Buying Life Insurance? Ask These Six Questions

Are you considering a term life insurance policy? If so, it’s important you do your homework to ensure that you get the policy you need.

Here are six questions to ask before you sign on the dotted line.

What are your income needs?

It’s important to consider your family’s income needs over the course of your policy, including expenses such as mortgages, college tuition, medical bills and funeral costs.

What length of term do you want?

The length of your term will depend on your long-term income outlook. For example, if you’re working for 10 more years and then have retirement benefits and Social Security, a 10-year term may work for you.

Can you convert the policy?

If you outlive your term life insurance policy, you may want to convert it near the end of the term without needing another medical exam. Be sure to read the fine print on the conversion option, as there can be time limitations for conversion.

What other benefits do you want?

Riders – such as disability waivers that pay your premiums if you become disabled – are more common on whole life insurance policies than on term life insurance policies. But they are available, so look into them.

How applicable are advertised rates?

Even if you’re relatively healthy for your age, the rates promoted in online or newspaper ads may be based on an applicant with exceptional health. The price quoted may not be applicable to you.

Is the insurance company stable?

Life insurance companies are usually in excellent financial health, but you should still check out their rating. Agencies that rate life insurance companies include A.M. Best Company, Fitch Ratings, Moody’s Investors Service and Standard & Poor’s Ratings Services.

Your Teen Is Driving. Here’s How to Lower Your Rates

The statistics are startling: Teen drivers are three times more likely to die in an auto accident than are those aged 25 to 64.

So it should come as no surprise when insurance companies raise your rates by 50% to 200% when your teen starts to drive. Fortunately there are ways to lower your rates, despite your teen driver.

Statistically, the longer your teen waits to drive, the less chance he or she will crash. Sixteen-year-old drivers crash three times more frequently than do 19 year olds. If your teen is not sufficiently mature, make him wait until he is.

A driver’s education course offers a lot of pluses for your teen and can reduce your rates by as much as 15%. Some insurance companies also offer good-student discounts.

Limit nighttime driving, as more than 40% of teen-involved fatalities occur between 9 pm and 6 am. Also note that distracted driving is now an epidemic in the U.S.; don’t allow calling or texting while driving. No passengers either; research indicates that the risk of driving fatalities increases with the number of passengers.

Once your teen turns 18, consider a separate insurance policy. If you decide to purchase a used car for your teen, be aware that older-model cars, while cheaper to insure, may have fewer safety features such as side-impact air bags.

Don’t forget, for your teen this is a rite of passage on the way to adulthood. Of course it’s important to keep your premiums low, but it’s more important to produce a good, safe driver.

Do You Need More Personal Property Coverage?

Your tenant or homeowner policy is useful when there’s a theft or other loss. But remember, it does limit losses for certain personal property items.

Generally your personal property limit under your homeowner’s policy, known as Coverage C for contents, covers movable property such as televisions, clothing, furniture and other household items.

Coverage C should represent 50% of the insured value of your home: If your home is insured for $250,000, your contents coverage should be $125,000, which is known as a coverage “limit”. You can add extra coverage, or “endorsements”, which vary according to the insurance company.

There are also restrictions to coverage known as “sublimits” that limit the amount your insurance company will pay on specific personal property. Here are some typical sublimits under a homeowner policy:

  •     $200 for cash, gold, silver, platinum and coins
  •     $1,500 for securities, deeds, evidences of debt
  •     $1,500 for theft of jewelry, watches, furs and semiprecious stones
  •     $2,500 for theft of flatware in silver, gold, platinum and pewter
  •     $2,500 for theft of firearms
  •     $2,500 for business property on premises
  •     $500 for business property off premises
  •     $1,500 for portable electronic devices in a vehicle
  •     $1,500 for watercraft and related trailers and equipment
  •     $1,500 for trailers not used with watercraft

These coverage limits may still be inadequate; with the price of gold increasing, the theft of just one piece of jewelry can seriously erode those limits.

Items or lists of items can be covered by “scheduling” them, or you can purchase a separate policy if, for example, you have a boat that is worth far more than the sublimit.

The cost to schedule items or purchase a stand-alone policy is reasonable. You may find it well worth the extra to protect the items most valuable to you.

Are Health Care Reforms Affecting Your Drug Costs?

In the first full year after the Patient Protection and Affordable Care Act (ACA) took effect, there has been much interest in its impact on out-of-pocket spending on prescription drugs. And reviews have been mixed.

Costs Decline for Many

As a whole, individuals did pay less for their needed medications last year. This decline has been noted as the first on record, and it was due in large part to the new coverage gap (“doughnut hole”) subsidy that was created for seniors who participate in Medicare’s Part D prescription drug plan.

In fact, these Medicare Part D plan participants saw their drug-related copayments decrease by more than $2.00, from an average amount in 2010 of nearly $26.00 to an average cost of $23.31 in 2011. And in total, the 3.5 million people enrolled in the Medicare program saved more than $2 billion on prescription drugs in the past year. As of early 2012, approximately 100,000 people have also received close to $92 million in prescription drug discounts.

Future Costs May Drop

Because of this, future costs to the government could also be lowered. One reason for this is that when seniors are able to take their needed medications, they are less likely to require hospitalization and other costly medical treatment. This is especially the case for those with chronic ailments such as diabetes and heart disease.

Yet while overall nationwide drug spending was down in 2011, thanks in large part to the provisions in the ACA, prescription drug costs for those aged 19 to 25 actually increased.

Still, many people believe that prescription drug cost savings are among the first tangible benefits of the new healthcare reform.

Other Changes in 2014

Other healthcare-related changes that are part of the ACA – including the guarantee that all Americans may obtain health insurance coverage – are slated to go into effect in 2014.