Health Savings Accounts, or HSAs, are one of the most useful but frequently overlooked forms of health insurance available to the average consumer.
A combination of savings account and health insurance policy, HSAs allow consumers to save money on the cost of health insurance while taking advantage of tax-free savings. However, there are a few things to keep in mind when trying to determine if a HSA is the right thing for you.
Deductibles: Part of the savings associated with HSAs comes from a high deductible, usually ranging from $1,100 (the minimum) to $5,600. In fact, the actual insurance policy is often called a high-deductible health plan (HDHP), with the HSA denoting the actual savings account where the pre-tax savings are held.
Choices: Much like other health insurance policies, there is a wide range of different coverage options, including in-network/out-of-network, prescription drug benefits and other choices to be made. It is essential to work closely with a knowledgeable agent in order to select the right high-deductible policy.
Fees: Depending upon your selection of savings account, a bank or credit union may charge an annual fee for overseeing the distribution of funds from the account. Because you determine how to spend the money in the HSA, no third-party or health insurance provider is required. However, you may also be required to make decisions related to the investment of those same funds depending upon the account selected. Annual contributions, plus combined earnings on the investment portion, may generate substantial returns that roll over from year to year, making HSAs an especially attractive option for those wishing to supplement health benefits during retirement.
Savings: One of the reasons behind the popularity of HSAs is undoubtedly the cost savings. Not only do the monthly rates for HDHPs tend to be significantly less than traditional health insurance coverage, but the total cost may also be less. Depending upon the terms of the policy, many HDHPs require little to no additional out-of-pocket expenses once the annual cap is reached (which is often the same as the deductible).
Life insurance is one of the most important considerations when it comes to planning for your family’s financial future, according to experts.
But for those who are self-employed, there is an even greater urgency.
The following information and tips will assist you in finding the best rates:
Loss of Income: Life insurance provides your family with protection from the loss of income that could result should you pass away. Your family will suffer a loss of income, but potential assets of the business could also be impaired or held in probate. Life insurance helps bridge the gap while providing important protection against the loss of a lifetime of income.
Personal and Professional Security: Not only does your family depend upon you, but so does your small business.
Clients, lenders and employees often feel more secure when adequate life insurance is in place on key employees. This is especially important for those who hope to seek angel or other start-up funding as well as those who have personal assets at risk.
If you’re a small-business owner and you’re not sure about what’s right for you, speak to your insurance agent to learn more about the different types of policies.
Some of the more common forms of life insurance for small businesses include term life, whole life, variable life, universal life, variable universal life and business owner policy.
Business owners are forced to make tough decisions, including substantial cutbacks, due to the challenging economic conditions. Unfortunately, staff shortages and prospective layoffs often lead to an increased risk of claims ranging from worker misclassification to wrongful termination. Here’s how to reduce the risk of claims.
Document. It is essential to have a written policy in place and then follow it. The next step is to thoroughly document each and every step when downsizing or redistributing duties. Make sure all managers are familiar with the process and implement it equally for each employee. Proper notification, submission of employer-provided equipment, final paycheck and other considerations should all be standardized in advance of terminations.
Review. Make sure your written policy is up to date and conforms to all state and federal requirements. Change is inevitable so it’s important to use the services of a professional to make sure the latest information and knowledge is up to date. An annual review should be conducted to make sure you comply with all recommendations and are not inadvertently exposed to additional risk in the event of an audit. Stringent new guidelines and incentives regarding worker classification should be carefully understood prior to cutting jobs in order to avoid potential claims.
Evaluate. Calculate the cost of cutting back prior to making a final decision. New mandates related to worker misclassification place severe penalties on employers that cut jobs then hire back employees under the ‘independent contractor’ status.
Re-schedule. Reducing the number of workers often results in an increased workload for the remaining employees. Pay special attention to creating job duties that comply with existing employment contracts, or take time to recreate the job position as well as provide proper training well in advance. Requiring employees to perform duties for which they are not compensated or properly trained is a sure-fire way to increase the risk of litigation, lawsuits or injury. It’s also a good idea to carefully consider the wisdom of re-hiring a recently downsized employee. To stay on the safe side, consider using a third-party employment service provider or outsourcing company instead.
