Every once in a while, I receive financial questions from readers. I am not a financial adviser, so I usually suggest those needing significant assistance with their financial decisions to seek the advice of a professional. However, I don’t mind answering general questions that might be helpful for a wider audience. If you have any questions, contact me. If there’s anything I’d like to address but I’d like to learn more about myself, I have a strong network of colleagues who can add facts and expert opinions.

If you’re in the market for life insurance, consider visiting GoInsuranceRates.com to find the best policy. Quotes are free and experts are ready to assist.

Today’s question comes from a frequent participant in Consumerism Commentary’s discussions, and focuses on a topic I don’t usually cover, life insurance.

Flexo, I recently read a book called Tax Free Retirement by Patrick Kelly and the author was selling the idea of buying Universal Life Insurance as a way to build your retirement fund. I’ve been doing research on Universal Life Insurance (pros and cons). What are your thoughts on Universal Life Insurance, and is it something you recommend people to do?

What is universal life insurance?

It’s worthwhile to describe life insurance in general, although I will address the specific question about retirement funds later in the article.

The primary parties when it comes to insurance are the insured, the beneficiaries, and the insurer. Life insurance policies offered by the insurer protect the income of the insured, so that if the insured passes away, the beneficiaries, who relied on that income in order to survive, can continue receiving income or a lump sum payment. For example, the head of a household or all income earners in a family may buy life insurance to protect their children. Life insurance benefits could help pay for funeral costs, medical bills, and the normal expenses of everyday life for the beneficiaries.

Life insurance comes in several flavors. The most common and basic is term life insurance. This is a typical insurance policy that is based on a set number of years. During that period, the insured will pay premiums and be protected, but at the end of the term, the protection ends. The nature of insurance means that someone could pay into a policy for several decades, and if that insured individual continues to live and stay healthy, she’ll never have any benefit other than peace of mind. At the end of a term, insurers offer an option to renew the policy.

In an effort to reduce the risk of non benefiting from years of paying into a policy, insurers came up with different types of policies, usually including a savings or investment component to help insurers mitigate the risk because in these scenarios, the chance of paying out benefits is closer to 100 percent. These are often called permanent life insurance policies, and there are several different plans designed to suit customers’ needs. Universal life insurance is one form of permanent life insurance, like whole life insurance.

Universal life insurance

Universal life insurance provides some flexibility in the premium payments, the amount of money the insured pays to the insurer, usually on a monthly basis, to pay for the coverage as well as fund the savings component. The savings component is the cash value portion of the insurance policy; it’s basically a savings account. The insured can withdraw or borrow money from the cash value portion of an insurance policy. Because of this benefit, the premiums are much higher. Sometimes, the difference in premium is a factor of ten. Is the savings portion worth ten times more than an insurance policy on its own?

Because insurance companies usually offer low rates on the savings portion, and unlike money market funds there are no regulations that describe what the insurance company can do with your “deposits,” insurance companies often invest the money at a higher interest rate, making money on the spread between their investment returns and the low interest rate they offer their insurance customers.

When you withdraw or borrow money from a universal life insurance policy, it reduces the amount of benefit your heirs or beneficiaries will receive. This reason alone is enough to steer people away from this type of coverage.

An interesting benefit of universal life insurance, beyond the similar whole life insurance, is that the insured can use the interest earned on the savings component to help pay the monthly premiums. Also, there is a type of universal life insurance called variable universal life insurance. With this variable plan, the savings portion earns a variable interest rate. With whole and some universal life insurance policies, the rate of interest you earn is locked in for the remainder of the policy.

Variable universal life insurance is one of the most flexible products you can buy to protect your income stream, but it comes at an even higher cost than the type f unversal life insurance described above.

Compared to universal life insurance, variable or not, you may be able to generate your own returns in savings or investment that are better than the returns you’d receive by including a savings portion in your policy. If you’re a savvy saver and investor, you may want to leave your investments separate from your life insurance policy and opt for term life insurance. If you appreciate consolidating your savings with your insurance policy and are not concerned with a significantly higher cost, it might make sense to opt for this type of coverage.

Can a universal life insurance policy build your retirement fund?

The savings component can make this a tempting option. There are three major drawbacks to this approach, and because of these reasons, I would not use a life insurance policy of any type to increase my planned income during retirement.

• Any retirement income you need and withdraw reduces the value of the benefits your heirs will receive, as mentioned above.
• You can get better investment options by opening an IRA at a discount brokerage.
• You’ll be paying much more for less potential performance than other retirement options. Even a 401(k) could cost much less.

For readers: Do you have a universal life insurance policy and are you happy with the insurer so far? Have you had any experiences collecting benefits from a policy?

The original version of this article, Universal Life Insurance, is copyrighted by Consumerism Commentary.

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One month ago, I notified my boss at the corporation where I worked that I would be leaving. I was headed for the new frontier. Leaving my salary and benefits behind, I looked to the horizon and contemplated what I needed to do in order to keep my life secure. My biggest concerns besides maintaining my income were health insurance, structure and motivation, saving for retirement, and the human connection. I’ve taken some steps to keep myself moving forward already; the first step has been regarding my health insurance.

Last month, I didn’t know what to expect regarding COBRA coverage. My notice arrived last week, and with the cost in hand, I’m ready to decide whether to continue the same coverage I had from my former employer through COBRA or to seek opening a plan from New Jersey’s list of providers. The same plan (Aetna HMO) costs about 10% less when enrolled through COBRA compared to the state’s price. Apex was spot on with his comments. My state does regulate the pricing scheme, but my expectations for COBRA’s prices were way off.

I like the plan I had at my company (or would have had in 2011 — there was a slight change to include a low deductible), so rather than shopping for something new, even if something else would be less expensive, I’ve accepted COBRA coverage.

