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.
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.
[click to continue…]
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.
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.
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.
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.
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.
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