Insurance

How can I lower my car insurance costs?

There are a variety of methods for lowering your auto insurance rates. Here are some tips for doing so.

• Comparison shop
• Take a higher deductible
• Drop collision damage on older cars
• Buy a low-profile car
• Check insurance costs by community when you are planning a move
• Do not duplicate medical coverage
• Pay premiums annually
• Inquire about discounts

What types of auto insurance discounts are available?

Most insurance companies will reduce premiums 10% to 20% for various reasons, such as air bags, anti-lock brakes, and insuring more than one car. There are also safe driver discounts and discounts if you live close to work. Your agent may not think to advise you of all of the available discounts. You should ask your agent for a list of all discounts and what requirements must be met for each.

Should I purchase my own disability insurance policy?

Many of us have life insurance, however very few of us have long-term disability coverage. Yet according to statistics, workers are more likely to sustain a long-term disability (one lasting longer than 90 days) than die at an early age.
Long-term disability insurance is fairly expensive, and people tend to think that they will be protected by workers’ compensation or other sources. However, Social Security, workers’ compensation, and employer-offered long-term coverage are often inadequate.

How much disability insurance should I have?

A disability insurance company will usually not cover you for more than 60% of your income. Look for a policy that provides coverage for this level. When you shop for a disability policy, be ready to prove your income level. If you purchase the policy and pay the premiums yourself, the income received will not be taxable. Therefore 60% should come close to replacing your after tax income?

How is disability defined?

The definition of disability in a policy is extremely important. It tells you under what circumstances you will qualify to receive benefits.
Own-occupation coverage pays benefits if you can’t work at your chosen field-e.g., attorney or teacher. Own-occupation policies are the most expensive type of disability coverage because they provide the broadest coverage. (If you cannot perform the duties of your own occupation, you can take a job in a related field, make a decent income, and still collect the benefits.)
Any-occupation coverage pays benefits if you can’t work at any occupation for which your education level and training has prepared you. Thus, if you can no longer perform the duties of a nuclear physicist, but you can teach physics at college level, you will not receive benefits.
Note: Many policies are own-occupation for a period of years, at which point they convert to any-occupation.

When can I qualify for Medicaid insurance?

Eligibility rules vary from state to state, but beneficiaries are generally required to “spend down” their income and assets to qualify. New laws in many states make it possible for the spouses of Medicaid nursing home residents to keep more income and assets than previously allowed.
By law, nursing homes cannot discriminate against Medicaid patients, but in reality, many keep “waiting lists” for them while enrolling patients with more income and assets. Medicaid coverage for home care is very limited in most states.

Should I buy long-term care insurance?

Long term care insurance (LTCI) is both complex and controversial. It covers certain nursing home costs and sometimes home health car. Here is a summary of some of the main points for and against purchasing such coverage.
Reasons Against:

• Inability to afford the premiums, or not having enough assets to protect. In such case, the individual will quickly qualify for Medicaid.
• Some LTCI policies lack sufficient home care coverage to keep an individual out of a nursing home, unless family members or informal caregivers are available to help in providing care. Thus, if your goal is to avoid nursing homes at all costs, LTCI may not be the best way to go.
• LTCI policies return from 60% to 65% of total premiums paid in benefits. This is much less than returns from other types of health insurance.
• The fact that LTCI policies are improving: In a few years, you may be able to get a better deal.

Reasons For:

• LTCI, although expensive, may provide protection against costly care. While the premiums may be wasted if you never need long-term care, if you do need the care the insurance can effectively pay back your premiums many times over.
• If you have family caregivers, the extra home care coverage in LTCI might make it possible to remain at home longer.
• LTCI premium costs increase with age. Once you develop a serious medical condition, you probably won’t qualify for coverage. Thus, it is better to buy LTCI early in the game, if at all.

Some Guidelines
Do not buy long term care insurance unless all of the following apply to you:

• Each person in the household has more than $75,000 in assets (not counting the value of the primary residence)
• Your annual retirement income per person in the household is over $30,000
• You can pay premiums without having to “go without”
• You could continue to afford the premiums, even if they increased by 20% or 30% in the future

How can I get the “best buy” in homeowner’s insurance?

The price you pay for homeowners insurance can vary by hundreds of dollars, depending on the insurance company you buy your policy from. Companies offer several types of discounts, but they don’t offer the same discount or the same amount of discount in all states.
Be sure to ask your agent or company representative about any discounts available to you. Here are some money-saving steps to take when buying homeowners insurance. For more information on a particular item, click on it.

• Shop around
• Raise your deductibles
• Buy home and auto policies from the same company
• Check a home’s insurance cost prior to purchase
• Don’t insure land
• Increase home security
• Stop smoking
• Check your policy once a year
• Compare private insurance and governmental plans

How often should I review my homeowner’s policy?

Compare the limits in your policy with the value of your possessions at least once a year, to make sure your policy covers major purchases or additions to your home.
Tip: On the other hand, you don’t want to spend money for coverage you don’t need. If your five-year-old fur coat is no longer worth the $20,000 you paid for it, reduce your floater and pocket the difference

What should I watch out for when buying life insurance?

Many insurance agents work on commission, and therefore may tend to promote those policies or other investments that pay the highest commission, investments which may not be suitable for your needs. The cost, buried in commissions, can be quite high. Here are some things to watch out for.
Policy provisions that are hard to understand and compare. Many insurance company products contain investment features as well as insurance elements. Because these insurance products are very complex and have many variations, most clients cannot understand them. As a result, rates cannot easily be compared.
Pushing inappropriate policies. Often, agents will try to sell a policy that provides the largest commission to the agent. The investment may be completely inappropriate for your needs. Make sure your agent carefully identifies your needs and explains why the policy is suitable for you. You may want to have your other financial advisors, such as your accountant, review recommended policies before purchase.
High commissions and overhead. Sometimes 50% of your first year premium goes into the pocket of the insurance agent. In addition, insurance companies can have very high overhead (and, usually, advertising budgets). These costs get paid from only one source: your investment return. Make sure your review the costs of any recommended policy.
Low returns. Insurance company investments usually provide low rates of return due, in large part, to the company’s need to have a large buffer against any miscalculations and also because most insurance companies are not very good at selecting investments. (After all, their primary emphasis is on insurance.)
Tip: If you want both insurance and investment returns, un-bundle your needs. Get your life insurance from the insurance company (at the lower premium for pure, term insurance) and put the premium savings (the investment element) into a more profitable investment vehicle, where your return at age 65 will be substantially higher than through the insurance company’s annuity.
Safety of investment. Many insurance companies have shaky foundations. (Even the venerable Lloyd’s of London is in financial difficulty.) And because unexpectedly high claims can wipe away the financial foundation, the insured’s investment (as well as life insurance proceeds) can be lost. Check an insurer’s rating before purchasing a policy.