Every time we experience a calamity, like Hurricane Sandy if you’re on the east coast, it reminds us that there are risk factors in life beyond our control. Through insurance, we transfer these catastrophic risks we cannot bear to insurance companies, but knowing HOW INSURANCE WORKS is vital to understanding why, how and what we need to insure. Take the next 90 seconds to more thoroughly understand HOW INSURANCE WORKS:
This is the eighth exercise in a series designed to walk you through an entire financial plan. The exercise is embedded in an Excel spreadsheet you can download and save for personal use. You can find the backdrop for the disability income exercise HERE and the long-term care exercise HERE, or just jump right in with the instructions given below:
This exercise is a three-step process. Step One is to determine what you need. This is accomplished by writing out a Disability Plan if you are in your 30s, 40s or 50s. If in your 50s, 60s, or beyond, you need to articulate your Long-Term Care Plan. Start the process by writing out a paragraph beginning with the following sentence: “If I became disabled [suffered a long-term health care incident], here’s how I would handle that financially…” We’ve provided space to do so in our online exercises for this chapter.
Step Two is to establish what you already have. The online exercise includes a template with spaces to fill in for the primary features mentioned in this two-part blog series. Once you have completed the template, you’ll better understand the coverage you have. Step Three is to determine what you actually need and want in a policy and create a template to retrieve quotes and find the best coverage. You’ll be better prepared for the engagement with the insurance agents because your template will ensure you’re comparing apples-to-apples, a very difficult thing to do with long-term disability income insurance and long-term care insurance.
Click HERE to access the long-term disability income app and HERE to access the long-term care app!
This is the seventh exercise in a series designed to walk you through an entire financial plan. The exercise is embedded in an Excel spreadsheet you can download and save for personal use. You can find the backdrop for the exercise HERE or just jump right in with the instructions given below:
In order to know if your home and auto insurance policies are providing you with the appropriate levels of coverage, you’ll want to collect the declaration pages for all of your home, auto, condo, and renter policies. The Application Exercise online will provide a chart to fill in your various coverage limits next to our recommended minimum limits.
After you’ve tailored your desired limits with the help of an independent planner who does not accept commissions or referral fees for the sale of insurance, you can use the Application Exercise to shop your coverage with several carriers.
Click HERE to access the app!
This is the sixth exercise in a series designed to walk you through an entire financial plan. The exercise is embedded in an Excel spreadsheet you can download and save for personal use. You can find the backdrop for the exercise HERE or just jump right in with the instructions given below:
This app is designed to help you determine what your life insurance needs are for final expenses, debts and mortgages, education, and income replacement. If you conclude that you have policies you don’t need or want, and you’ve confirmed your research with an independent planner who does not accept commissions on the sale of life insurance, then you should have several options for terminating your policies. These will differ from policy-to-policy, so check with your insurer. But don’t make those decisions hastily. Even if you shouldn’t have purchased the whole life insurance policy you bought 15 years ago and don’t need or want it now, in some instances it will make sense to keep it.
Requesting an “In-force Life Insurance Illustration” and a “Policy Cost Basis Report” from your agent (or the insurance company’s home office) will help you and your independent planner determine whether the policy should be kept or surrendered based on the investment value, future prospects for growth, stability of the insurer and tax consequences of liquidating.
Additionally, if you are considering replacing a current policy with a new policy that is more appropriate or economical, it is very important that you do NOT cancel any existing policies until you have received and paid for the new policy. This is to ensure that no issues arise throughout the course of your underwriting that would disqualify you from receiving the new insurance policy.
Especially in these economic times, it is important to ensure that every dollar of yours is working hard for you, and that includes the dollars channeled toward life insurance.
Click HERE to access the app!
This is the fifth exercise in a series designed to walk you through an entire financial plan. The exercise is embedded in an Excel spreadsheet you can download and save for personal use. You can find the backdrop for the exercise HERE or just jump right in with the instructions given below:
The best way to see activities through a risk management lens is to go through some ideas of your own, like the example of my car accident, and discuss or jot down the ways in which that risk could have been managed with each of the four methods. It doesn’t have to be something as dramatic or painful. It could easily be a risk management success story that you can now better understand.