The tougher question is whether to continue my dental insurance coverage. For $575, I can continue my coverage, which paid for 100% of the negotiated rates for covered services. My annual expenses, consisting of the co-insurance I’ve paid at each dentist visit, add up to about the same amount each year. I could reduce some of the services I get. Yet, I prefer having the peace of mind that if something were to go wrong with my teeth that would not be covered by medical insurance, I would still be covered. I’ve accepted dental coverage through COBRA as well.

The process of accepting coverage was surprisingly easy. I logged into a website administered by the third party company acting as a firewall between the insurer and me. The site confirmed my identity using just my Social Security number and I was able to create yet another account on yet another website. There are options to accept coverage my mail or by phone, as well.

Even though the choice of continuing my coverage under COBRA was an easy decision to make and the process for making that choice was easy, it seems to be the best option out of the choices offered by the insurance companies directly to consumers in New Jersey.

Photo: The Bode

The original version of this article, Life After Salary: COBRA vs. Individual Health Insurance, is copyrighted by Consumerism Commentary.

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Now that I’ll be leaving my corporate job and leaving behind the benefits a salaried position afforded me, I need to begin looking at alternative options for those benefits. One of the first concerns on my list is health insurance. Inside the company, our annual benefits enrollment period was completed only a few weeks ago, so the cost of insurance is fresh in my mind.

If I had chosen to remain employed by my company, I would pay a total premium of just over $1,000 next year for the national HMO plan administered by Aetna. I have the option of choosing to COBRA coverage for a period of time following my resignation, but I haven’t yet received information about the cost. I expect it to cost from $2,500 to $3,000 for the year, as the company will no longer subsidize the majority of the expense to the insurer.

COBRA will not last forever. The latest rules indicate COBRA will be available to me for 18 months. If I like the plan I have, I should take advantage of this; buying an individual Aetna HMO plan directly from the insurer would cost $6,400 next year, and that would only be if I had made the November 30 deadline to apply for these rates, which I hadn’t.

It pays to shop around.

Shopping amongst plans offered in my state of New Jersey gets quite complicated with different insurers offering different options. You can model your prospective health costs and usage to help you choose the plan with the best coverage you’ll actually use for the least cost, but these predictions are often inaccurate. Just looking at the New Jersey rate table [pdf] is enough to make you want to forget about insurance altogether.

There are two other paths I can choose. If I were to hire employees for my business, I could qualify for a group insurance plan. Having employees introduces other headaches, and I am not interested in going down this road at the present time. The other path is to marry someone who can include me under spousal coverage within their employer-sponsored plan.

For the near future, the best option is to continue my current coverage through COBRA. Although my employer is subsidizing part of the full premium now, once I leave the company, they will send me a bill once each month for the full premium. This would be much less money than shopping the market for individual health insurance, at least until healthcare reform takes effect.

I’d love to hear from any other self-employed individuals who have sought health insurance coverage. What has worked for you?

The original version of this article, Life After Salary: Individual Health Insurance, is copyrighted by Consumerism Commentary.

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As I mentioned a few days ago, Consumerism Commentary is matching your charitable contributions. Please take this opportunity to give to your favorite charity. Here’s how to make your charity count twice.

I work for a financial services company (a situation soon to be rephrased in the past tense), and every once in a while, our businesses go on “road shows” selling their products to the employees, supposedly at reduced rates. This month’s product is long-term care insurance. This type of insurance pays for nursing homes and at-home care for people who are unable to care for themselves. I’m 34 years old, so I don’t foresee needing this type of care for a long time, if at all.

The Long Term Care Insurance National Advisory Center — an organization with an official sounding name, though I don’t trust their website without any official information about who they are — says, “By 2030 those needing LTC will skyrocket to 23+ million Americans, with projected, individual long term care costs reaching $300,000 annually per individual!” Even if there is some hyperbole here, inflation is always scarier when it’s applied to expenses.

That’s the risk with insurance: you spend your money now and over time, and you never need the service you purchased. This is why I don’t buy added warranty insurance when I buy electronic items — I rarely need to take advantage, but if I were to need, I’ll have self-insured well enough to handle the expense myself.

The best unbiased information I could find on long-term care insurance comes from a series of articles on CBS Moneywatch. I call this unbiased, but in a broader view, you can bet that any information coming from a financial publication is going to have advice falling in the direction of taking advantage of products offered by the financial industry. The analysis of pros and cons of a variety of methods of planning for long-term care seems fair.

From what I have seen, the cost of caring for an elderly individual with a condition such as Parkinson’s disease can deplete all of that individual’s wealth accumulated after a lifetime of working. The peace of mind gained from long-term care insurance — as long as the insurance does provide the benefits when needed — is worth the expense.

CBS Moneywatch

The original version of this article, Do I Need Long-Term Care Insurance?, is copyrighted by Consumerism Commentary.

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A Consumerism Commentary reader wrote in with the following question:

I called our health insurance company about adding our sons back on our policy and they said they still had to be in school for 12 credit hours. Is this true? They said the new law did not effect them yet. Any answers for this would be great.

It likely is true. Some provisions of the health insurance reform law haven’t taken effect yet. However, a relevant piece of the legislation takes effect September 23, six months after the bill was signed into law. This provision declares that children can be included on parents’ health insurance plans until the age of 26. The reader did not specify the age of the sons, but if they fall into the allowed range, the number of credit hours enrolled in college is irrelevant.

This is good news for many graduates who have finished their education but have been unable to find a job offering benefits. The bottom line for this reader is that later this week, her sons enrolled in less than 12 credit hours will be eligible to be added to her own health insurance plans as long as they are under the age of 26.

The above only applies for insurance coverage that began after the law was enacted in March. Plans that were in existence at that time are grandfathered, and not subject to the new rules yet. If children under the age of 26 do not have access to other employer-based insurance plans, they can be added to parents’ plans to be effective January 1, 2011; the restriction is lifted so this feature is available to all children under the age of 26 on January 1, 2014.

Got any questions? Contact me, and if I don’t know the answer, I’ll research it.

