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Is Your Home Underinsured?

If you were to lose your home in a fire, would you have enough homeowner’s insurance coverage to rebuild your home and replace your possessions?

You would also need a place to live while your home is being rebuilt.  Does your policy contain a Loss of Use provision that will help pay for hotel, restaurant and other expenses accrued while you’re displaced?

Chances are your homeowners insurance isn’t going to provide you with enough coverage to resume the lifestyle to which you’ve grown accustomed should a disaster strike.

Homeowners Don’t Know They Are Underinsured
Homeowners are spending billions of dollars a year to add onto their homes, but most of them never update their homeowners insurance coverage, which leaves them grossly underinsured.

According to a Marshall & Swift / Boeckh survey, 66% of U.S homes are undervalued for the purpose of insurance by an average of 18%. If you increase your home’s value through improvement projects, but fail to notify your homeowner’s insurance provider, you could end up underinsured.

How Much Homeowners Insurance Coverage Do You Need?
Many homeowners might be unaware of how much homeowner’s insurance coverage they need. You need enough coverage to protect your home and assets in case of a worst case scenario where your home is lost due to a covered disaster. You need to review your policy at least once a year to make sure all your belongings are covered.

Homeowner’s insurance policies can be broken down into four categories - structures, possessions, living expenses and liability:

Structures
You generally want to have coverage equal to at least the amount of your mortgage. Your policy should cover rebuilding costs. And if you’ve recently remodeled your home, you need to update your coverage to cover these additional renovations.  

Possessions
Your homeowners policy will also cover your possessions. You may choose between replacement coverage (the cost to replace each item) and actual cash value coverage (the item’s original value less depreciation). If you have valuable jewelry, an art collection or a state-of the-art home theater system, you should consider purchasing additional coverage to cover these items.  Many policies have special limits on certain items (usually jewelry, furs, cash, precious metals, computer equipment) so make sure you review those limits with your agent to make sure you are appropriately covered.

Living Expenses
This often overlooked coverage will provide you with coverage for hotel, restaurant and other miscellaneous expenses you may accrue if your home is rendered uninhabitable by a covered disaster.

Liability
Most policies offer a base amount of liability coverage - typically $100,000. However, if you have a swimming pool or a dog whose breed is aggressive by nature, you may want to consider increasing your limits.   This covers you if someone gets hurt on your property.

Review Your Policy
The most effective way to know if you have enough insurance is to maintain a home inventory that you update regularly, and check your homeowners insurance policy at least once a year. Keeping your home inventory up-to-date will help you determine how much homeowner’s insurance coverage you need. After updating your home inventory, you may find you need to increase your coverage.

Even if you need to add more coverage to your homeowner’s insurance policy, there are still ways to keep your rates low. The best way is to compare multiple homeowners’ insurance quotes to find the right policy with the best price. Nothing is more costly than having an underinsured home.   A great place to get homeowners insurance quotes is right here at www.cheapinsquote.com.

Life insurance can be a very confusing product.  Many people find themselves wondering:

 

• What are the different life insurance products, what do they do, and which one is right for me?

 

• How much life insurance should I get?

 

• How much will it cost?

Here are some answers to those questions.

 

Let’s start with the different life insurance products that are out there.  I have also included a list of pros and cons.

 

Term Life Insurance -

Is temporary life insurance protection for a specific period of time. Think of it as “plain vanilla” or “pure” life insurance protection. The premium on a Term policy is low compared to other types of life insurance because it builds no cash value; you pay only for the cost of insurance (C.O.I.). The C.O.I. is the amount of money the insurance company charges to keep your life insurance policy in force, depending on your age and health at the time you apply for coverage. Under a Yearly Renewable Term policy, the C.O.I. is determined at the time you apply and increases at each policy anniversary (as you get older, it becomes more expensive to insure your life). Under a Level Term policy, the C.O.I. remains level during initial guaranteed period and then increases sharply. Term Insurance pays a specific lump sum to your designated beneficiary if you die within the period covered by the policy. The policy protects your family by providing money they can invest to replace your salary, and to cover immediate expenses incurred by your death. Term Insurance is best for young, growing families, whose financial needs are especially high but whose resources are often insufficient to cover those needs.

