Saving You Money For Life

Now that tax season is officially over, I’d like to take some time to remind everyone to make sure your other finances, such as your life insurance policy, is in order. Each year you should assess not your homeowners, auto insurance, life insurance, health insurance and disability insurance needs.

When it comes to life insurance you should ask yourself the following each year:

• Do I have enough? Use a financial calculator if your not sure how to determine what constitutes enough. If you had another child, got a better paying job or even bought a bigger house, you may need more.
• Am I paying too much? It’s easy to get a FREE instant life insurance quote online. Within 5 minutes or so you can determine if you’re paying too much.
• Does anyone else in my family need to be covered? Often times, we think only the breadwinner of the family needs life insurance. But what about the stay at home mom? If she wasn’t around, there would be a financial loss due to the people that you’d have to hire to replace all that she does.

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It’s unusual to see a state bureaucracy take the lead on legislation, but the Oregon Division of Insurance has announced plans to sponsor several legislative efforts in 2007. Four of the legislative efforts are outlined below.

Health insurance cost transparency:
The bill would require health insurers to be more transparent about costs. Consumers, who are increasingly paying a bigger share of health care costs through deductibles and other cost-sharing methods, need to know in advance what their actual out-of-pocket costs will be. The bill also would put in place a standardized method of determining the “usual, customary and reasonable” costs for services that insurers pay when there is no pre-negotiated price with a provider.

Discount medical plans:
The bill would require sellers of discount medical plans to register with the Department of Consumer and Business Services (DCBS). Companies would have to provide a free-look period and provide customer assistance. The bill would also allow DCBS by rule to establish advertising restrictions and disclosure requirements.

Long-term care insurance:
The division proposes to amend Oregon’s long-term care statutes to take advantage of changes in federal policy. The goal is to enable consumers to benefit from recent federal legislation that allows LTC policyholders, once their benefits are used up, to access Medicaid services without having to exhaust their family assets.

To obtain these benefits, states must amend their laws to include specific consumer protections and policy provisions, as well as training and continuing education requirements for insurance producers who sell long-term care insurance.

Medical malpractice program for rural physicians:
In 2003, the Oregon Legislature approved a medical professional liability reinsurance program totaling $40 million for rural physicians for 2004-2007. The proposed 2007 legislation will extend the program until it is phased out not later than Dec. 31, 2013. The bill will also tighten eligibility criteria for rural physicians.

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One of the ripples largely unnoticed in the tsunami kicked up by the November elections was the decision by Oregon voters not to ban the use of credit scores in determining insurance rates for new customers. This vote occurred despite the fact that only months ago the California Insurance Commissioner unilaterally declared the process unacceptable and outlawed it in that state. Moreover, the Oregon legislature had voted in 2003 to outlaw the use of credit scores in evaluating the insurance premium costs for existing policy holders.

Heavily funded campaigns against the measure stressed the fact that ending the use of credit scores would result in higher premiums on homeowners, auto and commercial insurance rates. There was much discussion about the negative political advertising across the country in the last round of elections; it was estimated that for every dollar spent on a positive ad nine dollars went to negative tactics.

The threat of terrorists invading our shores should a Democratic House of Representatives be elected wasn’t sufficient to ward off a turnover of power on Capitol Hill. In Oregon however, negative advertising convinced the voters by a two to one margin that their credit scores should be a part of their insurance evaluations. The insurance industry spent four million dollars worth on the campaign and their sole theme was that the ban on using credit would result in higher insurance premiums for all.

“We are very pleased that Oregon voters understood the harm Measure 42 would have caused – higher insurance rates for 60 to 70 percent of Oregonians. This vote represents the public’s continuing support for insurance pricing that reflects risk. Voters understood that: this initiative would have unnecessarily increased rates,” said Kenton Brine, northwest regional manager, Property Casualty Insurers Association of America (PCI).

This issue has been controversial since the practice was adopted, which is a relatively recent development. That fact makes Mr. Brine’s comments sound somewhat self-serving; how did the insurance industry survive all those years without access to credit records?

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If you are asking yourself this question, you may want to read yesterday’s post. Once you read it I think you’ll see why lying on your application is NOT a good idea.

You want to be as honest as possible for several reasons. First, the chances of you getting caught are very great. The medical exam that you must take to qualify for individually underwritten life insurance tests your blood and urine. From these two tests alone, you can find out a variety of medical conditions including whether or not there is nicotene in your blood (one of the most common things people lie about).

Second, you have to keep in mind that the Medical Information Bureau keeps track of any “red flags” for up to 7 years. So, if you applied for health insurance a few years ago and mentioned that you had depression and today you applied for life insurance but didn’t mention that in your life insurance application this could be considered a “red flag” on your application.

You want to be sure to tell your agent everything up front. Therefore, there are no surprises on your part or his.

