Archive for the 'Insurance' Category
Tuesday, October 1st, 2013
Open enrollment for individually-bought health insurance through state exchanges was supposed to start October 1, 2013, although several states experienced some delays and/or technical glitches. If your state exchange isn’t up and running yet, you can still estimate your premiums and tax credits here.
However, I was able to get a sample quote from the California health exchange website CoveredCA.com using my family’s demographic information.
Income: Above 400% of federal poverty line (roughly $60,000 for a 3-person household), so no tax credits or premium assistance.
Number of people: 3, specifically
- One 35-year-old male
- One 35-year-old female
- One under-18 dependent child
Here are the monthly premiums I was quoted for each plan tier. The lowest quotes for our family situation were all from Blue Shield of California. $628 a month for Bronze, $722 a month for Silver, $910 a month for Gold, and $1,042 a month for Platinum.
(click to enlarge)
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Thursday, September 26th, 2013
Open enrollment for “Obamacare” will start October 1, 2013 for coverage that will start January 1, 2014. Find your state’s exchange website at Healthcare.gov. Plans will be broken down into four tiers: Bronze, Gold, Silver, and Platinum. People 30 and under will also have a catastrophic coverage-only option. While the cost of these plans will not be based on any pre-existing conditions, they will depend on factors like age, tobacco use, and geographic location.
Based on approved insurance plans in 48 states, the average individual premium will be $328 monthly for the cheapest Silver option and $249 for the cheapest Bronze option. This is before any tax credits. Subsidies will be provided to households with annual income up to 400% of the federal poverty level (FPL) (~$88,000 for a family of four). Individuals and families earning less than 250% of FPL (~$27,000 for an individual and ~$55,000 for a family of four) are also eligible for additional cost-sharing credits.
You can get a rough estimate of your tax credits by using this Kaiser Family Foundation calculator. Once 10/1 rolls around, check the official exchange website instead. Any subsidies are paid directly to the insurer, and you only have to pay the difference.
The Department of Health and Human Services released a report with premium estimates for the 36 states with federally-supported exchanges (data as of 9/18/13).
For example, in Texas, an average 27-year-old with income of $25,000 could pay $145 per month for the second lowest cost silver plan, $133 for the lowest cost silver plan, and $83 for the lowest cost bronze plan after tax credits. For a family of four in Texas with income of $50,000, they could pay $282 per month for the second lowest cost silver plan, $239 for the lowest silver plan, and $57 per month for the lowest bronze plan after tax credits.
HuffPost condenses the tables into a nice map:
Wednesday, September 18th, 2013
The U.S. Census Bureau just released its 2012 annual report on Income, Poverty, and Health Insurance Coverage in the United States. A good recap of the data can be found via the charts in this slide presentation [pdf]. Below is my even-briefer summary.
The US median household income (inflation-adjusted) was roughly $51,000 in 2012. This number has decreased or remained stagnant each year since 2007, and is actually about the same as in 1989.
The 2012 official poverty rate was 15.0 percent, and roughly the same amount of the population was without health insurance coverage, 15.4%.
I think this report provides some perspective about the realities of many families today. As a household that earns more than average, this reminds us that it is quite possible to spend less, as many others already do out of necessity. I am not one of those money gurus that tells everyone that they can get rich and retire early; it will always be very difficult for most people. I want to take advantage of my current situation, save money and use it to create future income and financial freedom, and then hopefully that will enable me to help more people down the road.
Monday, July 29th, 2013
After doing a car insurance quote comparison test, I wanted to clear up any confusion regarding applying for car insurance and your credit history. Here’s why you should be able to get quotes from as many insurers as you like without worrying about your credit score.
Will auto insurance companies check my credit?
Probably. According to recent surveys, over 90% of insurance companies (including the top 5 auto insurers) use credit information in their underwriting process. It’s not the only thing, just one of the many things that gets considered like your driving record or accident history. There is a historical correlation between certain behaviors like high credit limit utilization and filing an insurance claim. Insurance scores weigh various factors differently than in standard FICO scores.
However, certain states including California, Hawaii, and Massachusetts do not allow the use of credit information in the underwriting or rating of car insurance. Texas had a similar bill proposed in 2013, but I don’t think it was passed.
When will they check my credit?
