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Insurance Companies Now Qualify for TARP Bailout Money

by Flexo on May 15, 2009

in Economy

Even though they are not bank holding companies as originally required for the original qualifications for receiving bailout money from the public, six insurance companies will now have the option of receiving this money.

Among others, Allstate, Ameriprise Financial, Hartford Financial Services, Lincoln National Group, Principal Financial, and Prudential applied earlier for inclusin in the Troubled Asset Relief Program. These six companies have now been approved for a chance to shore up their balance sheets with a piece of the $135 billion remaining for bailout.

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Medical Bills, Even if You Have Insurance, Can Cause Frustration and Debt

by Flexo on April 30, 2009

in Health

When I write about advocating for the consumer when he or she is in debt, I usually receive a good amount of feedback blaming the consumer for his or her situation. Yes, in many cases, households fall into debt because they buy more things they cannot afford, whether knowingly or unknowingly. In many cases, they ignore their own financial condition without worry for their future or while knowing that a declaration of bankruptcy can save them when life gets rough.

Not everyone falls into these categories, I remind the critics. Medical emergencies are expensive and cannot always be adequately planned for in advance. Credit card debt maybe the only option, or sometimes just a slightly better option that financing your bills directly from the hospital. Here is one example from the New York Times:

Mr. Kupka has multiple sclerosis. The Kupkas, who live in Lindstrom, Minn., have an annual income of $45,000 — a combination of her salary as an office manager and his disability payments. More than 20 percent of that income goes toward health care. Their annual insurance premiums total $5,400, and then there’s the $4,000 Mr. Kupka spends on drugs, doctor’s visits and lab fees before he fulfills his policy’s deductible.

In the three years since Mr. Kupka’s disability forced him to stop working as a mental health therapist, he has accumulated $12,000 in debt. “It’s frustrating,” he says. “We earn too much to qualify for state and county assistance, but not enough to stay ahead of the bills. I’ve thought maybe my wife and I should get divorced. But not only is it against our faith, it turns out it wouldn’t help…” [A]s Mr. Kupka’s situation illustrates, it’s not just uninsured patients who rack up large bills. Nearly two-thirds of those with debt problems… had health insurance.

The article offers tips for dealing with insurmountable medical expenses:

  • Confront, don’t ignore, your situation. If you don’t pay your bills and the hospital decides to use a collection agency, your hardship will increase. Your credit report and credit score will be adversely affected.
  • Review your bills. Health providers make mistakes on bills all the time, but many errors are not caught. Some procedures or services may have several names, identical is everything except price, so it helps to work with a medical expert if you have any questions. You can also resubmit your bills to your insurance company if coverage is denied. If you are still not satisfied, your bills may qualify for a third-party review.
  • Hire an expert. The article suggests working with the Medical Billing Advocates of America to find a qualified mediator to negotiate between yourself and the health care provider.
  • Don’t use a credit card. If you can help it, avoid paying your bill on a credit card if you can’t pay off the balance quickly. Interest charged for your use of someone else’s money will increase your debt. Watch out for credit cards offered by a hospital with immediate approval. These are like store credit cards; they might offer a 0% interest rate up front, but you might fall into a trap and owe much more interest than they’ll tell you when they’re busy saying, “You’re approved!”
  • Don’t let debt collectors take advantage of you. Know your rights for dealing with debt collectors in your state. They may only call you during certain hours, they may not harass you, and they may not threaten you. If they break the rules, you can file a complaint with the Federal Trade Commission.

Situations deteriorate faster if you do not have health insurance. Find a way to get covered if you are not a member of plan yet.

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Some Money Market Funds are Insured

by Flexo on March 8, 2009

in Investing

Through December 31, 2009, the Federal Deposit Insurance Corporation (FDIC) insures bank deposit accounts up to $250,000, with the limits returning to $100,000 after that. This includes checking accounts, savings accounts, money market accounts, and certificates of deposit. There are a few nuances to this coverage, so ensure you know the full details of FDIC coverage. This does not cover money market funds, which are occasionally called money market mutual funds.

Money market accounts are similar to savings accounts, and the names are often interchangeable. The main difference is that money market accounts are limited to six withdrawals per month. In my experience, many banks that call their products “savings accounts,” like ING Direct, still enforce this limit.

Money market funds are different than money market accounts and savings accounts. Money market funds are mutual funds offered by banks and brokerages. These products invest in bonds and commercial paper, which make them riskier than money market accounts. Since this type of fund carries more risk, the FDIC does offer insurance. Therefore, if a money market fund loses value or the bank can’t pay funds on withdrawal, the money is lost.

