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Archive for June, 2011

When you are looking for insurance on the vehicle you drive, everyone accepts you could change to a different vehicle tomorrow. It’s the same with a rental home. People who do not own their own homes often move on a fairly regular basis. Put the other way around, many people feel able to change their insurers more or less at will. If one insurer hikes their premium rates, many shop around and find another insurer with lower rates. That’s the way the world works. But, when it comes to buying cover for your life, there’s a big change.

The first policy you are looking to buy may be for a fixed term, making it unlikely you will cancel. If you buy a whole life policy, this is an even more permanent commitment. Given the policy depends on you building up the cash value, you are not expecting to change insurers unless there’s a crisis that requires you to surrender or sell the policy. This means both sides of the proposed bargain are going to look more carefully at each other. You want to feel confident you are buying a policy with the right terms for your particular circumstances. You also want to be reasonably sure the company is financially sound and likely to be around to pay out in thirty or more years from now. On their side of the fence, they want to ensure you are not going to die tomorrow – that means a medical exam.

If all you want is a policy with a short term for a small amount of money, a young man will be waved through with only a nominal check on your health. But if you are older and/or you ask for a larger amount of cover, the checks will get more real. The first rule to understand is that you cannot rely on your regular doctor to provide a medical report. You will always either be seen by an employee of the potential insurer, or referred to an independent person with medical expertise. Depending on the level of protection demanded by the insurer, you may find the exam will come to you. Many life insurance companies operate with mobile testing facilities that will visit your office or home. This provides an opportunity for a detailed questionnaire on your medical history and a basic set of samples for testing. But the more comprehensive tests will always require you to go to a clinic or hospital where you can be put on a treadmill for measurement of your breathing capacity, heart performance, and so on.

Remember you will be subject to a standard range of tests to determine whether you are currently taking any drugs. This ensures your honesty in disclosing existing medical conditions and also looks at your lifestyle to confirm you are not currently taking anything illegal. If any problems are detected, you may be asked for further tests or time may be allowed for you to take remedial action, e.g. to quit smoking, eliminate street drugs or lose weight. Life insurance rates are based on your health as it is. A healthy young person will be offered a low rate. Anyone with lifestyle or health issues will either be offered a high rate (as a deterrent) or refused outright.

The first wave of boomers is approaching retirement and, in a recent survey, almost half those born in the twenty years immediately after the end of World War II are worried they may not have enough money to be able to live through retirement comfortably. This is slightly surprising since more than half this age group have life cover. In fact, of all the generations, they have saved and invested more which, of course, partly explains the current worries. When the property bubble burst in 2008 and stock values fell so sharply, many people found their retirement investments seriously reduced. As a result, many boomers are now planning to delay their retirement as long as possible, hoping to rebuild their savings. The other factor in all this is the steady increase in life expectancy. When the boomers were planning their finances back in the 1960′s and 70′s, most expected to live through to around 70. Now the average expectancy is 79 years with women living on into their 80s. Indeed, with the improvement in medical care, the number of people dying fell by 36,000 in 2009. When you realize you may have to find the money to support yourself for another ten years, this puts a big strain on savings.

So are the boomers right to be worried? In practical terms, the answer is probably “yes”. It’s going to take many years for property values to recover. Without the security of positive housing equity to offer as collateral for a loan, this forces more people to use up their savings more quickly. If inflation rises, this will force a hike in interest rates. Although this is good for those with savings, it puts anyone still holding a mortgage under pressure. Any debts on credit cards also look bigger and take longer to repay. All this is manageable to long as there are no crises. But if there are hospital bills or any other large expenses, this can create real problems.

The best answer may be the market in life settlements. If you hold a policy with a cash value, you can sell the policy for more than the insurer will pay as surrender value. The way it works is simple. The individual or company buying the policy pays the premium installments and then collects the amount payable when you pass on. This is a good deal in three situations which may overlap: you need quick cash; your family circumstances have changed and there’s no one depending on you to leave a cash sum; or it’s become a strain to maintain the installment payments and you risk the policy lapsing if you stop paying.