Most people who purchase a homeowner insurance policy simply assume it covers almost everything.
But few things are further from the truth.
Learn how to protect your property and financial future by understanding the top three things your homeowner policy might not cover.
Big-Ticket Items. Read the fine print in your homeowner insurance policy. Chances are there will be strict limits on the coverage amount for big-ticket items like jewelry, electronics and collectibles. Ask your insurance agent about riders or addenda to your existing homeowner policy that will provide additional insurance coverage for expensive items.
Flood Damage. Homeowners are often surprised to learn that their policy specifically excludes flood damage. Even worse, many make the mistake of thinking they don’t need flood insurance because they live on “dry land” or areas not prone to flooding. Unfortunately, flood insurance can also provide valuable protection against more than just rising waters. For example, it might provide protection against other water-related losses, including those from a hurricane or even burst pipes during an earthquake. In fact, water-related damages are one of the leading causes of insurance claims. So if you’re a homeowner, don’t forget to ask your agent how to purchase flood insurance for your property.
Business Property. Whether you work from home full time or simply skip the office every so often, don’t assume your business property is covered. Computers and other equipment used at home are not typically covered by your standard homeowner policy. Employees should verify that their business provides full insurance for company-owned property used at home or in transit. Small-business owners should clearly differentiate business property from personal property while maintaining sufficient coverage for both. Ask your agent about business property riders or addenda that provide additional coverage for dual-use items or business property used off-site or at home.
During tough economic times it can be tempting to cut back on car insurance. But there’s a fine line between saving money and putting your financial future at risk. Take this quick quiz to determine if you’re over-insured or simply engaging in risky behavior.
Is the cost of comprehensive insurance coverage greater than the value of the car?
In general, if the value of the car is equal to or greater than three years’ worth of premiums, it is a good idea to keep comprehensive coverage. Otherwise, you might benefit from reducing or eliminating comprehensive coverage for your old clunker. Just be sure that you have the ability to replace or repair the vehicle should a total loss occur.
Do you have a second car or additional vehicle available?
If so, you may be able to reduce comprehensive coverage on older automobiles as well as eliminate extras, like rental coverage, on the policy. Determine if the savings is worth the inconvenience before dropping coverage.
Do you have enough money in savings to pay for small repairs out of pocket?
If so, you may benefit from an increased deductible that lowers the cost of auto insurance. On the other hand, if you don’t have much money in savings or you are worried about cash flow, keeping a lower deductible is a quick way to supplement your emergency cash savings.
Term life insurance is a great tool when properly used, but like most financial instruments, one size does not fit all.
It is important to understand when and how to use term life insurance in order to obtain the best results.
Use these tips to determine if term life insurance makes financial sense for your situation.
Term Life Defined
Term life insurance is a policy that covers a specific period of time, typically from one to 30 years. In the event of your death, the face value of the policy would be paid to your estate or designated beneficiary. At the end of the allotted time, the policy provides zero coverage and no residual benefit.
The Good and Bad of Term Life
In most instances, term life insurance is substantially less costly than whole life insurance or other alternatives. However, the longer the duration of coverage, the less significant the savings due to the residual value of whole life.
Term life insurance is an exceptionally valuable tool for young adults or those just starting a family.
Because earned income is often moderate during the early years of marriage, college or young adulthood, the lower up-front cost of term life provides the protection you need without the high price.
In the event of the death of a spouse, term life insurance could provide the means to ensure valuable financial assistance required to replace an income.
It could also be used to pay off a mortgage or put children through college.
Term life insurance is also valuable for those seeking an additional layer of coverage to supplement a whole life policy during a transitional stage in life planning.
For example, many older adults purchase an additional term life policy while paying college tuition for adult children or other specific situations.
Long-term care insurance is one of the most misunderstood and frequently forgotten forms of insurance coverage available, but research shows it’s also one of the most needed and likely to be used. Here’s some information to help you better understand your needs.
Alarming statistics. Nearly 80% of people will experience six months or more of disability that interferes with their ability to perform basic activities of daily living like grooming, eating or being mobile, according to the U.S. Census. Serious illness or injury resulting in high medical bills is one of the leading causes of bankruptcy and may result in years of financial hardship. With fewer safety nets and exploding government deficits, it’s more important than ever for individuals and families to have secure coverage.
