Jerry
http://www.leads4insurance.com

Additional comments:

Visit the need for a living trust to allow for an AB exemption, if necessary.

For large estates, purchase life insurance in a ILIT, or Life Insurance Trust to avoid add-on Estate taxes.

For seniors, take a look at some of the premium financing for life options available for life insurance, and explore the latest: no cost immediate annuities. What will Wall Street think up next?

I, on the other hand, am almost out of debt (thanks to that delayed inheritance) and have no children or spouse. I have my niece and nephew listed as beneficiaries on the life insurance policy that my employer pays for. It’s more than enough to cover my remaining bit of debt and my funeral expenses and my minor relatives wouldn’t be able to touch the money until they’re 18 so they won’t notice how long it might take to get paid so that’s plenty for me. I’m currently looking for a condo, though, and will have to re-evaluate all of my insurance options.

That’s the number one thing that people need to do when it comes to insurance: re-evaluate it whenever there are major life changes. Marriage, buying a home, having children, divorce, a job change, a move; all of these things cause changes in your financial situation and you should be looking at your insurance to determine if it needs to be changed.

Also, the post about UIM (underinsured motorist coverage) is good but I’d clarify a little bit. First by explaining what UnderInsured Motorist coverage is because it’s highly misunderstood. In fact, I get letters from attorneys every day requesting to use their clients UIM/UM coverage and I just shake my head because you can’t have both.

UM or Uninsured Motorist coverage covers you when you’re hit by a person who has no insurance. UIM or UnderInsured Motorist coverage covers you (maybe) when you’re hit by someone who doesn’t carry ENOUGH insurance. UM coverage comes in 2 flavors- UMPD, which covers your Property Damage & UMBI, which covers your Bodily Injury. UIM only comes in UIMBI.

So, why did I say ‘maybe’ on UIM coverage? Because in some states you’re only able to use that coverage if you have more than than the BI limit of the person who hit you. So if you carry a $10k UIM limit here in California and you’re hit by someone who has a $25k BI limit, you can’t use your UIM coverage. Basically in a state like CA where you can only collect if you’re limit is higher, buying the state minimum is pointless since you will NEVER be able to access your coverage.

Are you carrying state minimums? In CA, the Property Damage minimum is $5k. Anyone checked into auto repair costs lately? I see a lot more claims where our insureds have caused more than $5k in damages now than I did 5 years ago when I started. Because of rising repair costs of course, but mainly because of increased carelessness because in most cases the policyholder has hit multiple parked cars or homes, trees, etc. through simple lack of attention.

Insurance covers one particular kind of problem. Say getting sick, having a car-accident or having a fire at home.

The money you save by -not- having insurance on stuff you can afford to take the risk on though, covers ALL cases. A $10000 cash-reserve will help substantially with ALL problems where cash is an issue (most of them)

You also don’t have to argue with insurance-companies (sometimes for years, going trough several court-instances) to get the money if/when you decide you need it.

I don’t have car-insurance. (For my own car, offcourse I have liability!) but I *do* have enough cash saved aside that IF I’m unlucky or stupid enough to total the car, I’ll simply walk into a car-dealer of my choice the next day and say “I’d like a new car pretty please, and if you need any delivery-time, I want to rent a similar vehicle from you until my car is delivered.”

I think that is because they think of it as health insurance for their cars.

I won’t even get started on health insurance.

It drives me crazy when the same people that think that disability or life insurance is unimportant or a rip off also think that purchasing an extended warranty on their DVD player is a good idea.

This article along with the comments is the best discussion about insurance I’ve come across on the internet in a while. Great comments everybody.

What am I missing?”

AFLAC can actually fill in the difference between what you receive in disability and your salary. The AFLAC insurance (like the life insurance) will actually kick in and get sent to you faster then the worker’s comp checks, which can stem the tide betweenwhen you stop getting your normal check and when you start receiving worker’s comp.

Also, we carry AFLAC more for the things we do outside of work. Worker’s comp will only cover you if your injury is work related. AFLAC covers the injury regardless of how it happened. Our family is big into adventure sports, and our list of injuries is rather extensive. Carrying AFLAC through my husband’s employer has actually proved to be cost effective for us. As long as we don’t change our plan, our cost have not increased and we have filed a claim at a minimum of once a year since owning it. One year we filed three different claims.

I’m sure in the next 10 years, as our emergency fund grows and we have to cut out activities due to age, we will drop this coverage.. but for now, it gives us the piece of mind to enjoy our lifestyle without bankrupting the family.

It is a way to transform a LARGE but very UNLIKELY cost into a smaller, but certain cost.

Because insurers ain’t charities, you generally always pay more than the insurance is “worth” — sum total of premiums is always higher than sum-total of payouts.

Thus, insurance only makes sense in precisely two cases:

One, you know something the insurance-company don’t. You are, in reality, at higher risk for a certain happening than the general populace.

