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What is Universal Life Insurance?

Friday, May 26th, 2006

If you’ve just managed to decipher the whole life versus term life riddle, you may pull your hair out by the roots when you get to universal life insurance.

In at least one regard, universal life insurance functions as one would expect a life insurance policy to function: it provides benefits to a beneficiary at the time of the policyholder’s death.

However, universal life offers a flexibility that other types of life insurance do not. This coverage allows you to change the amount of protection you carry as well as the actual premiums you pay each month.

Changes in coverage are subject to approval of the carrier, of course, but you may increase or decrease the amount of insurance, based on your own changing needs.

Universal life insurance carries cash value. The policy has both a value when maintained, and a value if surrendered for cash.

The account value of the policy earns interest and that interest is tax deferred. Life insurance proceeds are also generally tax free to the beneficiary.

The account value of the policy accrues each month from the premium paid, less a five percent expense charge. The account value earns interest which is credited monthly.

A universal life policy can act as a savings account. Withdrawals may be taken against the cash surrender value, at a minimum of $500 per withdrawal. Those withdrawals are limited to four per year and reduce both the account value and the death benefit.

Check with your carrier for withdrawal charges or charges for surrendering the policy for cash.

By Darryl James

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What is assigned risk insurance?

Friday, May 19th, 2006

Assigned risk is the insurance of last resort for drivers who can not otherwise find an insurance company to issue a policy. Typically, a driver becomes an assigned risk after an excessive number of accidents within a short time frame.

Each assigned risk state mandates that insurance companies doing business within its boundaries participate in that state’s assigned risk pool. That means they must cover a number of the assigned risk drivers based on the amount of business that the carrier does within the state.

For example, an insurance company that does 15 percent of the business within a state must accept 15 percent of that state’s assigned risk drivers.

By creating an assigned risk program, states which require auto insurance can insure that there will be a way for even the most uninsurable driver to obtain coverage. This effectively reduces the number of uninsured motorists.

For the driver with the poor driving record, the insurance company is compelled to accept you, but with some stipulations. First, they will typically only provide you with the basic minimum coverage. Second, the policy will be higher than standard commercial insurance.

The assigned risk system is simple. When you get turned down repeatedly by insurance companies, your state, or sometimes even an independent insurance agent can give you a form to apply to the assigned risk pool.

Once you are in the assigned risk pool, the carrier who provides you with coverage must keep you as a policyholder for at least three years. During that time, you should put forth endeavors to keep your driving record clean.

You can, however, shop around for better rates with other carriers.

In some cases, rates are determined purely by the extent of your poor driving record. In other cases, more factors go into determining the rates offered.

Keep in mind, that your address may still play a factor in your rates, just as in standard commercial coverage.

By Darryl James

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Managed health plans: HMO versus PPO

Monday, May 15th, 2006

Chances are that when your employer offers a health plan, you don’t really know which one to choose. For many consumers, the alphabet soup of managed healthcare plans makes little sense.

Managed healthcare plans offer discounted health benefits to employers who have their employees join the plan. The organization negotiates discounts with a pre-selected group of hospitals and doctors. The two most popular types of managed healthcare plans are the Health Maintenance Organization (HMO) and the Preferred Provider Organization (PPO).

An HMO negotiates with pre-selected doctors, hospitals and clinics to provide services to all employees within the plan. The employee must select a service provider within the group. A PPO allows employees to choose their own health service provider, but usually at a higher rate than the providers within the plan. Each plan will vary in cost and benefits based on the company offering the plans. You should choose carefully, because it can be difficult to switch plans after making a selection.

Some things to take into consideration when choosing between an HMO and a PPO include:

Whether or not you already have a family doctor. If your doctor is not within the HMO system, you may want to choose the PPO.
Whether your family has pre-existing health conditions. If you are securing insurance for the first time, you should make certain that those conditions are covered by the plan you choose.
How emergencies are handled. Determine what emergency rooms are covered and how the plan defines emergencies.
How physicals are handled. Determine how often your plan will cover physical checkups, if at all. You may also want to look into what the plan offers for pregnancies or your existing children.
How Prescriptions are processed. Depending on how often you use prescription drugs, you will want to pay attention to any co-pay or level of coverage in a plan.
How miscellaneous services are handled. Those services include substance abuse rehabilitation, mental health, chiropractic care and experimental/alternative treatment.