Either during the premium quote process, or when you actually pick one and apply for insurance. (Some will also check your credit upon premium renewal.) Out of the four insurance companies that I got quotes from, only Progressive asked for a Social Security number and it was optional (I declined to provide it). However, all of them get permission from you to run a credit check in the fine print when you apply for a quote.
For some companies, the initial quote provided assumes you have acceptable credit, and during the application process they check your credit and may adjust the quote based on any negative information. For example, your report may show a high utilization percentage of available credit.
Will it affect my credit score? Hard vs. soft pulls
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Thursday, July 25th, 2013
Inspired by reader experiences, I set aside an hour today to obtain auto insurance quotes from the major providers in my area. Insurance companies provide different quotes for “new customers” and “renewals”. Guess which one is usually lower? Also, many insurers choose to focus on specific types of customers such young, high-risk, or low-risk. Finally, I’ve also moved around a lot so I’ve noticed that my quotes change significantly based on where I live. The bottom line is that insurance prices vary for a lot of different reasons, and the only way to know which one is cheapest for you is to compare quotes directly.
It will help to gather the following information first:
- Personal information. Full name, birthdate, occupation, education level, accident history. None required Social Security Number, but others might.
- Car information. Many pull this from DMV records automatically. Year, model, date of purchase, own/lease/finance, and security system details.
- Driving patterns. Is the car primarily used for work/commute/pleasure? How many miles driver per year?
- Insurance details. Have your current bill handy to know your specific coverages, limits, and deductibles.
The totals shown are 6-month premiums for two cars and include liability, personal injury, collision, and comprehensive coverage. Exact same limits and deductibles for all insurers.
- State Farm (existing) – $665 per 6-month period. This includes various discounts like accident-free, multiple-cars, etc.
- GEICO – $479. The cheapest quote by far, beating State Farm by $186 per 6 months, or $372 a year. This follows anecdotal evidence that GEICO is pricing their insurance very aggressively for new customers.
- Allstate – $693. Slightly more expensive than State Farm. I noticed that they have a lot of optional “bells and whistles” features like accident forgiveness. They also offer a discount for electronic bills and auto-pay from bank account. The price shown includes these discounts.
- Progressive – $849. Way higher than State Farm. Their claim to also provide quotes from other car insurance companies was also very disappointing. They couldn’t provide any other quotes at all. After changing my existing insurer, they said State Farm’s rate would be between $696 – $5,922. Not helpful.
- Liberty Mutual – $568. Cheaper than State Farm by $194 a year. Not bad but higher than GEICO for me.
- USAA – ???. I tried as I’ve heard good things about USAA, but I do not have the proper military affiliation to be eligible for their car insurance.
$372 a year is pretty significant. I’m definitely intrigued by this cheap GEICO quote, but I have to do some more research as I also have homeowner’s and umbrella insurance from State Farm and I’m not sure how the total package price would differ.
Thursday, July 18th, 2013
Ever since we started cutting back our work hours in order to share childcare duties, Mrs. MMB and I have kept a closer eye on our monthly spending patterns. One of the headaches for budgeters is dealing with large lump-sum payments like those for home/car repairs, healthcare bills (human repairs), and home/car/life insurance. Our homeowner’s insurance is due annually (we don’t use mortgage escrow anymore), life insurance is due annually, and auto insurance is due semi-annually.
We use State Farm for all of these insurances due to our positive claim experiences in the past and their multi-line discount. When I asked about payment options, they told me about the State Farm Payment Plan (SFPP). I’m sure that most other major insurers have a similar program.
- Steady monthly bill. With this plan, all your insurance bills get averaged into equal monthly, quarterly, or semi-annual payments. We chose monthly as that is how we visualize our spending.
- Float. Let’s say your total bill is usually $1,200 once a year. If your policy is renewing today, then instead of paying $1,200 upfront now, with SFPP you pay $100 per month spaced out over the next 12 months. So you’re gaining some additional float time on your money. If you’re already paid up then you have to wait until renewal to start an SFPP.
- Pay with credit card. You can use a credit to pay most bills already, but some auto-pay plans require a linked checking account. SFPP allows you to pay with a recurring charge on any Visa/Mastercard (no American Express). This is good news for those earning credit card rewards.
- Chose payment due date. I don’t use this, but if you find it convenient you can select your specific payment due date each month (any day except 29th, 30th, or 31st).
