AllFinancialMatters » Insurance

Dang it! My Car Insurance is Going Up

JLP — Thu, 31 Jan 2008 18:28:18 +0000

Remember last summer wehn I wrote about how my insurance agent set me up with a new auto insurance policy and that by doing so, I was going to save $800 per year? If not, you can read about it here. The only difference that I could tell between the new policy and my old policy was that the new one was a 6-month policy while the old policy was for one year.

I got my renewal in the mail this week. It looks like I’m going to have to give back some of that savings.

The renewal premium is $731, which is $84 more than my policy from 6 months ago. It doesn’t seem like that much of an increase but if they do this to me every six months, I ain’t gonna be happy! If I annualize the new premium, it makes premium $1,462 per year, which is still a lot cheaper than the old policy.

I asked the agent about this and she said that Travelers raised their rates and that my renewal reflected that. Now I know why the insurance company went with a 6-month policy! Every six months they have an opportunity to raise rates.

God Bless My Insurance Agent!

JLP — Fri, 20 Jul 2007 20:51:34 +0000

Our homeowner’s insurance is up for renewal next month. I hadn’t received any notices or anything yet so I decided to call to see what our renewal rate was going to be. I had to leave a message and an hour or so later an agent called me back. She told me that she had been working on our policy this week and that she was working with the insurance company in trying to get some adjustments made. Apparantly our insurance company (Travelers) has changed its windstorm coverage, by raising the deductible to 2% instead of the customary 1%. For us that’s like a $4,000 deductible, which seems pretty high.

Anyway, our insurance agent told me that she was working on it and would have our premium details soon. Then she told me that she looked at our auto insurance and noticed that we were in a grandfathered plan. She told me that Travelers has a new program and that based on our records and credit rating she could get us more coverage at LESS COST per year. A LOT less! We are currently paying around $2,000 per year and the new rate would be somewhere in the neighborhood of $1,200 per year! A savings of $800 per year ($67 per month). That’s some significant savings!

I would have never known about any of this had it not been for our agent. Needless to say, I’m quite pleased.

Full Disclosure: The insurance agency of which I speak is partly owned by my father-in-law.

Auto Insurance – When Should You Drop Collision and Comprehensive Coverage?

JLP — Thu, 26 Apr 2007 17:40:52 +0000

Lenders require car owners to carry collision and comprehensive insurance coverage on their vehicles as long as there is a lien against them (meaning, while they are being paid off). Then, once the vehicle is paid for, it is usually up to the insured to choose whether or not to carry the extra insurance. I’m blogging about this because our Buick will be paid off in June, which means there will no longer be a lien against it and we will be free to drop our comprehensive coverage and collision insurance.

Since our Buick is still worth $10,000 – $12,000 and the premium for collision and comprehensive coverage is only $425 per year (with a $1,000 deductible) it’s a no-brainer to keep the coverage. I will probably keep the coverage until the value of the car is around $3,000. Why $3,000? It just seems like a good number to me. It’s low enough that we could cover it out of our savings. In other words, if something happened to our car when it was worth $3,000, it wouldn’t put us in financial strain to pay for it out of savings.

I dropped both comprehensive and collision on our Honda Civic last year, which reduced our premium by nearly $500. It’s nice to have an emergency fund!

How an Emergeny Fund Can Save You Thousands Each Year!

JLP — Tue, 03 Oct 2006 19:24:10 +0000

By now most of us know the importance of having an emergency fund. Having enough money set aside to cover 3 – 6 month’s worth of living expenses makes a lot of sense and can help put a person or family back on their feet should they experience something like a job loss or a naturual disaster. That said, it also makes sense to USE that emergency fund, which can help your monthly cashflow and help you build wealth by saving you thousands of dollars each year. How do we do this? Here’s two easy ways to use your emergency fund:

1. Stick it in a money market or high-interest savings account. On a $10,000 emergency fund at 5% interest, you could earn an additional $500 or more per year. (You would actually earn more than that due to compounding, but I wanted to keep the math simple.)

2. Raise the deductibles on your car and homeowner’s insurance. Earlier this year, I talked about how I adjusted my auto insurance and reduced by annual premium by nearly $500 per year. I bumped up our deductible to $1,000 from $500 and dropped comprehensive coverage on our old Honda Civic. You can also raise the deductible on your homeowner’s insurance. Check out the table below, which I put together with my homeowner’s insurance information:

Our deductible is based on the coverage for our dwelling, which is currently set at $180,000.

Deductible %	Deductible Amount ($)	Annual Premium	Annual Savings*
1%	$1,800	$1,528
2%	$3,600	$1,177	$351
3%	$9,000	$827	$701

*Annual savings calculated based on the original premium of $1,528.

So, based on this information, if I had a large enough emergency fund, I could raise my deductible to 5%, and save myself $701 per year on my homeowner’s insurance premium.

In addition to the savings on the premiums, there’s also the hidden benefit of having a higher deductible in that you will be less likely need to file a claim. We all know that filing claims raises premiums.

So, adding it all up, we see that an emergency fund can potentially save a person nearly $1,700 per year ($500 earnings on e-fund + $498 saved on auto insurance + $701 saved on homeowner’s insurance = $1,699). That $1,700 invested in a Roth IRA at a 10% rate of return could potentially be worth nearly $100,000 in 20 years!

What are the disadvantages to doing this?

None as long as you have an emergency fund that is large enough to cover the deductibles. At the VERY LEAST, the emergency fund should equal all the deductibles. Ideally though, an emergency fund consisting of 3 – 6 months of living expenses is the way to go.

It’s true: the rich really do get richer!