Long-term care insurance provides coverage for the elderly as well as the disabled – making it an important part of your estate plan needs at any age. The extra cost of a serious illness or injury, lost wages, and the time and effort required by family members can quickly create the perfect financial storm. Having long-term care insurance can ensure that you and your loved ones receive the care needed at any stage of life.
Buy sooner, not later. Long-term care insurance is most affordable when you need it least. Young, healthy individuals are often surprised by how affordable it can be. Unfortunately, most people wait until they are older or already experiencing a health crisis before obtaining quotes.
Workers Compensation insurance is complex and confusing, especially for those who’ve just started their own businesses or are hiring employees for the first time.
Use these questions to determine if you need workers’ compensation insurance and to figure out how to obtain the best quotes:
Do you have employees?
If so, most states require you to obtain workers’ compensation insurance. workers’ compensation pays if a worker is injured on the job. Failure to comply may result in costly fines or lawsuits. Although requirements vary from state to state, once you hire your first employee, a business is required to obtain the insurance.
Do you conduct business across state lines?
While most states require Workers’ Compensation insurance for even one employee, other states allow up to five employees before requiring a small-business owner to obtain coverage. If you do business across state lines, you must comply with each state’s legal mandate.
Here are a few other facts to keep in mind:
• Independent contractors are exempt – usually.
• Married couples and family members might qualify. Unless a company is held in both names, hiring a family member often counts toward the number of employees.
• The type of industry might matter. Some states have different rules for different types of industries, such as contractors and construction workers.
• Keep an eye on subcontractors. Your business is ultimately responsible for any accidents or injuries that may take place on your property. Always verify that subcontractors are current on their own insurance coverage to avoid unwanted risk.
• One of the best ways to keep Workers’ Compensation rates low is to stay safe and implement a written safety policy. By keeping claims low, it is possible to reduce premiums.
Accidents happen – so savvy small-business owners plan for the unexpected by purchasing business umbrella insurance.
A business umbrella policy provides additional protection above and beyond the basics.
It’s different from a standard business liability policy that protects you up to a given amount.
For example, if your current liability policy provides $1 million of protection but you were successfully sued for more, the umbrella policy would cover the additional amount up to the policy limit.
Business umbrella policies are an excellent way to provide protection against costly lawsuits resulting from a wide variety of potential threats. Those threats can include things such as:
• Driving accidents that result in multiple claims or extensive types of damage
• Professional service errors resulting in inadvertent destruction or corruption of data
• Unknown defects in workmanship or other errors that result in multiple lawsuits or claims
• Other unanticipated events leading to a loss of life, property damage or other injuries
Many factors are involved in deciding on the appropriate level of business umbrella insurance to purchase, including the amount of existing coverage, industry, profitability and personal assets at stake.
Contact your agent to discuss options and obtain a quote for various coverage amounts.
Funding your retirement dreams requires you to look at all the available investment options and structure a portfolio that provides regular income for as long as you need it.
Typically, that will involve a mix of stocks (so your assets can keep pace with inflation) and bonds (so you’ll have a steady income stream). You’ll probably also want to have some cash on hand. But annuities can also play an important role in a retirement portfolio.
An annuity is a contract between you and an insurance company. Essentially, you give a sum of money to the insurance company, and in exchange, it provides you with monthly payments for life.
How do you know how much to allocate to stocks, bonds, cash and annuities?
You may want to look at an annuity as a part of your bond allocation. That’s because allocating some of your nest egg to an immediate annuity creates a stream of income you can’t outlive, and that, in turn, will help you overcome “longevity risk,” which is the risk that you’ll run out of money before you die.
But deciding exactly how much of your nest egg to allocate to an annuity can be a real challenge. To do so, you’ll have to assess the long-term trend of the stock market, your tolerance for investment risk and the probability that you’ll burn through your assets earlier than you wish.
A significant allocation to an immediate annuity might be a good option when:
• The stock market appears to be peaking or in the early stages of a decline;
• Your tolerance for investment risk is low; or
• The probability of exhausting your assets earlier than you wish is high.
