Archive for February, 2010

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Whole or Universal Life Insurance – Bullet Points

February 9th, 2010 by admin | 3 Comments | Filed in life insurance

There’s no question that life insurance is one of the trickier types to navigate, especially when you’re faced with terms like “whole life” and “universal life.” Aren’t both terms sort of all-encompassing? And what are the differences anyway?

The folks at Forbes define them as follows:

* Whole life insurance – Caters to long-term goals by offering consumers consistent premiums and guaranteed cash value accumulation.
* Universal life insurance – Gives consumers flexibility in the premium payments, death benefits and the savings element of their policy.

Those definitions are a little basic, but essentially correct, but when choosing between them, you should also understand the following:

Universal Life

  • Also known as “adjustable life insurance,” because it offers a lot of flexibility. You can increase or reduce your death benefit, or the time you pay premiums, once your first premium payment has been made.
  • You can increase the face value of your coverage, if you pass a medical examination, first.
  • You can decrease your coverage to the minimum allowed amount without surrendering your policy, but you may be assessed surrender fees.
  • There are two options for the death benefit: a fixed amount, or an increasing amount equal to the face value of your policy plus your cash value amount.
  • If finances get tight, you can reduce or stop your premiums, and use your cash value to make premium payments. (Never do this without consulting your insurance advisor).
  • At time of policy inception, your insurance company will disclose the entire cost of insurance to you.
  • Because universal life insurance is tied to an interest rate, your policy may not always earn the estimated returns.
  • If you have enough of a balance, you may withdraw funds from your cash value account when there is an urgent need.

Whole Life

  • Whole Life insurance covers you as long as you live.
  • You will pay the same premium for a specific period of time in order to receive the death benefits.
  • There is a savings feature embedded into whole life insurance – for this reason, you are likely to pay higher premiums than you would with term life, at least at the beginning of your policy.
  • Part of your insurance money will be held in a high-interest bank account; every premium payment will help increase your cash value account, on a tax-deferred basisd.
  • You are able to borrow against your cash value or surrender your policy for the full cash value.
  • You may choose to participate in your insurance company’s surplus, and receive annual dividends, either in cash, or by adding them to your cash value account and letting them earn interest.
  • Whole life insurance is best purchased while you are young, so you can afford to pay for it over the long term.

These bullet points offer a mere sketch of the differences between whole and universal life insurance. Be sure to consult your insurance advisor before committing to either type of policy.

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Insurance Rates in Big Cities

February 8th, 2010 by admin | 1 Comment | Filed in auto insurance

It’s often been rumored that insurance rates are higher in big cities, but no one has published a formal study to prove the theory. Nevertheless, it’s a safe bet that if you live in a major metropolitan area, you’re paying more for your insurance than someone driving a similar car, with a similar credit profile, living in a similar neighborhood, and working in a similar job, just in a smaller town. Why is this? The simple answer is risk.

We all know that insurance rates are based on perceived risk. This is why cars with large engines cost more to insure than tiny compacts with equally tiny horsepower keeping them moving: the driver of the car with the larger engine is more likely to move at higher speeds, and engage in “reckless” driving machines.

Similar risks are attached to people who dwell in major cities: there is a greater likelihood of theft, for example, because there is a larger pool of potential thieves. City dwellers are also less likely to have garages, and more likely to be involved in accidents, because more people live in apartments, and traffic is generally denser.

Recently, the III (Insurance Information Institute) published a report about the causes of the rising cost of insurance in the state of New York. What they found was fraud and abuse of the state’s no-fault insurance system cost consumers and insurers almost $230 million last year, with many of those consumers being residents of the New York City area. In addition, they report that one of the largest sources of fraud involves medical payouts to accident victims. Basically, unscrupulous medical providers form alliances with equally unreliable attorneys, who then sue inusurance companies when the insurers question the validity of bogus claims. It’s a vicious cycle. And the end result is raised insurance premiums to offset legal fees.

Is behavior like this limited to the city, or to any city? Honestly, no. The difference is actually in volume. More people = more cases = more opportunities to commit fraud.

What can you do? Be aware of common insurance scams, and learn to avoid them, always compare insurance rates from several companies before you buy a policy, and if you live in a major city…consider using public transit a couple of days a week.

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Insurance Fraud Not Limited to Auto Insurance

February 4th, 2010 by admin | Comments Off | Filed in insurance facts, travel insurance

Stories about auto insurance fraud and how to handle it if you’re a victim abound, as does advice on everything from how to spot the most common staged accident scenarios to how to deal with your insurance company if you’re run off the road, but insurance fraud is on the rise throughout the industry, not just within the realm of auto insurance.

Just as Internet scammers claiming to be collecting money for victims of the earthquake in Haiti, were trawling the internet for unsuspecting donators, there are as many types of fraud as there are insurance.

Recently, A. M. Best ran a story warning consumers about a rash of travel insurance fraud in Florida. In this case, the scam involved an unlicensed “insurance company” selling policies to cruise customers. All of the cruises were eventually cancelled, and over 300 complaints were logged before the company was shut down.

While that event was unfortunate, the more common form of travel insurance is on the consumer’s side, and involves travelers claiming missing bags that never existed, or claiming much higher values for the contents of their lost luggage, than their belongings are actually worth.

Whatever the form, insurance fraud is not likely to disappear. How can you protect yourself?

  1. Always purchase insurance from a reputable firm; if you’re not sure of a company’s track record, read reviews, and check with the BBB.
  2. Whether it’s auto insurance, homeowners insurance, or travel insurance, be sure to read all the fine print of your policy, and ask questions if there’s anything you don’t understand.
  3. Document everything, and take pictures whenever possible. Pictures of your belongings will help you track them later; pictures of accident scenes or damaged goods will help your claim get processed faster.
  4. Always cooperate with insurance investigators.
  5. Know your rights. Check with your state’s department of insurance for important consumer guidelines.

