I don’t know what I was thinking.
I am getting older. I finished my undergraduate education with a graduation ceremony about years ago. Since graduating, I’ve moved from apartment to apartment, first with a $400 per month one-bedroom place near my college, then back to New Jersey, sharing rent with a variety of roommates. I’ve roomed with friends and strangers in a variety of locations, from suburban apartment complexes to an urban railroad apartment above a grocery store. I’ve dealt with absent roommates, compulsive roommates, scary roommates, and even a few roommates with whom I got along well.
Despite making apartment-living my life, in the past ten years, I have never owner renter’s insurance. For some reason, this is one of those things I’ve managed to delay by allowing the part of my personality that prefers procrastination to prosper. Homeowner’s insurance is required in almost all circumstances, but renter’s insurance usually isn’t. In fact, insurance has never been required in any of the eight locations I’ve lived over the past ten years.
There was a snow storm overnight resulting in almost a foot of the white stuff on the ground, surely wreaking havoc in the roads. The facility managers at the office building where I work decided to close the location for the day. My boss and I determined this morning that there was no need for me to work from home, so I used the day to take care of a few personal tasks. One aspect of this plan was to research renter’s insurance. It was much easier than I had anticipated, and cheap.
I decided to work with the same company with which I have automobile insurance, Liberty Mutual. I originally found them after a long search for the most economical policy through some assistance with AAA. It took only ten minutes on the company’s website to answer a few questions about my living situation and decide how much should be covered by the policy. I received a quote right away that was so low I kicked myself for not taking care of this sooner.
If you rent, there’s no reason not to have renter’s insurance. Now that my home and possessions are covered, I can feel even better about my financial choices. I’ll also feel less nervous when leaving the apartment for weeks at a time.
According to a recent survey of 1,004 individuals born between 1960 and 1980, roughly Generation X, many expect their family or the government to provide care or funding for care as they age. Here are some of the more interesting statistics from the study, released by America’s Health Insurance Plans (AHIP), an association of health insurance providers with a mission to expand access to health care.
- Among survey respondents who do not own long-term care insurance, 36% plan on relying on government assistance, like Medicaid, to finance their long-term care.
- 55% of respondents within Generation X plan to rely on a family member for providing long-term care. 10% will rely on a visiting nurse and 9% believe they will live in an assisted-care facility.
- 95% of Generation X do not own long-term care insurance, and over half of those who are not covered do not realize that health or disability insurance most likely does not cover long-term care.
Today, long-term care in a nursing home in the United States carries an average annual cost of over $70,000 (according to AHIP). I can only imagine that just like health care costs, this price tag will continue to climb faster than the rate of inflation.
I’m not currently covered by long-term care insurance, but I decided to take a look at what is offered at my current employer. They offer their own group long-term care insurance. They have four separate plans based on coverage level. The first level would cover nursing home care up to $100 per day or home care up to $75, with a lifetime maximum of $182,500. The level offering greatest coverage would cover nursing home care up to $250 or home care up to $188, with a maximum of $456,250. There are two intermediate levels of coverage, as well.
Based on AHIP’s annual cost of $70,000 of a nursing home, I decided to look into the $200 per day coverage. My first thought is inflation. If I need long-term care, it will most likely not be for forty or fifty years, maybe more. After five decades of inflation, I think the daily cost of long-term care is going to be much more than $200. I am surprised that something basic, coverage adjusted for inflation, is offered at an additional premium.
According to my company’s calculator, I would pay $22 per month starting now for coverage at $200 per day once I enter the assisted care facility. But if I want my coverage adjusted by 5% every year, the premium jumps to $81.20 per month. The projected lifetime premium payments jump from $13,992.00 to $51,643.20.
If the cost of long-term care rises at that same 5% annual rate for fifty years, I could be looking at a daily cost of over $2,000 a day! A $200 daily benefit won’t help much if that is the case. Why both with coverage that is not adjusted for inflation?
Do you have long-term care insurance? Or do you plan to rely on family or government?
You can download AHIP’s survey results here [ppt].
In my mail recently, I received a colorful postcard from State Farm, the agency which insures my car, house, and several rental properties. I was “sorting” it directly into the trash when I noticed the word “dividend” peeking up at me.
Dividend. That’s right, my insurance company has declared a dividend for its New Jersey policyholders for the second year in a row. I’m so unused to this that last year I almost tossed out a $240 check they’d sent me for my dividend payment. Once I took another look at it, I called the company to make sure they hadn’t cancelled one of my policies, as I was worried the check might be a refund of monies paid.
It is a refund of sorts, but not due to a cancelled policy, the representative explained. “When we have a year where we profit, our policyholders profit too, since they’re also our owners.”
It was a nice surprise last year, especially since insurance rates in new jersey are so high, and now I’m looking forward to seeing how much I’ll get back this year. An internet search regarding the dividend yielded only 2006 information, so it seems I’ll have to wait for the company’s next correspondence or year-end financials to get more details.