Life, Not Death Insurance

JLP — Thu, 14 Sep 2006 16:11:26 +0000

Here’s why life insurance is so important. She doesn’t state how old her husband was when he died, but she is only 32! You just never know what life is going to throw at you. Anyway, stop by her blog and offer her some encouragement. As her blog’s title says, Life Goes on…

UPDATE I followed-up this post with a response to Emily question (from the comments section).

Be Careful Where You Buy Your Life Insurance

JLP — Wed, 31 May 2006 20:35:08 +0000

We are all familiar with stories about shady salesmen selling people fee-ridden insurance products without fully disclosing the fees and penalties for getting out of the product if you decide it is not for you. As if these salesmen weren’t enough to worry about, there’s something else you need to be aware of:

Certain organizations play by different rules than everyone else in the insurance business. To understand what I’m talking about, you NEED TO READ this article that was in yesterday’s Wall Street Journal. The article DOES NOT speak to highly of such organizations Modern Woodmen of America and Thrivent, which provides financial products for Lutherans. Both organizations have agents who make commissions on product sales.

What I found appalling in this article is the fact that Trivent has changed their rules so that they CAN’T BE SUED by their policyholders. Instead, disgruntled policyholders must go through arbitration. On top of that, Thrivent can make changes that are retroactive so that even if you bought the policy years ago under different rules, the changes can affect your policy. My question is: how can an institution prevent someone from suing them?

Anyway, the point I think we should take from this article is that we should not ASSUME that a fraternal institution that has earned our trust is going to look out for our best interests! If you want to look into their products, fine. However, get everything in writing and then get a second opinion.

Life Insurance Needs Calculator

JLP — Tue, 30 May 2006 04:29:02 +0000

I put this Life Insurance Needs Calculator together this weekend as a BEGINNING POINT for those who are evaluating their life insurance. The purpose of the calculator is to give you an idea of how much life insurance you need so that you can have an intelligent conversation with your insurance broker when you go shopping for insurance.

If you are going to buy insurance from a broker, I would recommend an independent agent because they are usually not obligated to sell one brand of insurance over another. However, that’s not always the case so it is a good idea to ask them which companies they represent. If you don’t like the answer, then go somewhere else or consider purchasing online through Insure.com or some other insurance website.

Remember that price isn’t everything. In other words, DON’T SIMPLY BUY THE CHEAPEST insurance. Company reputation should be more important than rates.

Should You Ever Consider Permanent Insurance?

JLP — Fri, 05 May 2006 04:51:06 +0000

Short answer: yes, you should consider it if you think you are going to need insurance throughout your entire life. As you age, term insurance becomes more expensive and will be unaffordable in old age. On the other hand, permanent insurance is quite expensive but will last as long as you keep the payments up. Marshall Loeb wrote a pretty decent short article on the pros and cons of permanent insurance that you might want to read. He makes a good point that if you have a disabled child that you will need to provide for, you might be a good candidate for a permanent insurance policy.

The important thing is to make sure you have a trusted insurance agent. Fortunately, my father-in-law is in insurance business so I have someone I can go to when I need my questions answered.

Day 16 – Health Insurance

JLP — Thu, 13 Apr 2006 16:15:49 +0000

I have to be honest with you. Of all the personal finance topics, health insurance (or any insurance for that matter) is my least favorite. I find the subject dry and boring. However, health insurance should be part of every financial plan.

Most people get their health insurance through their employer. Employer-sponsored health insurance is typically less expensive than health insurance you can buy on your own because the risk is spread out over a number of individuals rather than a single family. If you are eligible for employer-provided health insurance, GET IT!

There’s a new health insurance option available that seems to gaining some attention. It is called a Health Savings Account (HSA), which operates like an IRA for health expenses. An HSA must be paired with high-deductible health insurance. I’m still learning about these new accounts, so I’m definately not an authority on this topic. For more on HSAs, check out:

The Healthcare Cost Crisis: HSAs – Financial Planning Magazine. This article is written from the financial planners point-of-view.

All About HSAs (pdf) from the U. S. Department of the Treasury. I read through this booklet. It is a decent resource for HSAs.

HSA resource page on the U. S. Department of the Treasury’s website is also a pretty good resource.

The New Health Insurance Solution by Paul Zane Pilzer. Although I have not read this book, my dad has and he recommends it.

Unfortunately, health insurance is not a popular topic among personal finance bloggers. However, here a few health insurance-related posts by other bloggers for you to check out.

FiveCentNickel:

Appeal Your Health Insurance Denials

Be on the Lookout for Medical Billing Errors

MyMoneyBlog:

Health
Savings Account Search – Pros, Cons, and Free eBook

MakeLoveNotDebt:

Health Savings Accounts

Determining Life Insurance Needs the Easy Way

JLP — Wed, 21 Dec 2005 13:40:41 +0000

I am currently previewing Jane Bryant Quinn’s newest book Smart and Simple Financial Strategies for Busy People that will be out in early January. She talks about a relatively simple formula offered by the Consumer Federation of America: Married couples with two small children need eight times their joint annual income to cover future living expenses for 20 years (nine times earnings for 30 years). One thing that is a bit confusing with her formula is that she breaks it down into two classes: lower wage earners only need 8 times current earnings while higher income levels might need 10 times earnings. What’s not clear is the distinction between lower and higher level incomes.

Anyway, here is the formula in her book for a family with one earner:

Annual Earnings	$60,000
Multiplied by:	X 8
Subtotal	$480,000
Add for college:	$100,000
Subtract company-provided insurance	- $60,000
Total life insurance needed:	$520,000

There you have it. It doesn’t get any simpler than that. Now I must caution you that just because it is simple doesn’t make it the best formula. Compare this formula to the formula I talked about yesterday. It might not hurt to run the math using both formulas so that you get a good idea of what you really need.