The original version of this article, Children Covered by Parents’ Health Insurance Plans, is copyrighted by Consumerism Commentary.

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Historically, it’s been difficult, if not impossible, for Americans with medical problems to acquire affordable health insurance. That changed yesterday with the rollout of another piece of this year’s Affordable Care Act, the Pre-Existing Condition Insurance Plan (PCIP). As of July 1, 2010, adult citizens or legal residents who have been without insurance for six months, and who have been denied insurance because of a pre-existing condition, are eligible to buy into a state-run plan. (Read the full eligibility requirements.) Or if their state opted not to have a plan for these circumstances, there’s a national plan than can take its place.

According to healthcare.gov, the plan:

• Will cover a broad range of health benefits, including primary and specialty care, hospital care, and prescription drugs. All covered benefits are available to you, even to treat a pre-existing condition.
• Won’t charge you a higher premium just because of your medical condition.
• Doesn’t base eligibility on income.

Exact benefits and premiums will vary by state (pick your state and learn more), and coverage won’t be effective until August 1st, but you can apply today.

These plans will go away in 2014, when it will become illegal for private insurance companies to discriminate against adults with pre-existing conditions.

In addition to the PCIP website dedicated to this plan, there is also a wealth of easy-to-understand and useful resources at the new healthcare.gov, including an informative timeline of how the law affects health care, and on which dates.

The original version of this article, New Pre-Existing Condition Insurance Plan, is copyrighted by Consumerism Commentary.

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In March, I wrote about reducing the amount of automation in handling personal finances. Leaving your payments on auto-pilot is asking for trouble. Leaving your brain out of the decision-making process is a sure way to rack up overdraft fees when you don’t have enough funding to pay an automatic bill.

Also in March, I canceled collision coverage on my auto insurance. With a hefty emergency fund and a car that is no longer valued beyond $10,000, this is something I should have done a long time ago. My car insurance is deducted from my checking account every month, so I had not been focusing on this particular expense.

At this time, however, I decided to write an article about car insurance and that forced me to examine my own. I saw I was paying for unnecessary collision coverage, so I canceled it. The process was simple. I logged into my insurance company’s website, found the customer service phone number, and canceled the extra coverage within minutes. It was a surprisingly easy process.

I later received confirmation in the mail. My coverage was adjusted as promised.

Yesterday I received my renewal documentation in the mail, and somehow, collision coverage was back on my plan, and my total premium was higher than ever. Not knowing whether this was an error in the paperwork, I called customer service. Somehow, collision coverage was included in my renewal. The customer service representative suggested that by the time I removed collision coverage in March, and even though my renewal date wasn’t for another three months, my renewal paperwork had already been processed.

He was happy to remove collision coverage from the renewal and I should receive new paperwork in seven to ten days.

If my finances were fully automated, I might not have opened my renewal documentation and would have instead filed it away with the rest of my documentation. I knew that I had made a change recently, and when I received the mailing, I wanted to verify I the company renewed the plan as expected. I was surprised to find it did not, but glad I checked.

By the way, my insurance company, Liberty Mutual, is not a public company; I’m a customer and a stakeholder. Interestingly the company announced just yesterday that its property and casualty insurance subsidiary has filed for an initial public offering to access an influx of capital.

The original version of this article, How to Pay More Than You Should: Stop Paying Attention, is copyrighted by Consumerism Commentary.

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The entire concept of insurance, particularly public insurance companies with shareholders, is backward. If a company is to survive year after year, it has to make money for its owners. In the case of public companies, executives answer to the board of directors and the shareholders.

The goal is, of course, to make money for everyone involved.

Here is how insurance companies make money, reduced to the absolute basics:

• Collect as much as possible from insured policyholders in the form of premiums.
• Pay out as few claims as possible (but enough to avoid regulatory scrutiny) to policyholders.
• Profit.

An insurance company that pays all legitimate claims could not survive in a free market economy. To compensate for paying more claims, the company would be forced to raise its premiums, and would lose its business to less expensive insurers. In order to increase profits and keep shareholders happy, the company must deny legitimate claims.

When you battle with a publicly-traded insurance company that doesn’t want to pay your claim, it is trying to earn another fraction of a cent per share. You just want the company to honor your insurance agreement in exchange for the premiums you have been paying.

It makes more sense for an insurance company to exist as a mutual company, where the policyholders (customers) are the owners. With this type of structure, the shareholders and policyholders don’t have competing priorities. Claims can be paid, and customer-owners will be happy. When there is a surplus, the mutual company distributes the excess money to its customer-owners. This is clearly a better way to operate for all parties involved.

Mutual companies tend to demutualize, or go public, to get access to more capital from millions of happy investors. It’s at that point the company no longer works for its customers, it works for the huge institutional investors and to a lesser extent individual shareholders. While policyholders will have their mutual shares converted to stock shares, they will no longer be the primary focus of the company.

Public insurance companies are the only companies that improve their business by not providing a service to their customers. While everyone jokes about cable companies, they provide customer service by making sure you’re getting hundreds of channels all the time. They may not show up at your door to fix problems, but there are hardly any problems. If a cable company categorically refused to deliver service despite charging its customers every month, it would go out of business; yet, this is exactly how public insurance companies must operate in order to succeed.

The original version of this article, Insurance Companies Work for Shareholders, Not Customers, is copyrighted by Consumerism Commentary.

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The first time I shopped for car insurance I didn’t know much about what I would be buying. I should have taken the time to learn more about the various types of coverage before shopping. As a result of my lack of preparation, I did a poor job comparing rates. I was slightly better armed after I purchased a new car six years ago. By then I knew a little more about car insurance. I worked with AAA to find the best rates offered to me in New Jersey and received rates from a variety of other companies for similar coverage.

Yet I am still not a car insurance expert. A quick conversation with my co-workers reminded me that I should re-evaluate my coverage. I am currently covered for much more than necessary considering the reduced value of my car and the savings I have available. I plan to change my coverage this week.