Could it be they’ve avoided posting this among the news releases on their web site so other states don’t get jealous? Apparently the dividend payout is state-specific, so not everyone will be eligible.
Does your insurance company pay dividends?
If you are seeking your own health insurance outside of an employer plan, your weight has a lot to do with the premium you’ll pay as well as your ability to even qualify for insurance. Insurance companies find this to be logical. Overweight individuals account for a higher percentage of health-related costs than they should, all other things being equal.
From the New York Times:
Heavy people do not spend more than normal-size people on food, but their life insurance premiums are two to four times as large. They can expect higher medical expenses, and they tend to make less money and accumulate less wealth in their shortened lifetimes. They can have a harder time being hired, and then a harder time winning plum assignments and promotions…
Complications from obesity, particularly diabetes, which afflicts 21 million Americans, push up the bill: $44,000 for a heart attack, $40,200 for a stroke or $37,000 for end-state kidney disease…
As the cost of group health care increases for corporations, many companies are looking for ways to cut costs. One way to do so is to encourage a healthier lifestyle among employees. In my company, there are a number of programs available to employees who are looking for ways to improve their health. Some companies, in addition to offering employee assistance programs, are beginning to set health insurance premiums, or the percentage of these premiums paid by the employee rather than the employer, by a measure of weight.
The body-mass index (BMI) is one such measure being used to determine how much an employee should pay for their portion of the company’s group insurance plan. The reasoning is simple: overweight individuals cost the company more in health insurance costs. But is this discrimination?
The CBS Evening News with Katie Couric will be running a feature on this issue tomorrow night. This week, the program will focus on obesity in America. The series is called “Forced to Be Fit;” segments to be aired Tuesday through Thursday will take a look at ways people in this country are being encouraged to lose the extra pounds, whether they want to be or not.
Extra Weight, Higher Costs [New York Times]
Auto insurance companies are changing the way the calculate premiums, according to MSN Money. Did you know that some insurers look at your credit report to determine the risk of insuring you? Some states have declared this practice illegal, but the companies claim there is a correlation between a history of late payments and insurance claims.
That means that if you have a clean credit history as well as a clean driving record, you might be able to save some money. I have had the same insurance since 2004, so it may be time for me to shop around again. Now that more companies are using pricing schemes that are more flexible and based more on the individual than the process where drivers are placed into one of a small number groups or tiers, there may be some deals out there.
Earlier this week, I received my updated policy information from Liberty Mutual, the company that provides the insurance for my Honda Civic. I was expecting a significant increase thanks to a minor car accident last October. Here are some details about my coverage, which I haven’t changed since purchasing this car.
* Liability, bodily injury: $50,000 each person, $100,000 each accident
* Liability, property damage: $50,000 each accident
* Uninsured motorists, bodily injury: $50,000 each person, $100,000 each accident
* Uninsured motorists, property damage: $50,000 each accident
* Personal injury protection (PIP), medical expense limit: $250,000
* Personal injury protection (PIP), medical expense deductible: $250
* Collision deductible: $500
* Other damage deductible: $500
* Transportation expenses: $30 each day or $900 per accident
The total annual premium for this coverage is $1,552. This is about $100 more than last year’s premium, less than I expected the increase to be. It’s still a lot of money, but as a New Jersey resident that is to be expected. The last time I shopped around, “discount” insurers like Geico quoted higher premiums for the same coverage.
I thought about shopping around again, but I don’t think it a slight discount would be worth the effort at this point. All my extra time right now is being spent on finding the right place to live.
Have you recently welcomed your first child into your family? If so, it may be time to get some of your financial documents in order. These are some things you may not have considered before having a baby. This video from SmartMoney TV quickly runs down the basics: which documents are necessary and why.
1. Draft a Will. A will is a legal way to assign a guardian, because the court won’t recognize survivor’s claims. Also, without a will, your estate will be split between your surviving spouse and children by default in many states. Your will can ensure that the money is distributed as you see fit. Here are more reasons to draft a will. Watch out for companies selling overpriced will kits. Here’s an example last will and testament to get you thinking about what to include.
2. Set Up a Trust. Trusts define who is charge of the estate should something happen to both parents. It also can define the age at which point the children would receive money. In the interview within the video, the couple has decided that their children would not receive their inheritance until their mid-thirties. Here are instructions for setting up a trust.
3. Get Term Life Insurance. The financial advisor interviewed in the piece recommends getting five times your annual income in term life insurance. Term life insurance is often recommended over whole life insurance. Whole life insurance is generally an investment vehicle and usually demands high fees. This article from Motley Fool is a good introduction.
4. Check Your Beneficiary Designations. Retirement benefits, 401(k)s, and IRAs are passed on to individuals outside of your will, based on the beneficiary designations you choose, usually when initially setting up your account. I don’t currently have beneficiaries on my retirement accounts. I should take some time to update this. You can change beneficiaries as often as you want, and if you have someone in your life, there’s no point in waiting.
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