Pros:

Affordable coverage that pays only a death benefit, Term Insurance initially costs less than other insurance policies mainly due to the fact that, unlike other policies, it builds no cash value.

Cons:

Term Insurance premiums increase with age because the risk of death increases as people get older. Some Term Insurance premiums may rise each year (e.g., “Yearly Renewable Term), or after the initial guarantee period of 5, 10, 15, 20, 25 or 30 years. Over the age of 65, the cost of Term Insurance becomes very expensive, often unaffordable.

 

Whole Life:          

Whole Life Insurance is permanent life insurance protection for your entire life, usually to age 100. A Whole Life policy is contractually guaranteed not to lapse, provided that you pay sufficient premiums each year to keep the policy in force. Besides permanent lifetime insurance protection, Whole Life Insurance features a savings element that allows you to build cash value on a tax-deferred basis. A portion of the premiums you pay build up the savings element of the policy and are invested by the company. The interest rate return on your investment is added to the savings portion of the policy. This is how the policy builds cash value. In addition to crediting your policy with interest, “participating” policies issued by mutual insurance companies may also give you the opportunity to earn dividends. Dividends are a NON-guaranteed return of part of the premium intended to reflect a company’s favorable operating experience.

Pros:

Whole Life Insurance has a savings element (cash value) which grows tax-deferred. If the contract is set up properly in advance, you might build up enough cash value to stop paying premiums by a certain age, or to borrow from the cash value (take a policy loan) during your lifetime on a tax-advantaged basis. Unlike Term Life Insurance, whose premiums eventually rise after the initial guarantee period, Whole Life Insurance premiums will not increase during your lifetime (as long as you pay the planned amount and repay any policy loans).

Cons:

You are not allowed to choose separate investment accounts, i.e., money market, stock or bond funds; the insurance company controls how and where your premium dollars are invested. Whole Life Insurance offers no premium flexibility or face amount flexibility; the plan you buy today remains fixed for life. It is therefore important to plan carefully, because Whole Life Insurance is not very good at adapting to insurance and/or retirement plans that change significantly.

 

 

Variable Life Insurance –

Also called Variable Appreciable Life Insurance - provides permanent protection to your beneficiary upon your death. This type of life insurance is “variable” because it allows you to allocate a portion of your premium dollars to a separate account comprised of various investment funds within the insurance company’s portfolio, such as an equity fund, a money market fund, a bond fund, or some combination thereof. Hence, the value of the death benefit and the cash value may fluctuate up or down, depending on the performance of the investment portion of the policy. Although most variable life insurance policies guarantee that the death benefit will not fall below a specified minimum, a minimum cash value is seldom guaranteed. Variable is a form of whole life insurance and because of investment risks it is also considered a securities contract and is regulated as securities under the Federal Securities Laws and must be sold with a prospectus.

Pros:

Allows you to participate in various types of investment options while not being taxed on your earnings (until you surrender the policy). You can apply interest earned on these investments toward the premiums, potentially lowering the amount you pay.

Cons:

You assume the investment risks. When the investment funds perform poorly, less money is available to pay the premiums, meaning that you may have to pay more than you can afford to keep the policy in force. Poor fund performance also means that the cash and/or death benefit may decline, though never below a defined level. Also, you cannot withdraw from the cash value during your lifetime.

 

 

 

Universal Life (UL)

Also called “Flexible Premium Adjustable Life Insurance,” entered the life insurance market in the early 1980s as a more flexible version of Whole Life Insurance. Like Whole Life, UL features a savings element that grows on a tax-deferred basis. A portion of your premiums are invested by the insurance company in bonds, mortgages and money market funds. The return on the investments is credited to your policy tax-deferred. A guaranteed minimum interest rate applied to the policy (usually around 4%) means that, no matter how the investments perform, the insurance company guarantees a certain minimum return on your money. If the insurance company does well with its investments, the interest rate return on the accumulated cash value will increase. Universal Life allows you to choose from two death benefit options. Option A pays the death benefit out of the policy’s cash value; the more cash value you build up means the company is on the hook for less insurance (and therefore costs less). Option B pays the face amount stated in the contract, plus any cash values you accumulated over the years (costs more). Many UL policies today offer a no-lapse guarantee: as long as you pay the minimum designated premium, the policy will stay in force to age 100 (or even to age 120). However, paying the minimum guaranteed premium is rarely sufficient to build up significant cash values.