An easy-to-read guide to the various types of auto insurance coverage would have been helpful when I first received a driver’s license. Here is the information I had familiarized myself with when I first assumed the responsibility of a driver.

Liability coverage

Liability coverage pays other people when you are at fault — the cause of an accident. Liability coverage is usually mandatory. If you do not have liability coverage and you cause an accident (and the other individual involved does not have uninsured motorist coverage) you would be responsible for paying their medical bills and car repair bills out of your own pocket. You could be sued if you don’t have insurance, or enough insurance, to cover the expenses paid by the victim resulting from your accident.

Liability coverage is separated between bodily injury and property. Your bodily injury liability coverage will pay for the other individual’s medical expenses and there are coverage levels per person and per accident. For example, my maximum coverage is currently $50,000 each person and $100,000 each accident. That means I will be liable for any excess expenses above those amounts. Property liability insurance covers repairs. My maximum coverage is currently $50,000 each accident. The insurance industry refers to these numbers in shorthand: 50/100/50.

Collision coverage

Collision coverage pays you or pays directly to a repair shop for damage to your car regardless of which driver is at fault. A deductible must be met first. Currently, my deductible is $500. This is low considering a portion of my Emergency Fund is ready to handle incidents. This type of insurance is not required unless you are financing the vehicle and the bank requires it or you are leasing the vehicle. I will eliminate this coverage when I call to adjust my policy.

Insurance will only cover the actual cash value of your car minus the deductible. Assuming my car is now worth $6,000, insurance will cover at most $5,500 for collision, and I am paying $537 a year for that benefit.

Comprehensive coverage

Comprehensive coverage pays you or pays directly to a repair shop for any damage to your car that occurs at any time other than a collision. If your car is stolen, comprehensive coverage would pay you. We experienced a violent storm the past few days, and trees everywhere were uprooted. I didn’t personally notice any cars damaged by falling trees, only fences, buildings, utility poles, and roads. However, it’s likely quite a few people in the area experienced damage to their card. Comprehensive car insurance coverage would help them.

Like collision, comprehensive coverage is not required unless you have a car loan or a lease. I am currently covered with a $500 deductible. I will most likely raise the deductible on this coverage. I considered eliminating comprehensive coverage, but two issues are steering me towards keeping, First, I do not park in a garage, and while my neighborhood is usually quiet, I can’t control other people or nature. Second, I drive to New York City often and my car has already been broken into once.

Uninsured motorists coverage

Uninsured motorists coverage pays you if damage to your car cannot be reimbursed by the driver at fault because they fail to have adequate insurance. Although liability insurance is required for all legal drivers, not all drivers are operating a vehicle legally. There is some, but not complete, overlap with collision coverage. Uninsured motorists coverage might pay your collision deductible. Uninsured motorists coverage will also pay for bodily injury costs not reimbursed by the other driver’s insurance.

I currently have uninsured motorists coverage at the same levels as my liability coverage, 50/100/50.

Personal injury protection

Personal injury protection (PIP) pays you or a service provider for your medical, hospital, and funeral expenses. They may also pay for other family/household members and pedestrians involved in an accident. It’s a good idea to compare the personal injury protection benefits with those offered by your health insurance. If some of the benefits are duplicated, you may be able to justify lower PIP coverage.

If you drive passengers often, consider increasing your PIP coverage. I almost always drive alone, and I’m considering dropping PIP from my policy. Currently, I am covered for a maximum of $250,000 after a deductible of $250.

Other coverage

When my car was being repaired after the break-in I mentioned above, the rental car coverage was helpful. My insurance policy offers reimbursement for transportation expenses up to $30 per day or $900 per accident. This coverage costs me $35 a year. I will likely keep this insurance because its cost is low and I currently have no other convenient means of transportation.

Gap insurance usually is not associated directly with the other aspects of car insurance. It provides one specific benefit. For a driver whose vehicle is leased or finances, gap insurance will pay the driver the difference between the actual cash value of the car minus a deductible and the remaining balance due on the loan or lease.

For example, if you are upside-down, owing $20,000 on a car whose value is only $15,000, and the vehicle is totaled in an accident, your collision insurance will only cover $15,000. Without gap insurance, you would still need to pay what you owe without a car to show for it, and you’ll usually need to buy a new car as well. The gap insurance would cover the $5,000 difference.

Later this week, I’ll reduce my insurance coverage with my provider, Liberty Mutual, and soon after begin shopping around for better rates.

Photo: iboy_daniel, Eduardo Deboni, L. Marie, jeffwilcox, visualpanic, adrian8_8

The original version of this article, Car Insurance Coverage, is copyrighted by Consumerism Commentary.

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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.

The original version of this article, After Ten Years of Renting, I Finally Have Insurance, is copyrighted by Consumerism Commentary.

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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].

The original version of this article, Generation X Will Depend on Family and Government for Long-Term Care, is copyrighted by Consumerism Commentary.

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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?

The original version of this article, State Farm to Pay Dividend to NJ Policyholders, is copyrighted by Consumerism Commentary.

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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]

The original version of this article, Higher Health Insurance Premiums for Overweight: Discrimination?, is copyrighted by Consumerism Commentary.

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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.

The original version of this article, Time to Shop for New Auto Insurance, is copyrighted by Consumerism Commentary.

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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.

The original version of this article, Automobile Insurance Premium Increasing, But Not By Much, is copyrighted by Consumerism Commentary.

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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. 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.

The original version of this article, Financial Documents For Young Families, is copyrighted by Consumerism Commentary.

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Last week, I started a short series looking at Money Magazine’s 25 rules to grow rich by. I’m breaking down the advice within the article into five separate blog entries here; you can find part one here and part two here. Here are the next five tips, with a bit of my own commentary thrown in when appropriate.

11. If you don’t understand how an investment works, don’t buy it. Don’t bother with futures options, and don’t let your broker talk you into them, unless you have done some indepent research and you know what you’re getting into.