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Monday, May 13th, 2013
Much of the discussion around The Patient Protection and Affordable Care Act (PPACA) aka Affordable Care Act aka Obamacare has been about politics. But it’s the law, it’s constitutional, and a lot of things are happening soon. For most full-time workers that wish to keep their employer-provided health insurance, little will change. However, things will be very different for the self-employed, unemployed, uninsured, and those seeking semi-retirement or retirement before age 65 and Medicare. You can use it even if you already have employer-provided insurance, although you may become ineligible for certain tax credits. There’s way too much information to cover everything, but here’s my summary of the developments.
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Thursday, March 7th, 2013
It’s already March, and I’ve yet to make a New Year’s resolution. Then along comes this NY Times article about a mother of two who’s young, healthy husband was killed while simply riding his bike:
In the many months of suffering after Mr. Hernando’s death in July 2009, she beat herself up while spending dozens of hours excavating their financial life and slowly reassembling it. But then, she resolved to keep anyone she knew from ever again being in the same situation. The result is a Web site named for the scolding, profane exhortation that her inner voice shouted during those dark days in the intensive care unit. She might have called it Getyouracttogether.org, but she changed just one word.
The site offers some basic financial advice, gives away free templates for a master checklist and provides starter forms to draft a will, living will and power of attorney. There’s also a guide to starting a list of all of the accounts in your life that someone might need to access and shut down in your absence.
Let’s be direct; The site is GetYourShitTogether.org. The site is okay, but I felt the story itself was more powerful.
After his death, this much was clear: The family with the six-figure income and the four-bedroom house that they had bought in the Mount Baker neighborhood one year before had a will with no signature, little emergency savings and an unknown number of accounts with passwords that had been in Mr. Hernando’s head.
I haven’t blogged about this as it brings up bad memories, but a few years ago a family situation resulted in us each hurriedly bought $1,000,000 of term life insurance. We didn’t comparison shop, I just walked into my State Farm agent’s office and asked to get the insurance as soon as possible. State Farm actually has some of the highest financial strength ratings available (AA S&P, A++ AM Best). The final rates we got were probably somewhat higher than I could have gotten with slightly lower-rated company, but I don’t regret the decision.
Having life insurance along with hefty savings gave me adequate peace of mind for a while, but now with a child I worry about the future differently. We have a lot left to do. We contacted a lawyer friend who specializes in estate planning and trusts to help us with our first will. We talked to family members about child custody if something should happen to both of us. We’re looking into long-term disability insurance beyond what is provided at work. I already track most of our passwords using software (1Password), but after reading this article I’ve been filling in the gaps in the database and quizzing my wife every day to make sure she knows the master password.
We are one of those households where one person takes on all the financial duties. I pay the bills, track our monthly budget, and manage our retirement investments. I need to teach her the essentials and lay out a simple plan for managing things if I’m not around one day. I don’t worry about the spending as she is a frugal and smart person, but I have nightmares of some high-cost, low-quality financial salesperson mismanaging her money. Lots of smart people end up trusting the wrong person. I thank Mrs. Reynolds for helping me make my 2013 resolution.
Wednesday, January 2nd, 2013
Annual reminder for 2013. The most well known part of the Fair and Accurate Credit Transactions Act (FACT Act) is that you can get a free copy of your credit reports from all three major credit bureaus once every 12 months. However, there are also several other consumer databases that you should check as well which are also available absolutely free once every 12 months, and they can also have a significant financial impact. If you got one last year, you can now get another one and reset the 12 month clock.
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 a negative ChexSystems record can leave you blacklisted from opening bank accounts at most major banks.
Get your free ChexSystems consumer report here.
Medical History 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.” They record information of “underwriting significance” for those 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.
Get your free MIB consumer file here.
Insurance Claims History
CLUE stands for Comprehensive Loss Underwriting Exchange, and they collect information that is used to calculate your potential risk of loss and thus your insurance premiums. You can also find out about previous claims on the house you are currently renting or recently bought, even if they weren’t made by you.
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.
Get your free CLUE Auto and Personal Property Reports here.
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.
When a potential employer runs a background check through LexisNexis (formerly known as ChoicePoint), this is the information they see. It doesn’t seem to claim be comprehensive, and they may have only limited or even no data about you, but I would still check for potentially negative data.