Two, you cannot afford to take the financial risk of the LARGE but UNLIKELY cost yourself.

It makes no sense to buy “insurance” for something you can easily afford to pay for yourself.

This means if you’re unable to pay for a new car if the current one is wrecked, by all means insure against that possibility. But if you’re driving a $10K car, and your monthly salary is $8K — you probably DONT need that insurance, if you are unlikely enough to get the car totaled, you can likely afford to simply buy a new one, and on the average, this is CHEAPER. (because, as mentioned above, insurance-companies are not charities)

Just like a wedding or a new baby, a death and a funeral cost a lot more money and requires a lot more time than you expect it will cost. Unfortunately, it DOES cost money to settle an estate. Just because you’re not around to worry about it doesn’t mean your debts magically disappear when you die. If someone dies owing more than he or she is worth (which is not unlikely given the debts many Americans currently carry) or even just breaks even, it’s going to cost the loved ones to bury or cremate that person because there won’t be any money left to pay for it.

If the deceased owes money to a credit card company, nursing home, medical provider, apartment complex, or has liens on a property, those creditors have a right to sue the estate for recovery of funds, and you cannot sell property that is mortgaged if you don’t keep up the monthly payments. A judge will not let the estate out of probate if there are outstanding debts and no effort on the part of the executor to settle them. My grandma’s Discover card, nursing home, doctor, and hospice bills were all paid before we could get the money from her mutual funds.

Survivors don’t “owe” the money, but they can NOT collect money from the estate to pay funeral expenses until the debts have been paid. The funeral home cannot collect from the estate, they will collect from the person who plans the funeral. Also, going to court, and grief itself requires time away from work and the survivor’s normal life. If your parents or grown children are spending every weekend and evening cleaning out your home and running to your bank and creditors to get paperwork in order for court, it’s going to take a toll - even more if they have to travel from out-of-town to do it.

Without the proper paperwork, a family member can spend far more trying to get the estate out of probate than they will ever recover and may have to foot the bill for the funeral while they wait. Childhood homes and family heirlooms have been lost by poor planning.

Even “junk” can be costly to dispose of properly. When my grandmother died we had to pay her lot rent and utilities for her run-down trailer house until we could clean it (which took a long time) and sell it; and it was not worth a terrible amount of money. We also had to pay for a storage unit for some of her stuff until we could figure out what to do with it.

If you have 1) sufficient funds in savings and 2) the right paperwork in order so that the funds can easily and quickly clear probate without any being absorbed by outstanding debts, then yes, a single person without children does not NEED life insurance.

Also, you don’t want to underestimate the cost of a funeral and burial, especially if you live out-of-state from your family. My father’s modest funeral cost over $3000 ten years ago because of the transport from where he died to where he lived. Those expenses add up very fast.

Death is expensive for the survivors, so while insurance is certainly not necessary for people without dependents, a very small amount of it for people whose financial situation is precarious or even marginal can help ease the burden for the person handing the estate.

If I wasn’t married and didn’t have kids, but my financial situation was exactly the same as it is now, I wouldn’t NEED a life insurance policy because my net worth and the value of my home would more than make up for any expenses my mother or sisters would incur to get my estate through probate, bury me, or sell my house. BUT I would still have a small one because none of those people could afford to put several thousands of dollars on their credit cards waiting for that probate to be settled.

Not everyone needs the same insurance or legal services, but given the current state of many American’s finances, and the fact that this and many blogs like it exist; it’s a safe assumption that most readers are not in an ideal financial situation with tons of money available to their survivors when they die. It’s not unreasonable nor unwise to think through the details of death when planning ahead. Yes it is uncomfortable to think about it; but it’s even harder for the people you love to live through it.

Finally, I am quoting the following from Jonathan’s post at:
http://www.bloggingawaydebt.com/2008/04/protect-your-family-from-credit-card-debt/:
“You should also be aware that if you held any joint accounts or real estate with the deceased that a portion of those accounts become part of the estate of the deceased and will or no will, the creditors will get their money first. The only financial asset that is protected from creditors at time of death is life insurance policies.
Don’t leave your family in a financial nightmare should you pass away unexpectedly. Take some time to go over your debts and financial assets with your spouse or significant other. Know the laws of your state and consult with a family lawyer to make sure that your credit card debt won’t haunt your family long after you are gone.”

For example, single people without children do not need life insurance!! Having a few thousand dollars in an emergency or savings account will cover your funeral expenses, and you don’t need money to “settle your estate” — your debts die with you, no one else has to pay them.

Then there are all the “gotcha” insurances - cancer insurance, insurance for specific types of car or home damage, etc. There are always anecdotes about people who were glad they had such insurance. But overall, these are a rip off. Normal health, homeowners and car insurance are enough. The others are designed to bring in extremely high profit margins for companies.