Finally, check with each plan to determine what your actual out of pocket costs are. Find out what your monthly payment will be and balance it against the co-payments, if any, as well as the benefit limits and fees associated with specific services.

By Darryl James

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Dog Bite Liability

Thursday, May 11th, 2006

Not everyone loves the pooch you raised from a puppy, or the watchdog pit bull you saved from the pound. Sometimes, your beloved pet and protector can become a terror to a visitor or a neighbor who walks near or to your home.

Each year, more than four million people are bitten by dogs, with roughly 800,000 of those bites resulting in injuries requiring medical attention. Fifty percent of those bites occur on the dog owner’s property.

If your dog bites someone, you may be liable whether the bite occurs on or off of your property. A homeowner’s or renter’s insurance policy will usually protect you against losses in dog bite incidents.

Most policies will carry $100,000 to $300,000 in dog bite liability coverage. But after a single incident, the carrier may exclude the dog from future coverage, increase the premium or even suggest that the owner get rid of the dog.

Some insurance companies are more likely to insure a dog if the owner takes it to behavior modification training, keeps it in a cage, or uses a muzzle. Still other insurance companies will require the dog owner to sign a liability waiver or charge more for specific breeds, such as pit bulls and Rottweilers.

Actual liability varies from state to state. In some states owners are absolutely liable for the behavior of their dogs, while in other states, owners must have knowledge of their dog’s biting behavior in order to be held liable. In still other states, trespassers may not be able to sue when bitten by a dog on the premises.

Dog bite liability is generally inclusive of medical bills, time off work, pain and suffering and any property damage caused by the animal.

While the actual number of dog bite claims has fallen, the cost of each claim has risen, accounting for four percent of claims made against homeowner’s insurance policies. That translates into 15 percent of the total homeowner’s policy liability dollars paid out in 2005.

The case that will perhaps continue to cause ripples of change in dog bite liability laws and insurance coverage occurred in San Francisco, California. In that case, a woman was killed by two dogs in the doorway of her apartment while the owner watched from across the hall. Both of the dog’s owners were jailed for several years and ordered to pay restitution.

You may consider your pet to be a family member, but its behavior with other humans can cause you a great deal of money. Take precautions to protect other people, and make certain that your insurance protects you.

By Darryl James

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Securing insurance for your pet

Wednesday, May 10th, 2006

For some people, pets are just possessions for protection or home security. For others, pets are personal companions, and even considered a part of the family.

You may have paid little money for your pet, but dogs and cats have health issues just like people. If you need to visit the veterinarian, those health issues can also be costly.

You can now purchase insurance for your dog or cat to cover veterinary treatments, ranging from broken bones to the ingestion of a foreign object.

Pets have hearts, lungs and other body parts requiring maintenance just as humans do. With pet insurance, you can schedule regular checkups to prevent or manage health care concerns for your pet.

Pet insurance is much cheaper than human health insurance. While a visit to the vet for a bee sting can hit your pockets hard, pet insurance averages roughly $10 per month.

Pet insurance is easily available for dogs and cats. Older pets may have higher monthly premiums, but can still be insured. Check with your carrier to determine whether coverage is available for other types of pets.

The insurance will cover routine treatments, vaccinations and examinations, as well as emergency treatments.

For example, a if your dog suffer a fractured leg, the bill could easily reach $2,000. But if you had pet insurance, you would likely be covered. Since the average pet insurance policy has a per incident of $2,000, with a $50 deductible.

Sadly, every year some pets are destroyed simply because their owners could not afford their four-legged companions vet bills. Pet insurance can help owners avoid making such a decision.

By Darryl James

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Insurance Myths

Wednesday, May 10th, 2006

Similar to the stock market, everyone believes that he or she is an expert with insurance. People with no real background or training pass around advice that, quite frankly, can be harmful.