LexisNexis Screening Solutions Inc. provides Employment History Reports to employers only with a job applicant’s or employee’s consent. Employers utilize a variety of companies to obtain employment history information. Our files would only contain information on you if LexisNexis provided your Employment History Report to an employer.
Get your free LexisNexis employment history report here.
This report can be important if you are a renter and someone runs a background check on you at LexisNexis (ChoicePoint).
LexisNexis Screening Solutions provides Resident History Reports to housing providers that have the subject’s consent. Housing Providers utilize a variety of companies to obtain tenant history information. Our files would only contain information on you if LexisNexis provided your Resident History Report to a housing provider.
Get your free LexisNexis tenant history report here.
LexisNexis Full Disclosure File
You may notice that LexisNexis is involved in many different areas above. As one of the largest personal information databases in the US and a for-profit company (part of Reed Elsevier), they should just rename themselves Big Brother, Inc. You can request a “Full File Disclosure” that supposedly includes all of the information that they have on you – including public records, real estate transaction and ownership data, lien, judgment, and bankruptcy records, professional license information, and historical addresses on file.
Request your LexisNexis Full File Disclosure here. You’ll need to fill out a PDF form and snail mail it in.
This is part of my annual checklist at the beginning of each new year.
Monday, December 31st, 2012
Like many of you, we have a Flexible Spending Account (FSA) that allows us to pay qualified healthcare expenses using tax-free money. (Did you know that FSA money is also exempt from payroll taxes in addition to income taxes?) I still think the idea of guessing your future healthcare expenses in a use-it-or-lose-it system is illogical at best, but it is what it is. (In 2012, there was talk from the IRS that this policy might be changed.) We recently even got one of those FSA debit cards so at least we don’t have to deal with faxing in receipts when purchasing from approved merchants.
If you didn’t exhaust your funds with insurance copays or deductibles, here’s a quick guide to using up all that cash. First, I should say that some plans allow a grace period until March 15th of the following year as opposed to a December 31st deadline to use your 2012 funds, so confirm with your FSA administrator.
The go-to product used to be buying over-the-counter drugs like cough medicine or painkillers. Effective January 1, 2011, the cost of over-the-counter medications became no longer eligible unless the medication was prescribed by a doctor. Keep this in mind and ask for a prescription for any OTC drugs you buy on a regular basis. Don’t forget, Target and Walmart now offer 30-day supplies for $4 and 90-day supplies for $10 on many generic drugs that are also packaged under over-the-counter labels.
FSA Items Still Available Over-The-Counter Without A Prescription
- Eye care (contact lenses, solution, drops)
- First aid supplies (bandages, gauze, tape) for emergency kits
- Family planning products (birth control, pregnancy tests)
- Home testing aids (blood pressure, diabetes, thermometers)
As a reference, I usually check the well-organized lists from health insurers like Aetna or third-party FSA administrators like Conexis. In addition, just about every online drugstore (Drugstore.com, CVS, Walgreens) now has a special FSA-eligible section, but some still include items which now require a prescription under the the new regulations (look for FSA vs. FSARx).
Monday, September 24th, 2012
Health insurance can be a complicated subject. This article is about the specific situation where you recently ended a job and haven’t yet started either a new job with benefits or alternative health coverage. Should you take the COBRA coverage, or not?
COBRA Quick Summary
COBRA stands for the Consolidated Omnibus Budget Reconciliation Act of 1986, which requires the option to extend health insurance coverage for up to 18 months (more in some cases) after a “qualifying event” under a “qualifying employer”. In general, a qualifying employer is one with 20+ full-time employees. A common qualifying event is when you lose your job due to either voluntary or involuntary reasons (things like gross misconduct are excluded). So it applies both if you’re laid off and if you quit on your own. You are required by law to receive a notice about your COBRA options within 14 days after the plan administrator receives notice of a qualifying event.
However, the employee must pay the paying the full cost of the premium (both employer and employee portions), plus up to a 2% administrative charge. This means that it can be expensive. I believe that the last time I quit, my single-person coverage cost over $800 a month. The bill for a family with kids could easily be over $2,000 month.
Continuous Coverage and Retroactive Clause
Due to this high cost, you may consider skipping it and taking your chances. However, if something happens and you have a gap in coverage longer than 63 days, then your next health insurance no longer has to cover any pre-existing conditions. This can be a really big deal, and may scare you into signing up for expensive COBRA benefits right away. But there’s a final wrinkle.
