Saving You Money For Life

Because serious vacation travel can be a very expensive business, travel insurance policies have become a reasonable consideration for many people who make travel an important part of their lives. There are four major components to travel insurance: trip cancellation coverage; luggage theft; medical coverage; and accidental death.

Trip cancellation coverage has become a worthwhile consideration because it is not uncommon for firms that package vacation tours to go out of business. Less likely but still a possibility is a cruise line or airline ceasing operations. On an average, the cost of trip cancellation coverage is around six percent of the total cost of the trip.

Baggage and personal effects insurance covers the cost of loss or theft of your personal items. This particular area of travel insurance may also be covered by your homeowner’s policy, which often covers theft away from the place of residence. The tour operator or cruise line may also provide similar coverage as part of the tour package.

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Most experts agree that level premium term life insurance is the simplest, and most economical way to protect families against the unexpected loss of a breadwinner.What most experts haven’t noticed is that the term life insurance that we thought was inexpensive in the mid ’90′s has become ridiculously inexpensive over the past 10 years.

In fact, since 1994, term life insurance rates have fallen dramatically. For example, the most popular term life insurance product, 20-year guaranteed level premium term, purchased by a healthy 40-year old male nonsmoker in the best rate class available in January of 1994 would have cost a MINIMUM of $995 per year.That’s assuming the insured was astute enough to find the lowest rate in the market.Today, in 2006, a 20-year level term life insurance policy, for that same 40-year old is LESS than $400 per year, or less than $35.00 per month. That’s about 60% less than just 12 years ago!

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One of the proposed laws now floating around both houses of Congress would allow health insurers to take money that injury victims obtain in personal injury lawsuits in order to cover the health care costs that the insurer paid out as a result of the injury. While most insurance companies reserve this right in their policies, there are lots of states and some federal courts who severely limit this practice.

We needn’t debate the question of what health insurance is for, why we pay those premiums – those of us who can afford them. What is at issue here is the notion of putting an insurance company first in line in a liability action, first in line to recover costs that they are obligated to pay as a result of their line of business – insurance.

Or let’s say, the bill’s sponsors don’t think that debate is necessary. Their claim is that providing insurers access to personal injury awards will lower premium rates and make health coverage more affordable for everyone. Just as managed health care did, I suppose, and as deregulated energy lowered the power bills for all of Enron’s customers.

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Depending on the insurance company, the child might not get the money until they turn 18. But the fact is they’re going to need it when they’re young.

Also, minor children, when they are the named beneficiaries of a life insurance policy, should that policy end up paying a death claim before they grow up, might end up receiving a lot of money, a lot sooner (as early as age 18) than they have the maturity to know what to do with it. I’m not quite sure if I’d trust that my kids would use that money wisely. I’d be a little uneased.

For this reason, many people, rather than simply naming their children as beneficiaries or contingent beneficiaries, have set up trusts, to make sure that the money they have provided, through their life insurance, will be distributed more sensibly… on a schedule that they can predetermine using criteria that they have decided, in advance, that makes the most sense.

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Everyone agrees that the remarkable advancement in the medical sciences during the last generation is nothing short of miraculous. Many people are living well into their eighties and beyond. Our population of elderly citizens is increasing and, as has always been the case, some seniors need substantial living assistance as they move into their final years. In past generations, that duty often fell to children or grandchildren. Today, there are special long term care facilities to provide support and quality care for the elderly and frail; and there are insurance policies designed to pay for that care.

Long term care includes assistance with the tasks of daily living: eating, bathing, using the bathroom, dressing, and getting in or out of bed or a chair. Loss of two of these Activities of Daily Living (ADLs) generally qualifies an individual for long term care, and coverage from a long term care insurance policy. The need for care may be the result of surgery or illness and may not last for a long term. It may involve care in a nursing home, an assisted living facility or custodial care at home.

Depending on the policy, long term care insurance may cover some or all of these scenarios, at varying levels of cost. If the elderly person qualifies for both Medicare and Medicaid, the policy may not be necessary. But for those of us with average retirement resources, a long term care policy is a prudent choice.

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Twice in the last 6 months, I have been asked to evaluate and comment on a variable annuity currently being offered by AXA Equitable. The story many consumers are hearing from their sales force is that, regardless whether or not the underlying funds perform well, your “guaranteed” a minimum return of 6% per year.

While this is hardly the whole truth, in defense of the AXA reps that are out there selling this stuff, no one can realistically explain each and every line in a securities prospectus, which can often include dozens of pages of fine print. That being said, since the 6% guarantee is something that has come up twice in 6 months, the question is, “Can this product deliver a 6% guarantee while at the same time provide the potential upside of better performance if the underlying mutual funds within the product do better than that?”

The short answer is NO. So, what’s the catch? How can they say it does, when it doesn’t?

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Flood insurance may not be your top priority, especially if you’ve exhausted your insurance budget on home insurance, health insurance, and car insurance but in the wake of Katrina and with the upcoming hurricane season, it’s never been more clear how essential extra insurance protection can be.

But do you really need flood insurance? It depends where you live. About 11 percent of homeowners in the United States live in areas in which they are mandated to purchase flood insurance in order to qualify for a mortgage backed by the federal government. But almost 35 percent of floods happen outside of this high flood area.

FEMA sets flood insurance rates, so don’t worry about being hoodwinked here. Your rates are determined by where you live, ranging from $385 to more than $2000 per year. What kind of coverage do you get for those kinds of fees? Nor more than a quarter of a million to cover the cost of damages to your home and $100,000 for loss or damage to possessions inside your home. You can claim damages for equipment that is normally used in the home, but anything kept in the basement won’t be covered.

Just because you don’t live in a high flood area doesn’t mean you won’t suffer damages because of it. Flash floods happen everywhere and there doesn’t need to be a natural disaster or a hurricane to make it happen. The choice is up to you.

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One of the “hottest” concepts in the life insurance business today is the Non Recourse Premium Financing arena. Hundreds of millions of dollars of life insurance premiums are being written in it. And while it is fraught with serious problems, there doesn’t seem to be any way to stem the growth of these, often questionable, transactions.

The New York Department of Insurance recently issued a statement of position on these transactions. In no uncertain terms, the Office of General Counsel of the New York Insurance department determined that many of these transactions are NOT permissible under New York law. That’s because they violate New York’s insurable-interest regulations. Insurable-interest laws are intended to prevent people from gambling on the lives of strangers and profiting from their deaths.

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I know it’s not polite to answer a question with a question, but do you have children? Other dependents? If the answer to those questions is ‘yes’ then the answer to whether or not you need life insurance is also ‘yes.’ If you answered ‘no,’ however, it doesn’t necessarily mean that you don’t need life insurance.

Of course, if you have children, foster children, or close friends or relatives who depend on you, then you need to have enough life insurance so that at the time of your death, especially if it occurs unexpectedly, all your dependents will be cared for. This means housing and living costs at the very least, with provisions for college educations for minors and retirement costs for your partner or spouse.

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Life insurance isn’t a topic that is usually brought up at dinner time. No one likes to think about their death or the death of a family member. And no one thinks it could happen to them. But the reality is it could and therefore life insurance is a topic that should be discussed.

So how can you bring up the topic without sounding like a soap opera villian?

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