If a stranger wants a few thousand to invest in his new business, you’re not oging to give him the money without determining what it will be used for, checking his business plan, and making sure there’s a good chance he’ll be able to pay back as promised. The same theory is true for any type of investment, especially those beyond the basic stock or bond.

12. If you’re not saving 10% of your salary, you aren’t saving enough. Saving 10% can be difficult for people with little education, making minimum wage, and living in a high expense area. Some people will need to save much more than 10%, particularly if they started saving later in life and are trying to catch up before retirement. For those extremes, 10% is not appropriate. But for others, it’s a decent starting point. Of course, the more you can put away rather than spend, the better.

13. Keep three months’ worth of living expenses in a bank savings account or a high-yield money-market fund for emergencies. If you have kids or rely on one income, make it six months’. Creating an Emergency Fund is usually the first step once one decides to get financially in gear. Everyone will experience some kind of emergency eventually, so it’s good to have cash stashed. This way, there is no need to rely on credit card or emergency 401(k) loans to help.

One way to painlessly create an Emergency Fund is to handle the deposits automatically.

14. Aim to accumulate enough money to pay for a third of your kids’ college costs. You can borrow the rest or use some of your income to help out when your child is in college. First things first: make sure you are set before you save for your kids’ education. That is the approach that most financial planners suggest.

I’m not quite sure I agree due to the strong emphasis I place on quality education and my belief that too many “real world” jobs can distract students from focusing on school when their brains are the most impressionable for higher-level learning (high school and college). Parents should provide as much financial support for college as practical.

Tuition prices are only increasing, and doing so at a rate much higher than “official” inflation. A high debt burden when exiting college can dissuade students from taking on degree programs that are not predicted to be the most lucrative. It’s important that there continue to be people in the world studying and becoming experts in literature, art, music, education, history and social sciences.

15. You need enough life insurance to replace at least five years of your salary – as much as 10 years if you have several young children or significant debts. I have no life insurance. There’s no one depending on my salary other than myself at this time. Thus, life insurance hasn’t been on my list yet. This rule of thumb sounds good to me, but if anyone has any thoughts on life insurance to share, please feel free to educate me by leaving comments below.

This series will continue with Part 4 in the next day or so. I’ll also finish writing the series on my experiences with the University of Phoenix Online soon. There is much to be said, so it’s taking some time to put all of my thoughts together.

The original version of this article, Money Magazine: 25 Rules to Grow Rich By, Part 3, is copyrighted by Consumerism Commentary.

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If you’ve been following along, you may know that I was in a minor car accident over the weekend. I visited an auto body shop that my insurance company deals with directly. The damage to the doors and fender will cost at least $2,500 to fix, $500 of which is my deductible. They will need to work on my car for a week, so I’ll need a temporary replacement. Liberty Mutual, my insurance company, offers reimbursement/payment for a rental car up to $30/day.

Assuming 7 days of using the rental car, Liberty Mutual will be covering at least $2,210. The $500 I have to pay is not a problem, I save extra in my “Car Fund” at ING Direct to cover such semi-emergencies. If I had to pay the full amount, I’d have to dip into my true “Emergency Fund,” which is something I’d rather not do.

A few years ago, this accident would have had me in a terrible position, not able to afford the deductible. Thankfully, I started getting myself financially in gear in 2002.

Elsewhere in the blogosphere, Chitown from Windy City Blues was also in a car accident recently, and Jim from Blueprint for Financial Prosperity doesn’t carry collision and comprehensive insurance.

The original version of this article, Car Damage Update, is copyrighted by Consumerism Commentary.

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Over the weekend, I received the annual benefits enrollment package from my employer. Last year, the health benefits offered by the company changed significantly to take advantage of Health Savings Accounts and to raise prices. Even after the multiple sessions with Human Resources, there were some of my coworkers who didn’t know the difference between HSAs, PPOs and HMOs.

The publisher of Fred Brock’s new book, Health Care on Less Than You Think: The New York Times Guide to Getting Affordable Coverage, sent me an excerpt from this book, and I’d like to share it. Presumably the book will help the reader make the most out of health insurance options at the lowest cost possible.

The excerpt is a concise glossary of some of the most relevant health insurance terms.

Before selecting a policy from an employer menu (or shopping for an individual policy), you should be certain you understand the terms used by the health insurance industry. The meanings can vary slightly among insurers, so if a number or explanation doesn’t match up with the following definitions, press the insurance provider for more details; there may be costs or exceptions hidden in the differences in jargon.

Coinsurance is the amount you must pay after your health plan’s deductible has been met. It’s usually expressed as a percentage. For instance, you might have to pay 20 percent of every bill until the total of your own payments hits your out-of-pocket maximum.

Copayment is a flat fee you pay for health-care services, regardless of how much the doctor or hospital receives from your insurance provider. Some plans, especially HMOs and some PPOs, require a copayment, usually $10 to $30 for each office visit to a doctor and often higher copayments for emergency care.

Credit for prior coverage may be something you need to prove — normally with a letter from your former insurer — if you are switching employers or insurance plans and need preexisting conditions to be covered right away. This is especially important if you are buying an individual policy, which can have a waiting period for preexisting conditions.

A deductible is the amount you must pay for your medical bills before your insurance kicks in. Usually the higher the deductible runs, the less expensive the policy is.

EOB (explanation of benefits) is a statement from your insurance company showing what it has paid and not paid for a claim. Some companies resist supplying duplicate EOBs, so maintaining an organized file of your EOBs is important if you need to challenge a bill.

An EPO (exclusive provider organization) plan allows you to use any doctor or hospital within the insurance provider’s current network, without a referral. You have no coverage, however, outside the current network even if your doctor used to be included in the plan. There can be copayments similar to those for HMO and PPO plans.