Examine both the personal and the financial risk using all four of the risk management techniques. After doing that exercise, discipline yourself to analyze a few other examples throughout the course of your days. If you’re bold enough, teach the technique to a friend or family member (there’s no better way to learn something than to teach it). Eventually, it won’t be work, and you’ll see your options more clearly. Then, when you examine your existing insurance products or new offerings, look for ways you can reasonably avoid, reduce, or assume the risk before paying someone else to do it for you.
Click HERE to access the app!
Most of the time, we expect those in the financial sales realm to sell us MORE of something than we may need, because the more they sell, the more money they make, right? But in one very interesting example—home and auto insurance agents—they may actually have an Economic Bias to sell us LESS than we need. Please take 90 seconds to learn why:
In our second 90 Second Finance installment on the topic of Economic Bias—a conflict of interest where money is involved—we tackle the bias in the financial realm most often stereotyped: the life insurance agent. There are many great, trustworthy agents out there, but there’s no denying their Economic Bias is a big one. Of course, it might not be what you think it is…
(Click HERE if you missed the introductory 90 Second Finance video on Economic Bias.)
The fall is, without a doubt, my favorite time of year. And a not-so-insignificant element of that is the joy that fills my heart when huddled around my parents’ television on a Sunday afternoon with my family, a belly full of “linner” (a lunch big enough to be dinner) and the smell of apple pie wafting over a group of adults and children yelling in unison at the images of modern day gladiators chasing around an odd-shaped leather ball. Football is philosophy… and some of that philosophy translates especially well in our personal finances.
People tend to know the commercials for their car insurance company better than they know their coverage, so here’s a fly-by primer of how to understand your auto insurance with an extra special surprise at the end that’s bound to make you laugh.
Below is a guest post from my friend, mentor, boss and truly one of the great technicians in the realm of personal finance, Drew Tignanelli, on a topic that caused an immediate reaction in me–a phone call to my homeowner's insurance agent to make a change on my policy!
By now, most of us have seen the pictures of devastation in New Zealand from the 7.2 magnitude
earthquake. The message was very clear…When an earthquake hits, it's devastating! Houses can collapse, foundations can be destroyed, interiors can be cracked, and homes still standing can be too dangerous to inhabit. Many times the likely loss is a total of the insured value of the home. This is the result in a place that is accustomed to earthquakes, like New Zealand, that has building requirements to minimize the earthquake property damage.
Now consider the same degree of earthquake in a land with no building codes for earthquake damage control. The likely result may be the equivalent of the devastation from Hurricane Katrina. The East Coast of the United States is the perfect example of an area that has no building code requirements to protect from land movement. A magnitude 7.0 earthquake on the East Coast could be beyond our understanding of devastation, since nothing built in this region was designed to withstand land movement. Do some internet searches of U.S. fault lines on the East Coast and you will find out we are clearly at risk. These faults have just been less active than those out west.
Now here is the point of this article. Your homeowners insurance policy completely EXCLUDES coverage for the movement of land. So, if there is an earthquake and your house is destroyed, you will lose everything. I am a financial professional and even I did not realize that my policy excludes land movement coverage. Of course you can get coverage, because West Coast residents have it. But you have to ask for it from your property casualty agent who has incentives to NOT suggest that you consider adding earthquake coverage. Here is the best news of all… The cost to add the rider for land movement may be no more than $100/year.
Call your agent and consider the cost of coverage versus the risk of an earthquake on your homeowners' policy. No matter where you live–East Coast, West Coast, or any coast at all–call your agent and consider the coverage. One way to add the coverage without increasing your policy cost is to raise your deductible and self-insure the first dollars of loss. I would rather pay a $1,000 or $1,500 for a few small claims than to lose everything.
I was awake on July 17, 2010 at 5 a.m. when a relatively small 3.6 magnitude earthquake hit in Germantown, MD and I live 45 miles north in Reisterstown, MD. After what I experienced, and now what I have learned about my policy, I gladly added the $85/year cost of the coverage. You should be calling your agent NOW to look into adding earthquake coverage to your policy. Remember, if your agent tries to talk you out of it, it is because they have an economic incentive for you not to carry it.
Hopefully your area will always remain earthquake free and the coverage proves to be a waste of money!
Andrew V. Tignanelli, CPA, CFP(r)
President