman TV show, she announced that you can go to her website and get her Online Will & Trust kit for free for a limited time. Via Slickdeals. Here’s how to get it:
- Go to SuzeOrman.com.
- Click on Will & Trust Kit link on upper left menu.
- Click the orange Gift Code button.
- Type in the code “people first”.
I signed up for the initial profile successfully, but haven’t finished the questionnaires. The software includes the ability to create a will, a revocable trust, Financial Power of Attorney, and an Advanced Directive / Durable Power of Attorney for Healthcare. One less reason for putting off doing one of these if it’s free!
I’m not sure how this compares to a more established legal service like LegalZoom which I had considered using up until now (I used them to incorporate my home business), but they charge about $100. I suppose I must add that if you have substantial assets an estate attorney might be worth the extra cost.
Posted in Deals & Offers, Insurance | 25 Comments »
Tuesday, June 17th, 2008
This is not how I like to get reminded of things, but sometimes that’s just how it goes. I hope all those out there affected by the floods are at least safe. A few months ago I wrote about buying flood insurance even if you are not required to by your mortgage lender. This means you are outside the 100-year floodplain, but could still be in the 500 year floodplain (1 in 500 chance each year, or 0.2%). Check if you are in a flood plain here. We got quotes, but never actually got around to buying a policy due to a combination of cost concerns and simply forgetting about it.
1 in 500? Why bother? Well, reports say that one third of Iowa is currently underwater. From one local newspaper:
“We’ve been taking a lot of calls, but most people don’t have flood insurance,” said State Farm Insurance Agent Doug Valentine. “This flood has blown through the 500-year flood plain and most only have to have insurance if they are in the 100-year flood plain because the banks require it.”
Valentine said many homeowners will soon face a difficult decision on what they will do given many will still have mortgage payments to be made and no insurance to cover rebuilding. “They may have to plow it down and will have $200,000 in payments on a $100,000 house,” he said.
This got me thinking - how likely do you think it is that your house will burn down, which is a major reason for homeowner’s insurance? Perhaps a 0.2% chance each year of severe flooding is worth insuring against. Insurance is all about paying to transfer the risk for events that can crush you. On that note, I also will need to check if our policy cover sewer backup, which has also caused a lot of damage in the Midwest.
Posted in Insurance | 31 Comments »
Monday, June 9th, 2008
There are a bunch of different ways to determine how much life insurance you need, from a simple “ten times your salary” to complex Monte Carlo simulations. Somewhere in between is the “capital needs analysis”, which is often used by insurance brokers and financial planners. This is what most online life insurance calculators use (examples here, here, and here), although I like the idea of doing it by hand to play with the numbers. I have a brochure from my State Farm agent with some stats, and also found another good example in this worksheet.
What is your goal?
Here’s the fun part. You get to imagine you’re dead. Will the remaining partner stay at home with the kids? Work and pay for daycare? Some people basically want to replace everything - their future income and also leave an inheritance or other lump-sum. Others want to make sure their dependents would be able to live as close to the “same life” as possible. This means staying in the same house, working (or not working) at the same jobs, driving the same cars, the same lifestyle. Then there is the “adapted life” approach, where maybe they would downsize somewhat, but have all the critical areas covered.
How much monthly income will your survivors need?
It’s usually easier to think of this monthly, and then multiply by 12. Include housing, transportation, education, childcare, insurance, entertainment, and perhaps also regular retirement savings. The average cost of daycare for a 4-year-old is around $8,000 per year. Now subtract any sources of income. The survivor’s salary, existing passive or investment income, rental income, Social Security benefits, etc.
Then, you have to decide what amount of money can create this income. Lots of guessing on your rate of return and length of withdrawal period is involved here. If you are young, you could buy an immediate annuity which will pay out about 4% inflation-adjusted a year (a certain % will be taxable). This is the same as multiplying by 25. So to create an annual income of $40,000 per year, you’d need a lump sum $1,000,000. As you get older, the payoff gets better. A more conventional approach seems to multiply by about 15.
Add in lump sum expenses
You’ll probably want to take care of debts like student loans, credit cards, funeral costs, and medical bills. A recent survey put the average funeral cost at over $6,000. If you haven’t already accounted for it above in housing, you may want to pay off the mortgage on your home or set aside money for retirement. Finally, you may want to consider the education costs of your children. The average cost for tuition + room/board for an in-state college is now nearly $14,000 per year.
Add these two big numbers up, and you have you future capital needs. You can then subtract out the insurance you have through work if you like. Finally, you should subtract your current assets, taking into account their liquidation restrictions. The difference provides an estimate of how much life insurance to shop for.