A fee-for-service (indemnity) plan is the traditional kind of healthcare policy that allows you to go to any doctor or hospital you choose. Deductibles can range from several hundred to several thousand dollars. After you have paid bills totaling your deductible, the plan usually pays 80 percent of all bills; you pay the other 20 percent up to an out-of-pocket maximum that generally runs between $1,500 and $3,000. After you have reached the out-of-pocket maximum, the policy pays 100 percent of your medical expenses. In most states, fee-for-service is the most expensive health insurance you can buy.

An HMO (health maintenance organization) is essentially a prepaid health plan. For a monthly premium, the HMO provides comprehensive care. You likely pay a copayment for office visits, but most HMO plans have no deductibles. (The exception to the no-deductible rule is an HMO that is eligible for a health savings account.) There are usually no forms to fill out or bills to keep track of. You are, however, quite limited in your choice of doctors, hospitals, and other health-care providers. You commonly must get a referral from your primary-care physician to see a specialist; if you don’t, your treatment with the specialist is not covered. Though HMOs were designed to control costs, they have been the source of many consumer complaints. These complaints were often because of coverage limitations or the fact that some doctors were compensated for denying treatment or referrals to patients or punished for providing what was considered by the HMO to be excessive treatment, although both problems have lessened in recent years. Because of their comprehensive, deductible-free coverage, HMOs often compete with the most affordable health insurance options.

An HSA (health savings account) is a less expensive, high-deductible policy linked to a tax-free savings account that can be used to pay medical bills before the policy’s deducible is met.

Lifetime maximum is the maximum amount of covered expenses your insurance company will pay in your lifetime. Look for a policy with a lifetime maximum of at least $3 million.

Out-of-pocket maximum is the amount of coinsurance you must pay yourself before an insurance policy will pay 100 percent of your bills. It may or may not include the deductible. The term stop-loss is sometimes used to refer to the point at which you have met your deductible and paid your out-of-pocket maximum.

A POS (point-of-service) plan is like a PPO except that you need a referral from your primary-care physician to see an out-of-network doctor, for which you may have to pay extra. Without the referral, you will likely have to pay the entire bill for the out-of-network physician.

A PPO (preferred provider organization) plan is a cross between a fee-for-service plan and an HMO. You can see any doctor you choose without a referral, although if the physician is outside the insurance plan’s network you will probably be reimbursed at a lower rate. For network doctors, you usually have only a copayment for office visits. There can be varying copayments — as well as deductibles, coinsurance, and out-of-pocket maximums — depending on the policy. Most plans that are eligible for use with a health savings account are PPOs with a high deductible tacked on.

These terms, of course, aren’t exclusive to individual policies. Many employers offer a menu of plans for you to select from that usually includes HMOs, PPOs, and traditional indemnity plans. Increasingly, companies are offering HSAs and dropping indemnity plans because they are so expensive.

Reprinted from Health Care on Less Than You Think: The New York Times Guide to Getting Affordable Coverage by Fred Brock. Copyright © 2006 Fred Brock. Published by Times Books; October 2006;$15.00US/$20.00CAN; 0-8050-7980-7.

The original version of this article, Know What Your Insurance Protects, is copyrighted by Consumerism Commentary.

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I was in a minor car accident on Saturday. As I was turning out of my apartment court, another car tried to pass a van that was stopped, allowing me to turn. There was no lane for the car to pass the van, but since I was turning, I am legally at fault for the accident.

No one was hurt.

The police arrived and took the report, and I called my insurance company (Liberty Mutual) to begin the claim process. The first important point is my deductible. It’s likely I’ll be required to pay the first $500 of the repair cost. I have extra money in my “car fund” to pay for problems like these. Hopefully it won’t be too often.

The second important point is my rental coverage. While my car is being repaired, I will be able to use a rental car without charge. I should get the details about this coverage by Wednesday.

As far as the repairs go, there are deep scratches and dents along the driver’s side of the car, stretching from the front wheel to the back, left there by the sharp bumper of the Chevrolet that hit me as I was crossing its path. It’s completely driveable, but when opening the driver’s door, the edge of the door rubs against the body. My amateur guess is that both doors will need to be completely replaced.

The original version of this article, My Car Insurance Will Come in Handy Now, is copyrighted by Consumerism Commentary.

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According to some scientists who study earthquakes and tecnocis, the past 300 years has been a relatively quiet period (the “interseismic period”) for the southern part of the San Andreas Fault. They believe this period is coming to an end, and it’s not a question of if a major earthquake would hit southern California, but when. I heard about the issue from an interview with the lead researcher on All Things Considered.

The interviewer pressured the researcher not to be the “Alan Greenspan of seismology” by not giving a precise prediction, so he gave a 70% chance of a large earthquake — like the Great San Francisco eartquake of 1906 — within the next 30 years. While the resulting quake may be as strong, it may not be as devastating. The lower San Andreas Fault does not run through populated areas.

The announcement of the measurements appears in Nature magazine, but there are certainly financial aspects to this news. If you live in a vulnerable area, you may want to consider earthquake insurance, which is a bit expensive at the moment. Consider that prices may only go upwards. If you don’t live in an earthquake-prone area but are considering buying property… well, news like this usually doesn’t stop most people.

If you want to plan far ahead, buy some nice pre-oceanfront property by looking for land just east of the fault while it’s still cheap.

The original version of this article, Bad Time to Invest in Southern California, is copyrighted by Consumerism Commentary.

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Car costs got you down? The inimitable Suze Orman offers ten tips for keeping car insurance costs down in a world where gas prices continue to climb.