Of course, how much you allocate to any asset, including an annuity, depends on your individual financial circumstances, which only you and your financial advisor know. We recommend that you contact him or her for more information.
Today’s volatile market environment has made immediate annuities an even better option for many investors – because they act like bonds but offer additional benefits.
An immediate annuity is a contract between you and an insurance company. Essentially, you give a sum of money to the insurance company, and in exchange, it provides you with monthly payments for life (or longer, depending on the specifics of your contract). That’s similar to a bond, with some additional benefits.
Because immediate annuities are insurance products and only pay you income as long as you live, their yields are usually higher than comparable bonds. (For example, a 55-year-old Illinois woman who deposits $100,000 in an immediate annuity will receive $554 a month for life. That equates to a 6.6% yield.1 ) Additionally, you can pay an extra fee (or accept a lower monthly income) in exchange for annual inflation-indexed raises in income.
Immediate annuities are suitable for many retirees, because retirees generally have fixed, recurring expenses and want to avoid volatility in their investments. You probably want to avoid them if you’re under age 55 (because payouts are based on life expectancies – the younger you are, the less you get) or need your money to grow significantly.
Contact your financial advisor for information specific to your individual financial circumstances.
1Source: www.immediateannuities.com, as of 6/25/09. This is not intended as an investment recommendation.
Although most homeowners have fire insurance, few actually understand how it works. Fire insurance covers four basic areas.
This is the main structure or actual home or dwelling. In the event of a loss due to fire, the actual cash value minus deductibles would be covered. It is possible to purchase additional coverage for other hazards as well as replacement value and updates required to restore the home to the former value due to code or ordinance changes.
Other structures commonly included in a fire policy include a shed, a detached garage or even a greenhouse.
Personal property may or may not be covered, depending upon the type of fire policy purchased. In most cases, owner-occupied residential real estate would include some portion of personal property, whereas investment or rental dwellings would not.
Loss of Use
Loss of use assists homeowners in securing safe housing while the property is being restored or repaired after a covered loss. Remember, even if you are unable to live in the home, you will still be required to make mortgage payments; loss of use helps you avoid the possibility of making double payments for rent and mortgage in the event you are unable to occupy the dwelling. Investment properties may be eligible for additional protection that provides a replacement income in the event of a major loss or extensive repairs.
Remember, fire insurance may not cover all known perils, such as flood, earthquake or hurricane-related damages. If you live in an area prone to natural disasters, it is a good idea to speak with your agent about additional coverage options that provide complete protection. Otherwise, fire insurance is often an affordable policy choice, especially for those with second homes, investment properties or other structures that require basic coverage without a high price.
Have you recently purchased a new or used vehicle, or have you recently refinanced a car loan? If so, the value of the loan may be higher than the actual cash value of the vehicle.
Gap insurance can provide the additional coverage required to pay the loan off in full should a total loss take place. Learn how to protect your financial future by answering a few questions and then speaking with your insurance agent to obtain a quote.
Have you recently purchased or refinanced a car, or are you within the first two years of a five-to-six-year car loan? If so, you might owe more than the car is worth. Gap insurance may prove to be a good way to protect your investment and allow you to make a fresh start in the event of a major accident or other covered loss.
Are you able to pay the difference between the current loan and actual cash value of the car – plus deductibles and co-payments – out of pocket? If not, gap insurance might be a good investment. For a fraction of the cost required to set aside funds required to pay off the balance of a car loan plus other out-of-pocket expenses, auto gap insurance reduces the risk associated with rapid depreciation.
What is the actual cash value of your auto? Ask your agent what the maximum amount of payoff would be in the event of a total loss for your car, then compare it to the current outstanding balance. Most people find gap insurance an essential yet affordable part of their financial planning.
Whether you are between jobs, in the midst of relocating or waiting for coverage to begin at the workplace, short-term health insurance provides protection at a price you can afford.
Short-term health insurance typically provides coverage for 30-day increments, up to a total of three to six months maximum. Most preexisting conditions are excluded unless otherwise specified, but coverage can begin almost immediately. Each policy contains limits and exclusions, so check carefully to determine which one provides the coverage required. Some policies provide basic catastrophic coverage while others include benefits similar to those of a regular policy.