This all sounds simple, but in going through it myself there are so many variables. For starters, most couples will probably have different insurance needs for each person. Do I really want to pay off the entire house, or just allot for the mortgage payment? How many kids am I supposed to plan for? I end up with a number anywhere between $500,000 to more than $1M depending on different assumptions. (I’m open to advice here.) The good thing is that I am hoping that each $500k of coverage will only be about $30/month. I also may end up buying multiple life insurance policies as life goes on and stack them on top of each other.
Inflation?
If you buy a 30-year term policy with $500,000 of coverage now, at 3% annual inflation that you benefit will only be worth half as much after 23 years. But I don’t really worry about that, because for every year that I keep living, I should be saving enough that I don’t need as much coverage. And after the end of my term, we should have enough assets so as to not need any life insurance at all.
Posted in Insurance | 12 Comments »
Thursday, June 5th, 2008
Here are two more consumer reports which you can request free once every 12 months. Isn’t it scary how much of your information is floating around out there?
ChexSystems Banking History
ChexSystems is a consumer information database used by an estimated 80-90% of all banks to help determine the risk of opening new accounts. Think of it as the bank’s version of a credit bureau. If a person commits check fraud or overdraws their account, it will be listed here. In addition, the simple act of opening or closing a bank account may be recorded in their database. Getting an negative ChexSystems record can leave you blacklisted from opening bank accounts at most major banks. Via Fatwallet and my previous post asking Can You Apply For Too Many Bank Accounts?.
See here to get a free copy of your ChexSystems consumer report.
Medical Information Used For Insurance Underwriting
MIB (previously known as Medical Information Bureau) is run by 470 insurance companies and has a “primary mission of detecting and deterring fraud that may occur in the course of obtaining life, health, disability income, critical illness, and long-term care insurance.” Your consumer report “contains information of underwriting significance (medical and avocation information) about North American consumers who have applied for life and health insurance with MIB member companies.” If you have not applied for individually underwritten life, health, or disability income insurance during the preceding seven year period, then you probably don’t have a record. I’m still interested to see what’s in mine before I apply for life insurance.
See here to get a free copy of your MIB consumer file.
Posted in Banking, Insurance | 10 Comments »
Wednesday, June 4th, 2008
Most of us know about the free credit reports from AnnualCreditReport.com. This is mandated by the Fair and Accurate Credit Transactions (FACT) Act, which basically says that consumers should be able to see (and dispute) the massive amount of information contained in private corporate databases. But in addition to credit information, there are a lot of other databases with your personal information floating around. You can get one of each report free every rolling 12-month period.
Insurance Claims History
If you would like to know what the insurance companies are saying about you behind your back, you definitely want to get a free copy of your CLUE Personal Auto Report and Personal Property Reports, which you can get instantly online or by calling 1-866-312-8076. CLUE stands for Comprehensive Loss Underwriting Exchange.
The C.L.U.E. ®Personal Property report provides a seven year history of losses associated with an individual and his/her personal property. The following data will be identified for each loss: date of loss, loss type, and amount paid along with general information such as policy number, claim number and insurance company name.
The C.L.U.E. ®Auto report provides a seven year history of automobile insurance losses associated with an individual. The following data will be identified for each loss: date of loss, loss type, and amount paid along with general information such as policy number, claim number and insurance company name.
In addition, you should also request your free A-PLUS report (Automated Property Loss Underwriting System), which is a smaller database that also contains information about property loss claims. Insurance companies use this data to decide your premiums, so you’ll want to clear up any mistakes right away as they are probably costing you money right now!
This brings me to another use for CLUE reports. If you are seriously looking at buying a home, you should spend the $20 and get the CLUE report for the property and see its claim history. For example, if the water heater broke and flooded the basement two years ago, you may have a hard time finding homeowner’s insurance due to mold concerns.
Employment History Report
When a potential employer runs a background check through ChoicePoint, this is the information they see. It doesn’t seem to claim be comprehensive, as their site states:
The ChoicePoint Workplace Solutions Inc. Employment History report contains information related to your employment history as well as other information regarding your background. [...] Our files would only contain information on you if ChoicePoint provided your Employment History Report to an employer.
I would think you’d still want to make sure nothing inaccurate is on there. To get your free employment history report, call 1-866-312-8075. More information here.
Tenant History Report
This report will can be important if you are a renter and someone runs a background check on you at ChoicePoint.
The Resident Data Inc. Tenant History report contains information related to your tenant history as well as other information regarding your background. [...] Our files would only contain information on you if ChoicePoint provided your Tenant History Report to a housing provider.
To get your free tenant history report, call 1-877-448-5732. More information here.