Here’s the short version:

* Boost your deductible. Keep cash on hand for emergencies, or call it partially self-insuring. This will keep your monthly payments down and you can earn interest instead.
* Get less mileage out of your policy. Less than 10,000 or 12,000 miles yearly can qualify you for an insurance discount. Drive for “pleasure” instead of “commuting” or “business” and get a discount.
* Home in on a discount. Bad pun, but if you include your home insurance with the same company that provides your auto insurance, you might qualify for a discount.
* Couple up on your policy. Two heads in one policy are better than one… policy for each head. You could get a 30% discount by joining forces to combat evil.
* Get defensive. Sometimes, taking a defensive driving course will lower your premium. Sometimes, it’s incredibly boring.
* Put your degree to work. I told you an advanced degree is worth it; here’s the proof. Give your insurance provider a list of your lettered qualifications.
* Play group. Suze suggests you look to your affiliated organizations like alumni groups or teachers’ associations. They may provide special rates.
* Slow down. Think Slow Poke, not Speedy Gonzalez. They only look at the last three years, so it won’t take too long to clean off your record from an insurance rate perspective.
* Give yourself credit. Insurance companies look at a number that is similar to your credit score, so make sure that you don’t declare bankruptcy or default on loans.
* Make the grade. A 3.0 GPA in high school of college often reduces premiums.

Suze also suggests being vigilant about how kids are assigned to cars. My father solved this problem very simply, but in a way that I found disappointing. When I reached driving age, he sold his BMW. (Or was it his Porsche? I don’t remember which he had at the time.) I’m relatively confident both vehicles were purchased used.

After getting rid of the mid-life crisis cars, he picked up a Nissan Maxima to add to our traditional family Subaru Station Wagon. The Maxima beat the old Datsun he had for years (even though Datsun and Maxima are/were the same company) when I was very young.

The original version of this article, Ten Tips For Cutting Car Expenses, is copyrighted by Consumerism Commentary.

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Let’s say you have a life insurance policy that will pay $1,000,000 to your family in the event of your death. You’ve had the policy for several years, but you’ve decided that it is no longer needed. You don’t want to pay the monthly premium and there’s no one to receive the funds when you pass away, for some reason. The insurance company wants to cut their losses, so they’ll offer you $50,000 to buy the policy back. Perhaps another option is to let the policy lapse.

There is a third option. You could sell your policy to a third party investor [free Wall Street Journal article]. Rather than receiving $50,000, you’ll receive $200,000 for the asset you no longer desire.

Not a bad deal… unless you’re the insurance company. The insurance company is hoping it will never have to make your payout, that the policy will lapse. When you sell the policy to an investor, the chances of that happening are dramatically reduced. This whole process could, according to the article, end up raising the cost of life insurance for everyone, particularly those who do not sell their policies to investors.

The investors who take part in the purchasing of individual life insurance policies are the type who pay cash in exchange for an income stream. You’ve probably seen the companies who want to buy winning lottery tickets. An example of a settlement-purchasing company mentioned within the article is Peach Holdings, LLC which operates Peachtree Settlement Funding. That company apparently has no relation to the makers of the software Peachtree Accounting.

The process of selling policies to a third party sounds good for some consumers while bad for others and for insurance companies. It would be hard to turn away an offer to buy the policy for four times what the issuer offers, though.

The original version of this article, Sell Your Life Insurance Policy, is copyrighted by Consumerism Commentary.

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In February, Travelers Insurance will begin offering a 10% discount on insurance for owners of hybrid vehicles. Their research shows that these drivers are safer than average, typically married, and between the ages 41 and 60.

Before buying a hybrid car for the insurance discount, make sure hybrids make sense for you.

The original version of this article, Insurance Discount for Hybrid Car Owners, is copyrighted by Consumerism Commentary.

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This is the final part in a short series about Suze Orman’s advice for 2006, which is not about 2006, specifically.

Watch Your Identity.

There’s good advice here. Don’t pay for credit monitoring services because you can do it for free. Everyone in the United States is entitled to one free credit report from each of the three credit bureaus, Transunion, Equifax and Experian. You can manage these free credit reports from annualcreditreport.com. Beware — there are many copycat websites that attempt to trick the user into believing he or she will be obtaining a free credit report, but then the user is led to believe that payment is required. If you go through annualcreditreport.com, you don’t have to worry about that.

Insure Your Family’s Well-Being.

If there are people who rely on your income for subsistence, you should have a life insurance policy to protect them in case the worse happens.

You should use life insurance to make sure your family is safe should tragedy strike. All you need is term insurance. Ignore anyone who tries to sell you a super-expensive policy with a name such as whole life, variable life, or universal life.

Values Are Your Ticket to True Prosperity.

Net worth is important, but money alone will never make us happy. So ask yourself questions such as: “What’s the goal of life?” “What’s the goal of having money?”

This fits squarely into the latest trend in financial planning — “life planning” — in which goals and values are necessary to consider before understanding how to plan financially. Lee Eisenberg makes a big deal out of this in The Number.

The original version of this article, Suze Orman’s Tips For 2006, Part 4, is copyrighted by Consumerism Commentary.

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At the most, I would rent a car once or twice a year when I find myself traveling to remote cities for friends’ weddings, for example. Luckilly, this has not yet happened to me.

According to the New York Times, it’s common for rental car companies to charge mutiple customers for the same dings or dents on cars. There are a few examples where the company in question — in this case Enterprise — has charged customers’ credit cards $500 before the car has been inspected.

How many motorists are billed for existing damage to the cars they rent? Of the scores of complaints I have received about damage disputes, I counted about a dozen recent cases that seemed to fit the bill. All of them involved Enterprise.

Enterprise defended their actions in the article, saying the customers were misbilled due to their returning the rented vehicles on a Saturday. Now, generally I’m quite trusting and I give others the benefit of the doubt, but if that’s the best excuse they can come up with, it’s a sorry state of affairs.

The best advice is to thoroughly inspect the vehicle before you sign the rental agreement. Walk around the car and mark down any blemish that the company might try to blame on you. I generally don’t take the extra insurance offered by the rental company as between my own insurance and AAA, everything’s covered. Most of all, don’t get into any accidents.

Speaking of accidents, now it’s confession time: One time, I rented a small truck (like U-Haul or Ryder) for moving my worldly possessions from one town to another. As I drove around the gas station between filling up and returning the vehicle, I think I took out part of the roof of the building that extended past the side. The truck was fine.

Has anyone else had any interesting experiences with rental cars or the companies?