Insurance agents typically have to be trained and licensed by a state agency before selling protection that can have a serious impact on people’s lives.

Let’s take a look some of the most popular myths about insurance:

If you have insurance, you should use it for every covered incident.

Actually, insurance should be used when an incident occurs that would cause you financial hardship. If you can afford a small accident, for example, you should pay for it out of your pocket, otherwise, you may see an increase in your premium.

And, some types of insurance just aren’t worth buying. You should determine the risk of certain incidents and determine that either they may not affect you, or may not be financially catastrophic.

Everyone needs life insurance.

If no one will be adversely affected by your absence, then this insurance may not be necessary. Typically, life insurance provides for a spouse or children left behind after death. If no one depends on your income, then you may not need life insurance.

However, even if one spouse is a full time homemaker, their absence could create a financial hardship. A homemaker would have to be replaced by a housekeeper, cook and child care services. If the non-working spouse contributes to the household, their absence should be covered.

I don’t need flood insurance because my area isn’t high risk.

Even if your area isn’t considered high risk, it may still be prone to flooding. If it has a history of flooding, you may want to have a professional assess the risk to determine whether you should be covered.

Extending Auto Insurance to cover business usage is only for home businesses.

If you or a family member uses the car for anything to make money, it may not be covered by your personal insurance. Be especially careful if the outside usage is for a part-time job, such as delivery of goods.

If there is anything you are uncertain about when it comes to insurance, be sure to investigate. Don’t make assumptions about your policy.

By Darryl James

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Should You Continue COBRA Insurance Coverage?

Monday, May 8th, 2006

When you leave one job, the next job may have a ninety-day waiting period before your new health insurance coverage begins. If you can not secure private insurance, you and your family may experience a gap in coverage.

Thanks to the Consolidated Omnibus Budget Reconciliation Act of 1985, also known as COBRA, you can choose to continue the insurance coverage from your former employer.

The COBRA law allows employees to extend their health care coverage up to 18 months after separating from the employer that provided the benefits. This continuation of coverage can be secured for yourself and your spouse, as well as your dependents.

While COBRA can help to avoid a gap in coverage, the plan can be expensive. In order to continue coverage, you must pay the full monthly insurance premium, as opposed to any discount your employer may have provided.

There are a few things to consider before choosing to continue health care coverage through COBRA.

First, of course, is cost. Shop around for private insurance and if this option is less expensive, COBRA may not be for you.

Second, consider any health issues you or your family may have. If there are pre-existing medical concerns, it may be both expensive and difficult to move to private health care insurance. Some pre-existing health conditions may either be excluded from coverage or may greatly increase the cost of the monthly premium.

And finally, determine whether your new employee will actually offer health care coverage. Also determine what level of coverage will be provided.

COBRA provides an option when filling the gap in health care coverage. As with any insurance coverage, it is easier to obtain when you already have coverage in force.

There are several of companies offering competitive rates for private health care insurance coverage. Weigh all of your options before filling the gap when separating from your employer.

By Darryl James

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How Marriage Alters Your Insurance

Monday, May 8th, 2006

There is a long list of things to consider when exchanging marriage vows. Many things will change, including names, property ownership and living arrangements.

After deciding where to live, what house to buy, how many children to have and when to have them, couples rarely discuss their insurance policies. However, merging lives also means merging insurance needs and coverage. There are a number of ways in which merging lives can impact insurance coverage. Marital assets need to be insured and if you plan to have children, health care plans must include prenatal care and coverage for newborns. Automobile policies may also change when there is an addresses change.

Here are a few things that couples can do to merge their insurance needs effectively:

Make a list of all existing insurance policies to determine which ones will be kept and which ones will be cancelled. Make certain that both spouses’ names are on all new insurance policies.
Examine life insurance coverage. If there are no existing policies, coverage should be secured. Beneficiaries should be changed on existing policies and, in some cases, the actual coverage broadened.
Determine which spouse has the best health care coverage and add the other spouse. If you do cancel one spouse’s coverage, ask the employer if there is a reimbursement plan for unused coverage.
Determine if the current homeowner’s or renter’s insurance policy is strong enough to protect the valuables of both spouses, particularly wedding rings and expensive wedding gifts.