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The Medical Information Bureau or MIB is an organization who’s goal is to detect and deter attempts by applicants of life, health, disability or long-term care insurance who would omit or misrepresent facts on applications. The MIB works like this – when an underwriter at a member compnay has an applicant with a condition considered to be significant to his or her risk classification, this information is reported to the MIB. It’s important to note that the MIB does not recieve your entire medical record. The record is a “red flag” to alert an underwriter to look closer. It’s the underwriter’s job to make a determination of whether or not the condition is signifcant. The record is kept on file for 7 years.

Conditions most commonly reported include: height and weight, blood pressure, ECG readings and laboratory test results if and only if these facts are considered significant to health or longevity.

You can request to review your MIB record at any time.

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Penn National Gaming, the third-largest U.S. gambling company, is considering going without property insurance at its U.S. Gulf Coast properties as the costs for property coverage soar in the wake of Hurricane Katrina.

“We are doing a lot of soul-searching about whether it makes sense to have insurance in the Gulf Coast … Katrina may be a once-in-40-year type storm,” Penn CFO William Clifford told the company’s investors at an annual meeting. The company is publicly held. Katrina destroyed two of their facilities, one in Biloxi and one in Bay St. Louis Mississippi.

Clifford said the company is still haggling with their insurers over their aggregate claims as a result of Katrina. They have, however, collected $132 million in claims filed as a result of the storm. Prior to Katrina, Penn was paying Berkshire Hathaway $20 million per year for $200 million in coverage on all of its properties.

Penn’s CEO seems inclined to believe that Katrina was part of the storm cycle typical to hurricanes in the region, rather than a harbinger of changing weather patterns due to permanent climate changes. “It might make more sense to sock away that premium,” Clifford said. If the changes in premiums for Gulf Coast homeowners are any indication, the property and casualty premiums in the area for commercial enterprises are going to take a quantum leap.

Apparently, however, rates for commercial facilities such as these casinos are more flexible than consumer rates. Mr. Clifford said that insurance costs were likely to “remain high” for the next couple of years, and then take a dip if there are a few years with light storm seasons. Perhaps Penn feels that their insurance rate had already topped out. If that’s the case, it’s very different than the experience for tens of thousands of Florida homeowners.

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Fireman’s Fund Insurance Company has provided a grant to the small town of Washington Park Illinois, so that the town’s Fire Department can refurbish its truck. Washington Park is a town of 5,000 residents that is across the river from St.Louis and is a modest suburb of that city. The donation Fireman’s Fund will allow the village of to repair the truck’s transmission, replace the tires, rebuild the emergency light system and see to a number of body work needs.

In addition, the grant will pay for a new radio system for the department’s eight firefighters and new firefighting gear for the men as well. The town’s Fire Chief says the grant will have a huge impact, as the town has been unable to budget upgrades for the department’s vehicle and equipment over the years.

The Firemans’ Fund Heritage Program is a grants program that provides funds for equipment, fire prevention tools, firefighter training, fire safety education and community emergency response programs. Since its inception, the Heritage Program has provided over nine million dollars in grants to dozens of municipalities and their fire departments all over the country.

The grant proposals come to the company through Fireman’s Fund Insurance Agents, although municipalities are free to apply on their own. In 2004 and 2005, the company chose to concentrate on the San Diego, Atlanta, San Francisco and Chicago metropolitan areas to receive a concentration of company grants. Today, every community where Fireman’s Fund does business can participate in the Heritage program through agent-directed grants and employee nominations.

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First of all, if you need more coverage, never cancel the old policy until the new one is approved, in-force, and paid for. As for whether you should cancel and replace the old one if you need additional coverage, you need to compare the cost per thousand on the old one, to the cost per thousand on the new one, along with the length of the premium guarantee (if it is term insurance, of course). Sometimes it makes sense to simply add another policy to augment the face amount to the level you are seeking. Other times, it makes sense to replace the old one with a new, larger face amount policy. There is no rule of thumb. These decisions should be made based on the facts and circumstances in your specific situation. Other factors that may affect your decision include whether your health or lifestyle has changed since you obtained the old policy. If, for instance you have become a diabetic, it is more likely that the old policy will be something you’ll want to hold on to, with both hands! The new policy may very well have a higher cost per thousand as a result of your deteriorating health. On the other hand, if you were a smoker when you obtained the old policy, but have since quit, for at least a year, the new policy, assuming you are otherwise in the same health, should be significantly more cost effective, and you should examine whether it makes sense to replace the old policy with a new, larger policy. Another item to consider is whether the old policy is a permanent plan of insurance, i.e. universal life, whole life, etc. If it is, these decisions are more complex and you should absolutely engage the help of a qualified, licensed agent… one with access to lots of insurance companies, and one with many years of experience, to help you analyze the relative benefits of keeping, versus replacing such a plan.

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This post may be a little biased because of the fact that I own a life insurance quoting and brokerage firm, but many financial publications and reporters agree with me when I say the best way to compare life insurance products and prices is by using a life insurance brokerage firm such as AccuQuote or Term4Sale. These sites are free to use and there is no obligation.

However, if you have any questions, these brokerage firms have licensed agents that can help answer any of your questions and point you in the right direction.

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