Before you approach this market, you should get proper advice. If you are holding a life insurance policy worth at least $250,000, you may be able to get a good lump sum depending on the amount of the premiums and your current state of health. The usual advice is to hold on to the policies for as long as possible before offering them for sale. If you are at least 70, the life insurance policy will be worth more – fewer installments to pay during your remaining years.

When it comes to setting premium rates, the make and model of the vehicle you propose to drive is the most important factor after your own safety record as a driver. Some models attract thieves either because they are easy to steal or provide a thrill factor when driven at speed. But for everyday use, the way the model performs in crash tests is the real issue. Let’s take just two issues. If there’s plenty of metal between you and other drivers, you are less likely to be injured in an accident. So, for example, sport utility vehicles have size and weight on their side. Now that new electronic stability controls have been fitted to reduce the risk of roll-over, these are among the safest vehicles to drive. The only drawback is the gas-guzzler tag. With gas back up to around $4 a gallon, filling up the tank on an SUV means you have to be in good standing with your credit card providers.

So, if the cost of putting and keeping an SUV on the road is too high, what are the safest low-cost vehicles? The answer is provided by two bodies, working more or less together: the Insurance Institute for Highway Safety (IIHS) and the Highway Loss Data Institute (HLDI). The IIHS does the crash testing and general talking with the manufacturers about design to improve the safety of vehicles on the road. The HLDI analyzes all the available data from the insurance industry to put numbers on the human and economic losses that flow from traffic accidents. When you put the two sets of results together, you get a good picture of which vehicles to drive. When the IIHS first started, it preferred bigger vehicles. So long as the driver was wearing a seat belt, driving a truck or stable SUV was always going to give you the most protection. But now the tests have grown more open, measuring front, side and rear strength, as well as the risk of roll-over, small vehicles are outperforming the heavyweights. The top fuel economy cars are now safer than SUVs.

In part, this is due to their speed. You can often move out of the way of danger in a small car. The latest round of results show the Ford Focus, Honda Civic, Hyundai Elantra, Nissan Juke and Toyota Prius as the top safety picks. Note the Prius. The hybrid delivers an estimated 51 miles to the gallon on the highway. If you are going to buy secondhand, check the archives for the listing of makes and models by year. Small vehicles used to lack the safety equipment now supplied as standard. Designs change from one year to the next. So, for example, the Elantra has gone from being one of the worst vehicles to one of the best.

Before you buy, check the lists published on the IIHS site and then get auto insurance quotes to confirm the current premium rates. You are looking for the best balance between price on the road and insurance costs. The good thing about free auto insurance quotes is you can get premium rates for as many different makes and models as you can afford. This lets you make the best overall decision on safety and cost.

In a sense, this is the easiest of all the questions to answer because it all comes down to a choice between two basic types. Term life is what you might call a pure form of insurance. You agree a fixed amount payable in the event of your death during the term set. If you die, the company pays that amount. If you are still alive when the term expires, you are now without insurance cover. Because the majority of people are finding their life expectancy rather better than they had thought when young, the insurers do not pay out on many term policies unless there’s an accidental death. No one can predict a traffic accident. So the premium rates are low, offering potentially very good lump sum payments to your family for a relatively small outlay.

The second major type offers permanent protection while accumulating a cash value. The so-called whole life policy offers a basic minimum lump sum plus a bonus from investments. In the majority of cases, the management of the investment is delegated to the insurer but, if you think you can do better, there can be options for you to guide the investment. We then get into a small jungle in which you have to judge how much risk you want to accept. In a variable life policy, for example, you can abandon the fixed lump sum in favor of greater returns from the investment account. Universal life gives you the right to borrow from the insurer or actually withdraw some of the accumulated cash value should an emergency arise. This also has greater flexibility, allowing you to vary the amount of premium you pay. The maximum control comes to you through a universal variable policy. This has separate accounts and you can manage where your money goes as between stocks, bonds and the money market. If you make good decisions, there are good tax free returns.