Posted in Career, Insurance | 11 Comments »
Thursday, May 29th, 2008
I’m not an insurance or benefits expert, but while looking at life insurance I wanted to compare the coverage available from my employer vs. what I could buy on my own. As with most things insurance-related, there are big variations in group life insurance coverage, so I can only speak to what I have for the most part. We get a credit each paycheck for which we can spend on health, dental, life, and disability insurances.
Maximum Coverage
For my plan, I can only get up to $500,000 of coverage for myself and partner. So if I want more, my only choice would be to look privately for equivalent term life insurance.
Ability To Find Coverage
The best thing about group insurance from work is that your risk is spread across a big pool of people, so it should be easier to be granted coverage. But many workplaces still require you provide “evidence of insurability” once you increase your coverage limit past a certain amount. This may involve a simple questionnaire, or it could require a doctor exam and bloodwork. It seems unclear exactly how “healthy” you have to be in order to qualify for increased group coverage, but I’m guessing it would preclude major pre-existing conditions like cancer or heart disease. The limit where they start checking can also vary from $5,000 to $500,000.
Portability of Insurance
When you qualify for and buy a level term life insurance policy, you are guaranteed coverage for the length of that term (10, 20, 30 years, etc.). But if you rely on your employer’s group life insurance, usually the coverage stops when you leave the job. It’s almost like a 1-year term policy. My concern is, if you have you leave your job because you are seriously disabled, then you might end up both uncovered and unable to find new insurance.
However, looking around there might be some flexibility in certain plans. For one, you might have a “Waiver of Premium” benefit that continues the insurance protection through age 65 with no further premium payments should you become disabled. Or the policy may allow you to “continue coverage through an individual term policy without evidence of insurability as long as you continue to pay premiums”. Would this still be at the group insurance rates (minus employer subsidies)? A lot of this stuff seems to be left out of my Open Enrollment Guide, so I suppose an e-mail to the correct Human Resource person would be in order.
Cost
Many people get a certain amount of “free” life insurance from work, with the option to buy more. I think anything over $50,000 of coverage is paid with after-tax money, so I plotted out the monthly cost of my group plan vs. coverage levels below. I then went to Term4Sale and found the average of the top 5 quotes for both 15 and 30-year term insurance policy (rated A+ or better), for both the best tier of health (Preferred Plus) and the lowest allowable (Standard).
If you are youngish and in good health, even a long 30-year term policy is comparable to the group rates. Even if you are in average health, the cost of my employer group insurance is comparable to the premium on a 15-year term policy.
Summary
Again, this is only based on my plan, although I found my wife’s numbers to be similar. If you are lucky to have no-questions-asked insurance with high limits and you are in below-average health, it might be good to use your group plan. But if you are looking for extra coverage for a guaranteed period of time and are at least relatively healthy, it’s probably just as cheap if not cheaper to go with an individual plan. If you are an older worker, things may tilt back in favor to group life, but I haven’t run those numbers. In any case, it’s worth a comparison before your next Open Enrollment period.
We used to just buy some extra coverage from work due to the convenience factor, but why pay more when I could both save money and have a better, portable plan?
Posted in Insurance | 15 Comments »
Thursday, May 22nd, 2008
Up until now, there are two reasons I don’t have any privately-bought life insurance. For one, as I’ve mentioned nobody is actually dependent on my income. Wife is doing fine, don’t have any kids yet. We also have 1x annual salary’s worth of life insurance as a benefit from our employers, and she’ll get all my retirement account funds if something happens to me. The other reason is that I know that life insurance is priced based on tiers of health, and I’ve been secretly thinking that I can back into my high-school swim team physique and get the absolute cheapest level of life insurance.
However, I’m starting to think both of these reasonings are flawed.
I used to think that there was no need for life insurance if nobody needs your income. But perhaps I should amend this - You need to weigh the chances that someone will eventually need your income. For example, if I fully plan on having kids within the next 2-5 years then my income will probably be needed at that time. And as someone else mentioned in a comment, life is a funny thing and you never know when my wife might just get pregnant unexpectedly.
So the question is, do I really gain anything by waiting until the last minute? The risk I take is that in the meantime my health deteriorates and I become uninsurable. You might find out you have cancer, fight bank and end up in remission, and lead a long life. You develop a heart condition have it under control, and be perfectly functional. But in either case, nobody will be issuing you an affordable policy.
(This argument has also been used by an insurance salesmen telling me to insure my kids starting at birth with a whole life policy, but I think that is stretching things a bit.)
What about trying to get healthier first? The fact is that if I’m young and even slightly healthy, term life insurance is still going to be relatively cheap, whether or not I manage to stamp out my love of ice cream. One easy-to-use site to do some quick comparisons on is Term4Sale.com. Currently, it says I can get $500,000 of 20-Year Term insurance (non-smoker) for about $25 for the highest Preferred Plus tier. But the lower Preferred tier is only $5 more, and the even lower Regular Plus/Select tier is only $10 more per month. The site estimates that I can have both elevated cholesterol and raised blood pressure and still land in one of these groups.