The original version of this article, Dinged Rental Cars, Dinged Wallet, is copyrighted by Consumerism Commentary.

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Marketwatch reports that “Two out of three adults would rather have their employer pick a set of health plans than be given an employer-funded account so they can go out and buy it for themselves on the individual market.”

My company provides several options for health coverage, but the selection is getting more complicated next year. In 2006, the company will offer one point-of-service plan (provided by CIGNA, one national HMO plan (provided by Aetna, a consumer-directed health program with a health fund, a high-deductible health program with a health savings account, local HMOs, and an out-of-area medical program.

This year and in past years, the company has offered a “flex credit” to cover most of the health insurance expenses deducted from the paycheck, but this will no longer be offered in 2006. The cost of the programs have been lowered to compensate for the lack of reimbursement, but the 2006 plans still end up being more expensive.

I’m probably going to stick wih the national HMO plan ($552 per year). It’s not as cheap as the high-deductibe program ($132 per year) and only slightly more expensive than the consumer directed health program ($444 per year). Open enrollment begins later this month.

The original version of this article, Employee Health Plans, is copyrighted by Consumerism Commentary.

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CNN Money has an extensive feature on how general consensus is wrong again. The articles look at the biggest money fears, how they may be unreasonable, and what should worry the public instead. Here are the first three from the series. The remaining three appear in a follow-up post here at Consuermsim Commentary.

While Americans are afraid of dying young and leaving their families without their income for support, they should be more concerned about becoming disabled and unable to work due to an injury or illness. While 50 percent of workers have life insurance, only 28 percent have extended disability insurance.

Suggestions: Get adequate disability insurance, covering at least 60 percent of your salary, “own occupation” coverage which pays if you can’t do you current job regardless of whether you can do another, and keep premiums low.

The stock market crashing is a big fear, while researchers believe there is more of a chance of mediocre returns throughout the next several decades. “Unless whole new demographic groups, like Asia’s burgeoning middle class, suddenly start putting a lot of money into U.S. stocks, the once-in-a-lifetime rise in what people are willing to pay for equities looks like it has about run its course.”

Suggestions: Diversify holdings throughout types of investments, dollar cost averaging, buy cheap funds like index funds, and invest more.

High gas prices, high stock prices, and some other factors have caused many to believe that the U.S. economy will crash. CNN Money believes we’re more likely to see some stagnation. “But today the U.S. could be facing a long, sometimes painful return to average. Even optimistic economists figure the boomers’ retirement will slow the pace of economic growth a bit.”

Suggestions: Outsource investments by looking outside the U.S. for investment opportunities, buy treasury inflation-protected securities (TIPS) to hedge against inflation, and invest 5% of your portfolio in gold through an ETF. On the other hand, gold just hit a 17-year high. That sounds a little like it’s not time to invest.

More of our biggest fears are debunked in Part Two.

The original version of this article, What Are You Afraid Of?, is copyrighted by Consumerism Commentary.

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Some of my favorite commercials on television right now are GEICO spots. You know the ones. Salesman/actor: “Buying car insurance from GEICO is so simple, even a caveman could do it.” Caveman: “That is so offensive.”

Seth Stevenson from Slate Magazine feels the same way and cites another good one, the “Tiny House reality series” commercial. Although GEICO did not come out on top during my latest seach for auto insurance, their quirky commercials and reputation for low prices did send me to their website first.

Since those who need car insurance span a wide variety of demographics, advertisements need to appeal to a vast audience. Quirky and clever commercials catch my attention, but then again, so do commercials like GoDaddy‘s Superbowl commercial (my title for it: “The Congressional Hearing”) from earlier this year. Incidentally, all my domain names are registered through GoDaddy.

The original version of this article, That Is Really Offensive, is copyrighted by Consumerism Commentary.

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How Much Personal Liability Insurance Do You Need? The Motley Fool recommends covering yourself for how much you might have to lose if sued at the end of the term of insurance rather than how much you might lose if sued now.

Are you an extreme saver? (For some reason, I’m reminded of the extreme kayaking from Harold & Kumar Go to White Castle.) Michael Potter lives on an income of $15,000. He hardly ever drives, cuts his own hair. and still finds a way to support kids and his hobbies, which include ceramics and motorcycles. Even on his low income, he can afford a $7,000 entertainment system, thre Corvettes, and a $16,000 Harley.

Google [GOOG] is still above $300 per share. Will it split? Meanwhile, oil has dipped below $60 while we should expect gas at $3 per gallon.

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On Saturday, I made a visit to my local AAA branch to finalize my new auto insurance. The company providing my insurance will be Libery Mutual for about $1,500. Geico came back to my with a price several hundred dollars higher, and that might be a blessing considering some of the company’s negative reviews.

If I had not switched insurance companies this weekend, I would have had a $500 insurance bill due this month; instead I will begin monthly installments of about $125 on July 1.

The original version of this article, New Auto Insurance Follow-Up, is copyrighted by Consumerism Commentary.

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Yo. I think your website would be da bomb if you had the gecko do the Robot.

Last month, the nine points on my New Jersey Driver’s License fell into obsolescence. It has now been three years since the points were “awarded” to me for various stupid indiscretions. This is good news for my wallet.

My auto insurance yearly premium is $3,536. I’ve decided that my newfound point-freedom and a $500 payment due this month give me a perfect opportunity to shop around for new insurance.

So I did. I first called AAA, who brokered my current insurance. Currently, I’m on the state-mandated high risk plan so I had no options. AAA offered me new insurance through Libery Mutual for $1,568 (with options similar to my current coverage). That’s a decent amount of savings, but maybe I could do better.

I shopped around a little more and I’ve settled with Geico. They were able to offer me the same coverage for $810. The choice is clear. Now, there is one last obstacle: I must wait while they verify my information through “independent sources” before they decide whether my application is approved.

Update: I’ve received the response from Geico. Read the comments for the rest of the story.

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