You have 60 days after you lose your benefits to elect to pay for COBRA coverage. However, even if you enroll on Day 60, your coverage is retroactive to Day 1. Of course, you’ll have to pay the retroactive premiums for that period. Thus, you could technically waive your COBRA coverage initially, and then wait to see if you incur any medical bills. If you manage to get on a new health plan on Day 30 or Day 55 with no medical bills, then you’ll still be guaranteed full coverage going forward and you won’t have paid anything during your gap. If you can’t find new coverage within 63 days or rack up medical bills higher than the premiums, then you can rescind your waiver and retroactively activate your COBRA benefits. Effectively, you get a do-over.
Under current law, it is very important to maintain “continuous coverage” in order to guarantee that your future insurance can’t exclude pre-existing conditions. Otherwise, if for example you hurt your back during a gap, you may never be covered by insurance for back problems again. However, if you expect your gap in coverage to be under 60 days, then you can use the retroactive clause under COBRA to try and avoid paying for COBRA during that time. If you are going to use this do-over, be very careful with your dates. You can wait 60 days to elect for coverage, and then you actually have another 45 days to make the payment to cover the period from the date of election to the date of lost coverage. If you send in a premium payment, make sure it is for the correct amount and use certified mail and return receipt to document everything. Legally, payment is considered to be made on the date it is sent to the plan. Don’t cut things too close.
I have read articles that recommend using these extra 45 days on top of the initial 60 days to allow you to wait 105 days before having to commit. Their reasoning is that most insurance companies will not pursue you (sue you, ding your credit, etc.) for the insurance premium if you simply never send it in and tell them you no longer want coverage. I don’t agree with this logic and it seems rather risky, but I think it is okay to use the 45 day period if you are tight on funds and need more time to pay the premium.
Sources: Wikipedia, Department of Labor COBRA FAQ, DoL Employee Brochure (PDF), DoL HIPAA FAQ.
Wednesday, August 22nd, 2012
Life insurance tends to be one of those things that you know may be good for you, but is so easy to put off. For one, it makes you confront something uncomfortable: possibly untimely death. On top of that, some insurance products are so complicated that even the people selling them often don’t fully understand. Who designs these things anyway?
A life actuary works for an insurance company and analyzes the many factors involved: the likelihood of death in various circumstances, the investment returns generated by premiums charged (minus expected payouts), and pricing decisions that balance profit margin with market competitiveness. They have strong mathematical and analytical backgrounds and passing all the exams for full credentialing usually takes several years. In other words, these people make sure the insurance company makes money in the end no matter what happens.
(Fun fact: Being an actuary consistently ranks as one of the best jobs out there due to the combination of high pay, solid demand, and low stress.)
So I was happy to see a post on an investing blog I read called “What Insurance do Actuaries Buy?“. What beer do brewmasters drink? What toothbrush do dentists use? The author David Merkel is a CFA and also used to be a life actuary. Excerpts from his response below:
Actuaries avoid complexity in insurance products. Why? In general, complex products hide high profit margins. Products that are easy to analyze, like term life insurance, are competitive, and profit margins are low.
Also, they tend to use insurance as catastrophe cover, because they know that having insurance companies pay on a lot of small claims is expensive on average.
There is an exception to all of this. If you are so rich as to need to stiff the taxman, buying cash value insurance policies can make a lot of sense. In that case, wealthy actuaries with clever tax advisors buy cash value life insurance. Death benefits do not pass through the estate.
This aligns with most of the unbiased advice I’ve read on life insurance. If a death in your household would be a financial catastrophe, then you need life insurance. Don’t waste money insuring on your cell phone or laptop that will be outdated next month. Use that money to secure your family.
Term life insurance is the easiest to compare across providers, which results in the slimmest profit margins and affordable costs. Term is best for the vast majority of people. More complicated types of life insurance may have proper application in very limited situations for the very wealthy with estate planning needs. A good place to start is Term4Sale.com which doesn’t include every provider but does provide good info and the same prices that an insurance broker would charge you.
This post is participating in the Life Insurance Movement, organized by Jeff Rose of Good Financial Cents, a group writing project about life insurance.