I would say if you’ve been harboring this desire to get healthy for more than 6 months or so and haven’t made significant progress, it’s time to give it up and pay the extra $5 per month.
Finally, the current cost of term life insurance is still historically low, so there is not much incentive to wait for better overall rates. Here is the general trend over the last 10 years for 30-year term (click to enlarge):
Yet another thing that reminds me that I’m not getting any younger…
Posted in Insurance | 35 Comments »
Wednesday, May 21st, 2008
I recently received a nice greenish pamphlet from the government, my Social Security Statement! I thought it would tell me how much to expect from them in retirement… instead it just says is that I haven’t accumulated enough work credits to get Social Security benefits. Gee, thanks… *toss*. But wait, a few recent events have shown me other ways that it can be useful.
How Do I Get A Copy? If you are 25 or older, you should automatically receive it annually about 3 months before your birthdate. Otherwise, people of any age can request a copy to be sent to them. Here’s a sample statement.
Use #1: Find Out How Much Money Have You Earned In Your Lifetime
One of the books I am currently reading is the much-praised Your Money or Your Life. In it, one of the first exercises is find out how much money you’ve earned in your lifetime. Under the Your Earning Record section of your SS statement, it will break down all the (taxed) income you’ve ever made by year. Add it all up, and you should have your lifetime income. Besides breaking out your old Quicken files or tax returns, this is probably the only place all this information is easily available.
Why do this? For one, you may be surprised by how much money you have been able to earn, and this should boost your confidence. Second, if you compare this number to your current net worth, you may also be surprised by how little you’ve actually kept so far. Hopefully this will motivate you to waste less money.
…Or it could be cool just to know how much money you’ve ever made. 
Use #2: Life Insurance Planning
I’m also (slowly) doing some research on life insurance. In calculating how much life insurance you’ll need, you may want to consider what sources you already have. Many people don’t know that Social Security offers survivorship benefits if you have kids, or spouses of retirement age. In fact, about 20% of all Social Security benefits are paid out to those younger than age 62.
Under the Your Estimated Benefits Section, there is information for your estimated survivor benefits if you die. Currently, it says that my child would get over $1,100 per month if I died, and my spouse caring for the child would get over $1,100 per month as well. Over $26,000 a year? Really? This is much more than I would have imagined. As far as I can tell, this until the child turns 18.
There are also disability benefits listed, but usually privately-bought disability insurance only covers up to 60% of your original income, so I would still try to buy all I could get.
Use #3: Realize The Whole Thing Might Be Wishful Thinking
Finally, there’s a happy message snuck in at the bottom:
Your estimated benefits are based on current law. Congress has made changes to the law in the past and can do so at any time. The law governing benefit amounts may change because, by 2041, the payroll taxes collected will be enough to pay only about 75 percent of scheduled benefits.
Posted in Insurance, Retirement | 26 Comments »
Friday, April 4th, 2008
I’ve been noticing that multiple banks like Washington Mutual, Bank of America, and other banks have been offering me “free” Accidental Death & Dismemberment (AD&D) Insurance. Usually I get around $1,000 to $3,000 of complimentary coverage, just for being a valued customer. Awww, how thoughtful! At first glance, it sounds pretty good. That could cover a few funeral expenses in case I decide to go sky-diving again.
Of course, they are always “proud” to be able to offer you more coverage at a rock bottom price. Additional covered for you is only $1 per month for each $10,000 of coverage. But wait, that makes my $1,000 of free coverage worth…. 10 cents a month Hmm, they must value me a lot to spare $1.20 a year for me…
As you might guess, the price isn’t that great. And again it only covers accidental death, so it’s not as comprehensive as traditional term life insurance. But it does cover dismemberment, and somehow my morbid sense of humor was amused by the dismemberment payouts. I can just imagine some actuary researching on how many people lose a thumb and index finger on the same hand. Just a thumb? They’ll be fine.
100% Benefit
Death 
Both Feet or Both Hands
Entire Sight of Both Eyes
One Hand and One Foot
One Hand and Sight of One Eye
One Foot and Sight of One Eye
Speech and Hearing
50% Benefit
One Hand or One Foot
Entire Sight of One Eye
Speech or Hearing
25% Benefit
Thumb and Index Finger on Same Hand
So, should I bother taking it? I’ll probably pass, but it is still free. If I add up all my offers over time I might eventually build up a nice bounty. Probably not worth giving up the personal information needed, though. Anyone else sign up?
Posted in Insurance | 21 Comments »