Pros:

Universal Life gives you the flexibility to adjust the death benefit as your needs change, as well as the flexibility to pay smaller or larger premiums - depending on your financial circumstances. This is often an important feature for families who may have fluctuations in their ability to pay.

Cons:

If your premium payments are too small for too long, the policy could lapse, leaving you without insurance protection. Also, if the insurance company does poorly with its investments, the interest return on the cash portion of the policy will decrease (but never below the minimum interest rate guaranteed in the contract). In this case, cash values will probably fall, forcing you to pay more premium in the later years.

 

 

How much do I need?

 

                The worksheet below allows you to figure out how much life insurance you need.

 

Life Insurance Worksheet

 

 

How Much Will It Cost?

The least expensive life insurance is likely to be from your employer’s group life insurance plan. These policies are typically a term policy, which means you’re covered as long as you work for that employer. Some policies can be converted upon termination.

The cost of other types of life insurance varies greatly, depending on how much you buy, the type of policy you choose, the underwriter’s practices, how much commission the company pays your agent, etc. The underlying costs are based on actuarial tables that project your life expectancy. High risk individuals, such as those who smoke, are overweight, or have a dangerous occupation or hobby (for example, flying), pay more.

There are often hidden costs in life insurance policies, such as fees and large commissions that you may not find out about until after you purchase the policy. There are so many different kinds of life insurance, and so many companies that offer these policies, that I recommend using a fee-only insurance advisor who, for a fixed fee, will research the various policies available to you and recommend the one that best suits your needs. To ensure objectivity, your advisor should not be affiliated with any particular insurance company and should not receive a commission from any policy.

A healthy 30 year-old man could expect to pay approximately $300 a year for $300,000 of term life insurance. To receive the same amount of coverage under a cash value policy would cost over $3,000.

Summary

When choosing life insurance, use the Internet’s resources to educate yourself about life insurance basics, find a broker you trust, then have the policies he or she recommends evaluated by a fee-only insurance advisor.

Internationally known financial advisor Suze Orman strongly believes that if you want insurance, buy term; if you want an investment, buy an investment, not insurance. Don’t mix the two. For the record, unless you’re a very savvy investor and understand all the implications of the various types of life insurance policies, I agree with her. The bottom line is that the average person should be purchasing term life insurance.

Shop Around

The most important part to educating yourself and making sure you get the best deal is to shop around for the best rates.  You can go to our website, www.cheapinsquote.com, to get a cheap life insurance quote from at least 5 agents.

 

According to the National Highway Transportation Safety Administration, 80% of all accidents are caused by distracted drivers.  Driving while Distracted (or DWD) has become a serious side effect of the controlling interest technology has in our lives.   

 

According to a recent survey by Nationwide Insurance over 80% of cell phone users admitted to talking on their phones while driving, while another 75% admitted to partaking in some sort of distracting behavior while driving – anything from eating, reading, talking and texting.  In fact 40% of teens and Gen Yers said they texted or emailed while driving.

 

The ironic thing is 98% of the drivers who admitted to these distractions also believed that they were safe drivers.

 

“Clearly, distracted driving has taken over our roadways, and our survey shows that no one is immune - no matter how safe they think they are,” said Bill Windsor, associate vice president of Safety for Nationwide.

 

The survey showed that age does not make a safer driver.  Many surveyed felt that little of DWD was due to age alone.  Well above half of all surveyed (78 percent of Generation Y, 80 percent of Generation X and 65 percent of Baby Boomers) were guilty of participating in tasks such as talking on a cell phone or eating.  Most contributed DWD to the pressure of always being available, whether from family, friends, or work.

 

“We found Americans think they’re safe drivers, even though they admit to driving while distracted,” continued Windsor. “This dangerous false sense of confidence combined with current ‘rules’ making it socially and professionally unacceptable to not respond immediately to a call or e-mail, have made DWD commonplace, but Americans need to realize that there is no such thing as safe DWD.”