When you are young, a term insurance policy can give you low-cost protection during the first years of your adult life. The question you have to ask is whether this represents the best long-term value. Should your health not hold up, renewing the term or switching to whole life may become impossible unless you bought a convertible term policy. The other factor is inflation. If you buy a whole life insurance policy early, the premium may start off higher but, over time, it becomes more affordable as your pay rises. If you delay, the cost of the whole life cover rises as your life expectancy falls. What you may find a slight struggle when you buy during your twenties, will cost you significantly more if you ask to buy the same amount of cover during your forties. Equally important is the question of a medical. As a young buyer, the insurer is likely to wave you through without any comprehensive medical exam. But as the years pass and your weight rises, the risk of different diseases and disorders increases. You may find it more difficult to buy whole life even if you can afford it. Life insurance is all about taking the decisions at the right time. In reality, all this should be discussed with a knowledgeable advisor before you make any commitments. Early mistakes can lock you into unfortunate policies.

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First, a Warning

Don’t confuse the cost of insurance alone with the cost of owning a car. Rather, paying more for insurance could actually save you a lot of money. Someone who pays a lot might have better coverage, which saves you a financial crisis if you should get into a bad collision. One of the reasons some states have such high rates is because they mandate a higher level of coverage than other states. They do this for a reason: to protect their citizens from being bankrupted by a crash.

In Michigan, costs are partly so high because the state requires that medical coverage be unlimited for life, meaning that if someone is permanently disabled in a collision, the insurer could wind up paying their bills for tens of years. Companies charge more to take on that risk, but Michigan legislators believe it is an important protection for people in their state.

Louisiana has problems with its legal system that send insurance prices through the roof. Claims resolutions are simply too expensive, and it hits consumers in their premiums.

The 10 Most Expensive States and Districts

1. Louisiana (the most expensive state in the country)
2. Michigan
3. Oklahoma
4. Montana
5. California
6. South Dakota
7. Washington, D.C.
8. Georgia
9. Illinois
10. Connecticut

The 10 Most Affordable States

1. Maine (the least expensive state in the country)
2. Vermont
3. Ohio
4. Wisconsin
5. New Hampshire
6. Iowa
7. Massachusetts
8. North Carolina
9. Arizona
10. Tennessee

The Influence of Cities

Insuring a vehicle is a whole lot more expensive in big urban areas. There is more traffic, more pedestrians, and more stress-meaning a higher risk of collisions. The statistics back this up, which is why people living and working in the big city pay more for coverage. In stark contrast, rural areas are always in the lower section of costliness within states. Things tend to be cheaper in the country, because there are fewer cars and fewer opportunities for devastating collisions.

The 5 Most Expensive Cities

• Detroit, MI
• Philadelphia, PA
• Newark, NJ
• Los Angeles, CA
• Hempstead, NY

Other Costs to Consider

As far as the expense of owning a vehicle, insurance is only one factor in the equation. You have to add in taxes, fees, the cost of depreciation, financing and interest payments, fuel costs, maintenance prices, and repair fees. These prices vary by region, state, and city. Of course, most crucially, they vary by individual situation.

No matter how high the average cost of owning a vehicle in one place is, there are always some people who go about things super smartly and save a lot of money. Good credit? Loans wont’ be as expensive, and neither will coverage. Have a handyman in the family? Don’t worry so much about maintenance costs! If fuel is expensive, get an electric vehicle.

People with great driving records and who pick extremely safe vehicles will save a lot on car insurance. There are hundreds of ways to go about saving money, so don’t be discouraged by state averages.

Who knows what it will cost next year?

A couple years ago, Washington, D.C. was the cheapest place to get car insurance. Politics change a bit each year, as do mandates and car insurance rates.