Short-term health insurance is a valuable tool for those who are between jobs, employees newly hired and awaiting benefits to begin, college students awaiting enrollment periods and others who need health insurance for a short period of time. Even those eligible for COBRA coverage often find short-term insurance coverage more affordable, especially if they are in relatively good health.
Purchasing a short-term health insurance policy is as simple as contacting your agent to fill out a brief questionnaire. Be prepared to provide your Social Security number, medical history and evidence of any preexisting conditions. Because short-term health insurance may have limits on the number of renewals, it is often wise to purchase a policy longer in duration than anticipated. You can always cancel and request a refund if needed.
When it comes to life insurance, opinions tend to take precedence over the facts; term life insurance is viewed as affordable, while whole life insurance is considered secure.
Unfortunately, like most things in life, the actual situation is somewhat more complex.
Discover the truth about whole life insurance and whether or not it is the right move for your portfolio, based on these facts.
Unlike term life insurance, whole life policies are permanent.
Once the initial term is completed, term life coverage might actually become more expensive, whereas whole life tends to become more competitively priced over the long run.
All or Nothing
Whole life insurance offers a death benefit just like term life but also provides additional protection in the form of “cash value.” Unlike a term life policy that pays nothing unless you die, whole life policies allow you to recapture or “cash in” a portion of what you invested over the years.
Another attractive feature of whole life insurance is the ability to borrow from the policy in the event you need a loan. Because a portion of the money is set aside into a savings account, whole life policies are able to provide additional funds in the event of an emergency or even serious illness.
Most experts agree, if you are short on cash or need a policy for less than 10 years, term life insurance is typically the most affordable route. For those who require more than 10 years of coverage or are able to invest a larger portion of their income up front, whole life often provides valuable protection over the long term. Ask your agent for a comparative price quote demonstrating the long-term cost as well as the benefit of each policy option; you might be surprised to learn how affordable whole life insurance is when used as a financial planning tool.
One of the most frightening aspects of running your own business is the loss of income should the unexpected happen. Fortunately, small-business owners may be able to reduce the risk of financial hardship by purchasing business income insurance.
Business income insurance helps cover the cost of putting your business back together during a major interruption due to property destruction, interruption of sales or other production issues resulting from a covered loss.
Depending upon your type of business and the level of loss sustained, business income insurance may provide the cash you need to remain in operation or get back on your feet without breaking the bank. Combined with extra expense insurance, it may even be possible to cover both your normal routine operating costs and additional expenses, including investments required to keep your business in the black.
To purchase business income insurance, it’s a good idea to schedule an appointment with your insurance agent. Explain your desired level of coverage, including cash or other liquid reserves that could be used in the event of an emergency. Don’t forget to consider deductibles and other fees that must be paid in the event of a claim; it’s always better to have a little extra cash on hand than too little, especially during uncertain economic times.
Finally, keep in mind that business income insurance provides protection for needs related to the business itself – not individual living expenditures. If you don’t have at least six to twelve months of cash on hand for your personal reserves, be sure to ask your agent about coverage designed to help pay your monthly bills.
An ounce of prevention is worth a pound of cure – especially when it comes to reducing the expense of business liability coverage.
With a little planning and preparation, it’s not as difficult as you might imagine. Simply follow these steps to start saving and minimizing the ever-rising rate increases associated with insuring your business.
1. Put it into Writing: Make sure that every employee knows and understands what is expected and the proper protocol when dealing with equipment, injuries or other situations. Implement a chain of command and actually adhere to it. Research shows few small business owners have written safety policies and even fewer put them into action. Update it frequently and keep a signed copy showing that each employee has read the policy upon being hired.
2. Carefully Screen Applicants: The first step in maintaining a safe workplace is to hire safe employees. Employees with a history of substance abuse have been associated with everything from increased risk of injury to increased risk of driving accidents; worse, they typically have higher rates of tardiness and unemployment. Drug screening and testing may play an important role in minimizing the cost of liability insurance for your company. Ask your agent how much you can save by performing routine drug screening prior to hiring and/or testing for drugs in the event of an accident or injury during work hours.