This rarely happens, but it did happen in 2008. At that point, the Treasury Department stepped in and covered the loss. The Treasury now offers an insurance program for money market mutual funds that agree to participate (details here). If the offering bank pays an insurance fee to the Treasury, their money market fund will be guaranteed against losing money. Specifically, the value of the fund will be protect against falling below one dollar per share.

Many banks and brokerages have opted not to participate in this program. Those that do participate, like Vanguard and Fidelity, cover money invested in the funds as of September 12, 2008, and unless extended by a new law the coverage will end in April 2009.

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After Ten Years of Renting, I Finally Have Insurance

by Flexo on March 2, 2009

in Insurance

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.

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Generation X Will Depend on Family and Government for Long-Term Care

by Flexo on February 13, 2009

in Insurance

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].

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Thieves Smashed Into My Car and Stole $700 Worth of Stuff

by Flexo on September 2, 2008

in Consumer

While staying in Queens, New York a week ago, I discovered on Sunday that my car had been broken into. Some time between Friday night and Sunday morning, someone broke the front passenger side window and pulled out my car radio and a few other items I had left hidden in the car. In addition to the radio, they grabbed my iPod, GPS, and cell phone chargers. After several years of visiting Queens, I had become fairly lackadaisical about leaving items in the car, even hidden. Nevertheless, the suction imprint on the windshield, the out-of-state plates, and the fact that the car hadn’t moved since Friday night most likely signaled to the thief that my car would be a good mark.

I filed a police report and worked with the insurance company. They weren’t able to find a glass company that could come to replace the window until Tuesday; I found one that would come sooner, so the insurance company worked directly with them. There was no out-of-pocket cost for me to replace the window, but the stolen items were not covered.

This past weekend I replaced just about everything that had been stolen. In the process, I’ve learned or reinforced a few things.

People were amazed that I didn’t get upset about the ordeal. Stuff is just stuff. Nothing stolen was irreplaceable. At least no one I know was hurt. There’s a possibility, however, that the thief was hurt during the theft. There appeared to be a small drop of blood on the inside of the door under the broken window. We cleaned that right away.

Consider renter’s insurance or homeowners insurance. If I had renter’s insurance, the items stolen may have been covered. I should have researched this years ago. I’m not beating myself up about it because I had enough income in September to replace the items without dipping into savings, but that may not always be the case.

Don’t leave valuables in your car. I’m glad I didn’t have anything more valuable in my car. I don’t normally leave my laptop or camera, but those would have been significant losses for me. I switched to a larger laptop and I am getting into the habit of taking everything with me all the time.

This may not apply to everyone, but I plan on being more selective about where I park. My girlfriend lives in a decent neighborhood, but by the time I arrived at her house on that Friday night, the only parking spot I could find was close to one of the major streets through Queens and Long Island, in front of a business. It’s frustrating to have to drive around for a half an hour or more to find a decent parking spot, but I’ll have to wait until something in front of a residence opens up.

I’ve decided not to replace the GPS for now. While I had the device I didn’t use it as often as I thought I would. The cell phone I bought this year has basic GPS capabilities. As long as the cell phone has service, if necessary I should be able to use it to download a map of my location.

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Can You Eliminate $500 of Your Expenses Each Month?

by Flexo on August 14, 2008

in Consumer

I may have fallen back into old habits. Several years ago, when I was refreshing my life and beginning to control my finances, I made deep cuts into my expenses. I took on three roommates, paying only $325 a month for my portion of rent. I didn’t own a car and relied on mass transit for most of my transportation. When I did move out on my own, finding one of the least expensive apartments in town, I eliminated all but the most basic cable television.

There was more I could have done had I wanted to reduce my expenses, but I reached the point at which I was consistently investing and saving money every month.

As my income has grown over the past few years, I’ve allowed my expenses to follow. I moved into an apartment I actually like and feel comfortable spending some cash on unnecessary things I like, such as amateur coin collecting, amateur photography, and amateur high-definition entertainment enjoyment.

I’ve already thought of some ways to reduce my expenses by $10,000 a year. Consumer Reports has some suggestions for finding another $6,000 a year, but only a few apply to me. How about you?

Find cheaper auto insurance. I mentioned that several years ago I didn’t have a car. That wasn’t quite by choice; my license was suspended when I was younger for failure to pay speeding tickets. It would be easy to say that I received those tickets thanks to a stressful job working 100 hours a week and my failure to pay was because I had no money, but I should have been more responsible. Until I got rid of the car, my insurance was about $4,000 a year if I remember correctly. Now my insurance is about $1,500 a year, and I could only find that rate by shopping around for a while. It’s been several years since I’ve shopped around, so that’s something I will consider. I need to add renter’s insurance as well — something I’m sad to admit I’ve never had despite its reportedly low price.