Case in point. I was working with a couple that was making an auto claim. The lady had over 50k in medical bills. The person that hit her only had a 25k policy. After that 25k was maxed out we looked into her UIM. Well, her agent only sold her a 10k UIM to save her a couple of bucks. UIM is super cheap. UIM is to protect you from people that don’t have enough insurance. It is in essence YOUR money if you have to use it. It doesn’t go to anyone else but you if you have to make a claim under it.

Long story short, we got her the 25k liability and the 10k UIM. That still left us 15k short because she didn’t have enough insurance.

Morale of the story is the agent wanted to sell her a policy and get her business. In order for him to do it he needed a competitive price. So he cut out the portion of the policy she didn’t understand and got her business. It’s her fault for not doing her homework, but be weary of anything an agent is trying to sell you just to be competitively priced.

Those who said that insurance should only be for things you can’t afford to take care of without it is right on. Having a good savings cushion is much more important than insurance, generally speaking.

Always figure the odds. Do the math. Determine what is best for you and your individual situation, rather than just paying for as much insurance as you can get, thinking this will save you from financial catastrophe. One thing that will do is to prevent you from being able to build up an emergency savings account and save for your retirement!

If you look at insurance as something to cover a major loss that you would be unable to pay for on your own, you’re on the right track. Auto insurance is one area I think where most people are overbuying. If a $250 deductible is all you can afford, fine, but for most people a higher deductible is smarter. Personally, in my almost twenty years of driving, I’ve been in one accident. I’ve used my deductible ONE time in twenty years. Paying more for a lower deductible in my case doesn’t make sense.

One of the things that amazes me is people’s perception of auto insurance as something to fix every ding and scratch. Plus, these days, reporting an “incident”–even if you never get the repair or use your deductible–can get you penalized. Don’t even get me started on towing coverage–again, do the math–how many times have you had to be towed? Is it worth paying the $40 extra year?

One of the things not mentioned here, but I would like to see more discussion about, is buying long term care insurance for your parents–as a supplemental. It’s something I’m struggling with.

See, even the insurance people have a hard time with insurance.

I really recommend checking out what sort of coverage is available to you as far as medical coverage in the state you are in. Most medical coverage on automobile policies does not have a deducible or co-pays and can really offset the cost of ambulance and hospital stays if injured in an auto accident, and pay regardless of what party is at fault in an accident. You may also be able to purchase income loss coverage that will pay if you are unable to return to work right after the accident due to injury.

Also, because I’m a nurse I can’t resist this one. It’s “lap-chole”, short for laparoscopic cholecystectomy, or having your gallbladder removed.

Isn’t that true of anything you purchase?

Insurance companies are selling you peace of mind, and they are charging you for it. Of course they are going to “win in the end”. The insurance company isn’t gambling on your life, they are insuring it. Those things should not be confused.

The basic rule-of-thumb that I have been told, and that makes sense to me, is that you don’t insure against risks that you can afford.

If the same thing that happened to you happened to me (my car was destroyed), could I afford it? Yes, I could. I could replace my car. It would hurt me a bit financially, and I hope I don’t have to do it, but it wouldn’t come anywhere close to ruining me. As such, paying for insurance to replace the car for me doesn’t make sense. I’m also not the type that buys expensive cars, so that helps.

Now, I can’t afford not to have liability coverage - I don’t have millions of dollars lying around - so paying for insurance to cover that does make sense.

What I need to do now is look into life insurance…

They also pay me a $60 “wellness benefit” payment once a year when I send in a receipt for any of a whole list of medical exams…mammogram, eye exam, physical, etc. It’s one payment per policy per year, but the exam can be on anyone listed on the policy. I pay quarterly premiums, and that $60 pays me back for one premium, plus a little bit.

Also, they make no bones about telling you to hush it up if you have their coverage and get hurt. A lot of insurance companies will reduce your benefits if they know there is other insurance in place. AFLAC tells it’s policy holders (okay, they told me, so I’m assuming they tell everyone else) not to bring up thay you have their coverage so that this doesn’t happen. (Maybe that’s not quite kosher, I’m not sure…)

I don’t mean to sound like a shill for the company, but so far I have had good experiences with them. Granted, I’ve also never had a claim to file…

BIG MISTAKE!

I live in Chicago, and I park my car on the side of the road. Well, it was sitting there last Thursday, minding its own business, when a guy comes barreling down the street the wrong way, hits another guy, and they both careen into my vehicle. The guy ran, and guess who’s left with the bill? So now I’m waiting for the adjustor to call me and tell me just how much I’ll owe and just how little (read, nothing, outside of a miracle) they’ll pay.

On my next car, I’m getting everything up to and beyond terrorism insurance, if they offer it.

Much love,

John

chicagoprayer.blogspot.com