Remember that each spouse has to be covered in the event of a catastrophe. You may want to consider securing disability insurance, long term care or an umbrella policy after the marriage.

By Darryl James

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Defining identity theft insurance

Friday, May 5th, 2006

While virtually unheard of 10 years ago, the crime of identity theft is seems to be on everyone’s mind these day. So persuasive is this crime, that it has even given rise to a new market for the insurance industry: identity theft insurance.

Identity thieves work in a variety of ways to garner your basic personal information, such as social security numbers and date of birth, which enables new credit profiles. They can also access current profiles to open new credit card or banking accounts. Identity thieves can even write checks or take out loans under the stolen identities.

All of this can wreak havoc on your credit rating, which unless corrected could hinder your ability to take out future loans, apply for credit card. It could even hinder your ability to get a new job since many employers check your credit rating as part of your background check.

However, correcting your credit history can be time-consuming and expensive process. You may have to spend hours on the phone with various credits and have to fax them several documents in order to clear up the damage your identity thieves caused.

Identity theft insurance is designated to cover is the cost of clearing the damage to your personal credit profile. Keep in mind that identity theft insurance will not protect you from identity theft, nor will it pay for the losses incurred by the theft. Keep in mind however, by federal law you are only liable to pay the $50 of what identity thieves charged to your account, so perhaps the most damage costs come from restoring your credit and correcting erroneous information in your credit profile.

Identity theft insurance will typically cover those costs, including phone calls, making copies, mailing documents, taking time off from work without pay (lost wages) and even hiring an attorney.

Identity theft insurance will typically cost anywhere from $25 to $65 per year. Check with the carrier to determine the limits of the policy. Some identity theft insurance policies have limits of $10,000 to $15,000. Some carry deductibles of $10 to $500. The policy may also include limits on legal fee provision as well as the lost wages provision.

Before purchasing identity theft insurance, check your homeowner’s insurance policy, it may already an identity theft provision already built into it.

Even with identity theft insurance, financial advisers agree that the it is best to take steps to avoid identity theft in the first place. As such, they recommend taking the following precautions:

Make certain to keep your social security card and driver’s license are in separate places.
When pre-approved credit card offers arrive, immediately shred the ones you don’t plan to use.
Use a post office mailbox instead of having mail delivered to your home.
Take care when making credit card purchases online. If possible, reserve one card for this purpose.
Check your credit report regularly.

But even after taking these steps, there is no way to ensure that you won’t become a victim of identity theft. Identity theft insurance may help protect your losses if you do become a victim.

By Darryl James

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Dental insurance vs. Discount dental plans

Thursday, May 4th, 2006

With discount dental plans becoming more common, it’s important to understand the difference between these plans and traditional dental insurance.

Dental insurance is usually provided to employees and their families by an employer as part of a benefit package, which may also include health insurance and a life insurance policy. Depending on your benefits package, you may have to pay for all or a portion of the premium. If your company does not offer a dental plan, or if you are self-employed, you may considering purchasing you own individual insurance plan.

The standard policy will generally cover exams, cleanings and regular dental procedures including extractions, fillings and root canals. While some insurance plans may pay all of the costs for these procedures, others may require you to make a co-payment. In addition to co-payments, keep in mind that some dental insurance policies may also put caps on the amount of dental work it will pay for within a calendar year, or it may have an annual deductible before the coverage begins to pay for services.

If you already have a family dentist, check with their office before securing coverage. Not all dentists accept all dental insurance plans. Also, check to see if your dentist will require you to pay up front and then collect from the insurance company on your own. On the other hand, discount dental plans generally assess a flat annual fee to access their dental network. The plan will offer you discounted flat rates for each service item. Rates for dental services within a discount dental plan will typically be available before you make your purchase.

Perhaps one of the biggest differences is that traditional dental insurance plans may have prohibitions on pre-existing dental conditions. The discount dental plan will usually charge the flat discounted fee without such limitations. By knowing the differences between dental insurance and discount dental plans, you will be better suited to determine what plan is best for you and your family.

By Darryl James

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