Optimize your life insurance. Right now, my cat Rupert is the only living being that relies on my income to survive. I have not opted for life insurance yet as it will be generally unnecessary until I have a (human) family. According to Consumer Reports, insurance premiums have decreased on average, so it may be a good time to replace your policy with a new one. You may be able to get the same coverage for less.

Shop smart for food. Buying food for a single guy is not simple. Food is usually packaged for families. This means I usually end up spending more per meal and eating larger portions that I should be. I don’t enjoy spending time preparing and cooking dinner. I have accepted my failure at brown-bagging my lunch and moved on. Consumer Reports’ advice is tailored to a family, indicating on average an household could save $190 a month by shifting to less expensive food. My entire monthly grocery bill is about $190, though eating out (and ordering in) matches that.

Plan menus around sales on fresh poultry, fish, meat, dairy, and produce, and make use of leftovers. Avoid costly prepared meals. Eat more low-priced, high-nutrition foods such as beans and potatoes… Shop in lower-cost stores such as Aldi Foods, PriceRite, Costco, Trader Joe’s, Wal-Mart, and Sam’s Club, but be sure to compare prices. Try less-expensive store brands. Sign up for store discount cards. Stock up on sale-priced staples.

Stop paying bank fees. This is one of the most unnecessary expenses for just about everyone in the United States of America. There is rarely a reason that you should have to pay incidental or monthly fees for any basic banking service if you manage your money. Avoid overdraft fees or over-the-limit fees by being aware of your account balances. Avoid monthly or yearly maintenance fees by taking advantage of only free accounts — there are many to choose from if your bank insists on charging you a fee for your banking. Avoid cash withdrawal fees by using the right ATMs.

According to Consumer Reports, 52% of consumers don’t pay any bank fees, but the rest pay lots.

Optimize your telephone service. I don’t spend that much time on the phone. I could probably save a lot of money if I were to choose a prepaid cell phone plan. However, I chose a Blackberry plan with Verizon Wireless, which I use more for business, and I don’t intend on changing the plan.

I’ve helped other people look at their telephone usage habits and choosing a plan that better fits the amount of time they spend on the phone. On many plans, going over the allotted number of minutes can be very expensive. If you’re consistently exceeding your limit, you can save tons of money by switching plans.

Pay off your credit card. According to Consumerism Commentary, “On average, consumers who carry a balance owe $2,200, on which they pay 15.2 percent in annual interest charges.” Paying that much interest negates any progress you may be achieving with your savings or investments. To get rid of credit card debt, stop using the cards and then apply the Debt Avalanche.

It’s been several years since I’ve paid interest on a credit card, but I still pay about $30 a month on my student loan interest. I still have a student loan because several years ago, I applied some tuition reimbursement towards expenses rather than my loan. I probably should have done whatever possible to avoid that, but for whatever reason, it was the choice I made. At the time, the interest on the student loan was about 2% and I was earning more in my savings accounts, but that’s no longer the case. Therefore, I have been increasing my debt repayments every month this year, with the goal of vanquishing the remaining balance by the end of the year. If I decide that goal still makes sense, I’ll have to accelerate in order to achieve it.

According to Consumer Reports, the average family can save $500 by making the changes listed above. I have a feeling that many Consumerism Commentary readers are already optimized.

Cut your spending by $500 per month, Consumer Reports, August 2008 (subscription required)

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Ben Stein’s Parents are Well-Off Thanks to Variable Annuities

by Flexo on February 26, 2008

in Investing

Should you get a variable annuity when you retire? The company I work for hopes you will, but many financial advisers, gurus, and authors steer people away. The reason is simple — the benefits in the form of gains don’t outweigh the fees and diligent investors can manage their retirement money in the form of index mutual funds, at least with a long-term time horizon.

Ben Stein holds a differing opinion. He is a fan of variable annuities in moderation. He admits that only a portion of a portfolio should be invested in annuities in order to ensure a modicum of guaranteed income. Here are his reasons:

* Variable annuities allowed his parents, both economists but not great investors, to retire comfortably.
* Some annuities will “lock in” your stock market gains to guarantee you won’t lose your money. Of course, the stronger the guarantee, the higher the fee.
* Old people get Alzheimer’s. Even skillful investors can lose their ability to control their portfolios and can benefit from a regular check.

Ben admits that individuals who are successful at investing and continue to be through retirement can manage to perform better investing on their own. He is thoroughly convinced that most people should consider putting at least a portion of their savings into annuity products when they retire.

I’ve generally been strongly against variable annuity products, especially after hearing story after story of elderly people being encouraged to enroll their life savings into products from which they would be unlikely to receive a benefit worth the fees. I do see Ben Stein’s perspective and perhaps annuities would be worthwhile for some individuals in varying degrees.

Why Ben Stein Loves Annuities [Money Magazine video]

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