 

This false sense of security causes more accidents, which in turn hikes up auto insurance rates.

 

 

Source:  Nationwide Insurance

Even though the cost of auto insurance may not be the primary focus on everyone’s mind, (consider the slumping housing market and skyrocketing prices at the pump) taking the time to review a few keys parts of your auto insurance policy can make a big difference in what you pay per year.

In 2005, the latest year for which figures are available, the average annual cost of auto insurance was $829, according to the insurance institute.

Robert Hartwig, president of the Insurance Information Institute, indicated that auto insurance rates are rising at roughly 4% a year which only adds $8 to $9 to the average consumer’s annual bill. However, a dollar saved is a dollar earned.

Fortunately, there are steps you can take to lower your insurance rates.

Have a clean driving record.  The first, and most important, is to drive like your grandpa was sitting in the passenger seat. Even one speeding ticket could raise your insurance premium. Conversely, many insurers will lower your rate if you haven’t had an accident or been ticketed in the past three to five years.

Raise your deductible. If you have a $250 deductible on your policy, raising it to $500 could reduce the cost of collision and comprehensive coverage by up to 30%. Raising your deductible to $1,000 could lower your premium by 40% or more, according to the institute. Just make sure you have enough money put aside to cover the higher deductible amount in case you’re in an accident.

Take advantage of discounts. Many insurers provide a discount of up to 15% for teenage drivers with a B average or higher in school. Some also offer a 5% to 10% discount for policyholders who take a defensive driving course.

Companies also give discount for multiple cars on the auto insurance policy, up to 25%.  If you have your home insurance with the same company, that can give you an additional discount up to 10%.

If the price of gas has led you to join a car pool or to take the bus to work, talk with your insurer, because you might be eligible for a low-mileage discount. You’ll probably need to provide documents to support the change in your driving habits.

Being part of a trade group or association, such as a teacher or a member of AARP, can give you additional discounts on your auto insurance.

Some Insurance Companies are now giving discounts for hybrid type vehicles.  This can vary by carrier and individual situation however.

Consult your insurance agent before you buy a car or truck. Premiums vary significantly from one type of car or truck to another. Insurers review several factors, including repair costs, the likelihood the vehicle will be stolen and the model’s safety record (You can check out different vehicles’ “crashworthiness” ratings at the website for the Insurance Institute for Highway Safety, www.iihs.org), whether it is a two wheel drive or four wheel drive, how many cylinders it has, and even if it is considered a sports car.  The Subaru WRX for example, is the highest costing car on the road to insure.  All of these factors and more play an important part in figuring out your car insurance rates.  So before you sign on the dotted line for that new dream car, get some insurance quotes first.  This is something you could do now on our website – yes I know it is another shameless plug.

Be Honest.  The more accurate information you give up front the more accurate of an insurance quote you will get.  Many times I have seen people come to get insurance quotes and only tell the agent what they believe will give them the cheapest insurance premium.  However, all companies check your Motor Vehicle Record and insurance reporting databases, like CLUE, to make sure the information you have given is accurate.  Some companies even check your credit history to determine auto insurance rates.  If credit or driving record is not so pretty, make sure you tell your insurance agent or auto insurance quoting website upfront to avoid costly surcharges later.

Don’t drive without insurance. Yes, auto insurance is expensive, and times are tough. But driving while uninsured will cost you a lot more in the long run. Insurers regard people who go without auto insurance as high-risk drivers. That means you’d pay higher premiums for insurance if you tried to buy it in the future.   In addition, some states require you to carry mandatory auto insurance.  If you don’t they could force you to carry a policy for a certain amount of time, usually referred to as a SR22 policy.  Non compliance can cost you your driver’s license and a hefty fine, not to mention the higher insurance rates mentioned above.

Shop around. The auto insurance industry is competitive, so get at least three quotes before you buy a policy. You can shop for quotes at our website, www.cheapinsquote.com, which allows you to compare insurance quotes from at least 3 different insurance agents.

Your state insurance department can help you find out whether there have been complaints against insurers that operate in your state. For more information, go to the consumer website for the National Association of Insurance Commissioners, www.insureuonline.org.