3. Comparison Shop: It’s always wise to comparison shop in order to obtain the best rates, but remember that rates alone aren’t enough if the company isn’t responsive to your needs. Take the time to compare price, service and satisfaction ratings by other business owners before making a final decision. It’s a good idea to review your policy at least once each year or more frequently should you encounter a major change in staffing or other business operations.
Annuities are usually considered relatively safe investments – but in today’s environment, investors can’t help but wonder if that’s still true.
With an immediate annuity, you make a lump-sum payment to an insurance company. In exchange, the insurance company starts making a series of payments to you immediately. In regard to an annuity’s safety, there are two factors to consider:
The Safety of your Income Stream: Immediate annuities can be fixed or variable. With a fixed annuity, your money earns interest at rates set by the insurance company – which means that your income stream is safe in a volatile market environment. With a variable annuity, the insurance company puts your premiums into a “separate account,” and you decide how the company will invest those premiums – which could result in losses when times are bad. That’s why it’s important to consult an advisor about how the money in your variable annuity is invested.
The Safety of Your Insurance Company: With many financial companies failing, it’s understandable if you’re concerned about the health of your insurance company. The good news is, there’s probably little to worry about.
Your annuity is protected by a “legal reserve,” which means that your insurance company must maintain a reserve of money that equals the withdrawal value of every annuity account. If your insurance company fails and you have a fixed annuity, the payments will likely continue – though it’s possible for a court to determine that the initial interest rate is too high and lower it, which would reduce your payments. If you have a variable annuity, the payments will continue without modification, since the assets underlying your contract are separated out from the general assets of the insurance company.
So, we’d recommend that you not worry, as it’s improbable that your existing annuity will experience problems. Going forward, however, we recommend that you research the strength of any insurance company from which you’re considering buying an annuity. Your advisor can help you do so.
Purchasing an annuity involves navigating a complex maze of information – including the question of how much you should invest.
An annuity is a contract with an insurance company. You make a lump-sum payment or a series of payments to the insurance company. Your money grows tax-deferred while it is in the annuity. Then, either immediately or at some point in the future, the insurance company starts making a series of payments to you at regular intervals.
There are many types of annuities. For example, with a fixed annuity, your money earns interest at rates set by the insurance company. With a variable annuity, the insurance company puts your premiums into a “separate account,” and you decide how the company will invest those premiums depending on how much risk you want to take.
How much you should invest in an annuity is primarily a product of how much you want the annuity to pay you. And that payout – also called a settlement option – depends on many factors.
For example, if you want a stream of income for life, you will have to estimate your life expectancy in order to determine how much to invest.
You will also have to estimate the expected returns from the annuity, which can be difficult if it is a variable annuity.
In fact, analyzing all these variables can be complicated. It’s wise to consult an advisor when considering how much to invest in an annuity.
If you are in between jobs, one of the most important decisions you can make is how to obtain short-term insurance.
Many people make the mistake of thinking they can skip health insurance for a few months until landing another position. Unfortunately, it often makes a bad situation worse. Accidents, illness and other emergencies tend to crop up when you least expect them.
Fortunately, short-term health insurance options are available if you know where to look.
Compare Individual Coverage with COBRA: If you had health insurance through your employer, chances are you qualify for COBRA coverage. However, many people are surprised to find short-term health insurance for individuals to be more cost effective than COBRA, especially if they are in relatively good health without major pre-existing conditions. Don’t delay. Put in a call to your agent right away to determine the most cost-effective policy for your needs.
Select a Term: Short-term health insurance is typically sold in one-, three- and six-month increments , but there may be a limit on how many times you can renew the policy. It’s often a good idea to purchase for a longer period of time just to be on the safe side. You can always cancel the remainder of the policy if desired.
HAS: Depending upon your situation, it may also benefit you to consider a HSA, or Health Savings Account policy. Although not specifically short-term health insurance, these high-deductible policies are often quite affordable. They tend to benefit those in relatively good health who are able to afford the large out-of-pocket deductibles, as well as those with chronic health conditions who would normally experience large annual co-payments.
Additional Coverage: Don’t neglect add-on coverage just because you are in between jobs.
In fact, it might be more important than ever to make sure that you are covered against accidents or have available vision, dental and prescription drug benefits to rely upon.