While it’s never a good thing to be a victim of insurance fraud, experiencing travel-related fraud is always a bit more jarring, especially since it often happens when you’re nowhere near the comfort of home. Remember that there are always people willing to help if you need it. Remember also, that your state’s insurance department keeps a list of all the licensed insurers in your state.

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No Dental Insurance? Consider a Dental School Clinic

February 3rd, 2010 by admin | 1 Comment | Filed in advice and how-tos, alternative health plans, dental insurance

Whether or not health insurance reform is ever actually passed, the reality is that there are some kinds of coverage that often fall through the cracks. Smaller businesses may offer health insurance, but not vision or dental coverage, and some communities don’t have a low cost dental insurance option. What do you do, then, if you have a dental emergency, or are trying to avoid one?

According to an article that ran in the New York Times last autumn, one solution may be to visit your local community college, college, or university – any one that has a dental school – because almost every dental school in the country offers affordable care provided by students, and supervised by experienced, qualified teachers. The quality of care is excellent, and the cost may be as little as a third of what your actual dentist would charge.

As an example, a young mother in Portland, Maine, took two children to a pediatric dentist for checkups. After receiving a bill for $375, she realized there had to be another choice. She ended up going to the University of New England’s dental college clinic, where the bill for her children’s next round of checkups totaled only $100.

Low prices aside, there are some downsides to going to a dental clinic.

They include:

  • Time. A procedure that takes 45 minutes in a normal dentist’s office could take up to three hours at a college clinic.
  • Scope of Care. Because the practioners are students, some states don’t allow them to actually diagnose problems, or treat anything that requires anesthetic. Instead, they’ll provide you with a report listing any “suspicious areas.”

Knowing that, are dental college clinics still worth it? If you typically have clean checkups, and merely want to be sure nothings wrong, or if you just want a cleaning, college clinics are an excellent option.

If you have trouble finding a dental clinic in your area, you can seek help from Oral Health America (oralhealthamerica.org or 312-836-9900).

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Planning for Retirement? Pay Attention to Health Care

February 2nd, 2010 by admin | Comments Off | Filed in advice and how-tos, health insurance, medicare

If you’re planning for retirement pay close attention to your health care options. Why? Because according to financial journal MarketWatch, this is likely to be one of the biggest costs you’ll have to absorb once you leave the workplace, even with the federal Medicare program providing your basic coverage.

Why is health care so expensive for seniors? There are several reasons, including:

  • You must often pay substantial out-of-pocket fees and costs
  • Medicare doesn’t cover long-term care, beyond a brief transition period
  • There are multiple parts to the Medicare plan that cover different aspects of care (hospital stays, regular doctor visits, prescription drugs)
  • Even above the three main parts to Medicare, you’ll have to make many, many choices about which benefits to choose and when they should begin, which is especially difficult if you have continuing health coverage from your union or employment when you enter retirement.

So what should you do to help keep your financial future easy to navigate? Charles Ellis, co-author of The Elements of Investing advises that simplicity is the key.

While keeping it simple may be wise, the advice is a bit vague. Here’s some that isn’t: you should know that you have the option of choosing to buy Medigap or a Medicare Advantage plan – both are supplemental policies that extend your health coverage. As well, you can choose to purchase private long-term-care insurance, in case you ever need ongoing nursing home care, or home health care, later on in life.

But how do you know what’s essential to saving money on health care in retirement, and how do you know what you can live without, and what must be purchased immediately? For that matter, how do you even know when the window for Medicare eligibility even begins?

One invaluable source is the Medicare Rights Center, they’re a non-profit consumer advocacy group with a mission to help senior citizens and those nearing retirement age in understanding how Medicare works, how to apply, and what changes may be occurring as health care reform moves closer to actuality.

Health care may be one of the biggest expenses of retirement, but it doesn’t have to be the most confusing. Get informed now, so you can be confident in your coverage later.

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Health Plan Tax Resolved?

February 1st, 2010 by admin | 1 Comment | Filed in health insurance, insurance news

Consumers worried about the rumor of taxes on high-value health insurance plans, the so-called “Cadillac” plans, can rest easy. Why? Because the White House and union leaders reached an accord two weeks ago which changed the cost threshold and added an eight-year exemption for collectively bargained plans.

According to a report in Modern Healthcare, the deal, which was cemented in mid-January, removed one of the major issues causing friction between the House and Senate.

The final bargain raises cost levels to $8,900 from $8,500 for individuals and to $24,000 from $23,000 for families. Union plans would have an exemption from the tax until 2018. Additionally, dental and vision benefits would be excluded from being part of the total cost beginning in 2005, and the threshold would be adjusted to account for age and gender.

“It’s subject to the final bill,” said Richard Trumka, president of the AFL-CIO, who added that the concessions were tough-won. He also felt that they would move the unions toward an official endorsement of a merged health reform bill.

The move does come at a price, however. The original Senate proposal would have raised almost $150 billion over ten years. With the negotiated changes, the measure will only raise $90 billion, making it necessary for lawmakers to find other sources of revenue to make up for that loss. One idea is an extension of the Medicare tax to include capital gains earnings.

House Democrats have always maintained that they were wary of the Senate’s measure, saying that middle-class workers would be affected, but wealthier ones would not.

Rep. Joe Courtney (D-Conn.) has always been very critical of the tax, and has not yet endorsed the deal, telling reporters only, “It’s too soon to say.”

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