Archive for the ‘Car Insurance’ Category

How I Wisely Navigated My Way Off My Parents’ Car Insurance

Thursday, April 16th, 2015

I am a lucky girl. Throughout high school and college, my parents kept me on their car insurance policy. I was an expensive item to add! I kept the cost as low as possible by earning the good student discount, driving a 14-year-old Subaru, never having a speeding ticket and being born a girl. However, when my fiancé James and I were preparing to get married, one of the financial conversations we had was about the car insurance policy. My parents gave me the title to the car (they owned it) and it became my responsibility, my car — and my turn to get insurance.

I set out to find a policy and did all of my research online. I soon found out, however, that some of my preconceptions turned out to be misconceptions. Here’s what I learned along the way.

Where to Start?

I looked online and compared premiums from three difference companies, which I will refer to as Insurance Company A, which my parents have, as well as Insurance Company B and Insurance Company. C. My preference was to stick with the familiar — my parents’ insurance company – but it turns out it was far beyond my budget. Here is the quote I was offered:

InsuranceCoA

It was like the story of the Three Little Bears. Insurance Company A cost too much. My parents have the advantage of bundling their policies (homeowners, etc.) and saving that way, in which case I recommend it. However, I’m not at that place in life where I need anything other than car insurance.

Which Option Is the Best Fit for Me?

The rates offered by Insurance Company B were affordable but I needed to investigate exactly what I was paying for or missing out on.

InsuranceCoB

I plugged in my price to see what coverage options were available. Company B’s most highly recommended package cost less than Company A’s basic option. I didn’t feel comfortable enlisting in the most basic option because I don’t yet have a fully stocked emergency fund in case of a serious accident. So I compared the mid-range option at Company B with what I could get from Company C.

I was impressed. The premium Company C package offered more and cost less than the equivalent from Company B. The same was true of the mid-range package. Continuing my research, I called upon several important sources: my mom, Google (GOOG), and the insurance company agent (in that order). I needed to clear up some confusing lingo I was experiencing and get an opinion. I’m generally skeptical, and believe that if a deal sounds too good to be true, it probably is.

InsuranceCoC

What Does a Comprehensive Deductible Cover?

I asked my mom (and Google) about the comprehensive coverage. Basically, that means the non-accident damage that will be covered. Hail and flood damage are some examples.

The collision deductible is what you’re willing to pay as cash out of pocket after an accident for repairs.

Bodily injury and property damages are the amount insurance will pay if you cause harm to another person or property with your vehicle.

What Happens If I Total My Car?

I learned that a totaled car means the total loss of a vehicle. A vehicle is considered a total loss when the repairs needed exceed 50 percent to 70 percent of the value of the car, depending on the insurance policy. The insurance company will give you the market value of the car before the crash. So a $600-800 repair would be a total loss for the Subaru because it had a market value of $1,200 (optimistically). In my case, if that happened, I would receive about $1,000 from my insurer to then find a new car.

Can I Get Additional Discounts?

It never hurts to ask for a discount. You might be surprised at what you’re offered.

All things considered, I chose the Company C “similar” (mid-range) policy, but was able to bring my cost down to $79.96 each month. After going into the office, my agent asked me about my qualifications for other discounts, which brought it down even further. For example, I have a diploma, which still qualifies me for a good student discount. It’s not paying off my debt, but hey, I’ll take a discount when I can get one.

Also, in most states, insurers may check your credit — essentially a credit-based insurance score — when determining your monthly premium. That’s when working toward, or maintaining, good credit over time can help you out. By looking at your credit reports regularly, you can spot errors or other problems that are dragging down your credit, and resolve them. Checking your credit scores regularly can also give you an idea of where you stand, too. You can get your credit reports for free once a year from AnnualCreditReport.com, and you can get your credit scores for free, updated monthly, on Credit.com.

New Holiday Shopping Warning: Beware of Men in Parking Lots

Thursday, April 16th, 2015

All those jokes about women drivers need an overhaul. At least when it comes to parking, men are the true terrors of the lot. Chances are that if someone hits someone or something or blocks a lane, waiting for someone to eventually pull out, the culprit will be a guy.

A CarInsurance.com survey of 2,000 drivers ages 25 and older found that, contrary to many stereotypes, men are the real danger in parking lots. About 37 percent of men reported they had hit another car, vs. 33 percent of women. Nineteen percent of men said they had hit a pole, and 12 percent a shopping cart, vs. 11 percent and 5 percent respectively for women. Eight percent of men (4 percent of women) had hit a cart corral, while 8 percent of men reported hitting a pedestrian. Only 1 percent of women had.

Another big difference: Who gets hit in those incidents. 59 percent of women said they had been hit, while only 45 percent of men had.

Men generally admitted to being more aggressive in confrontations over parking in crowded lots: 27 percent had used a hand gesture while driving away; only 20 percent of women had. When it came to saying something to the other person, 20 percent of men did, but only 12 percent of women. And 8 percent of men said they had touched the other person, compared to only 2 percent of women. Similarly, 5 percent of men, but only 1 percent of women, had touched the other car. Men outnumbered women 4 percent to 2 percent in calling security or the police.

Get That Last Space

One area in which men and women didn’t differ significantly was in the tactics they used to acquire a parking space: •38 percent circled a lot at least twice, a technique called “vulture parking”.
•24 percent would follow people with bags and wait for them to pack their car and leave.
•3 percent cut someone off for a spot.
•3 percent straddled their cars on top of snow banks to fit into spaces others had passed on.
Given that Black Friday isn’t the best time for discounts, maybe it would be wiser to pass on the whole parking lot sardine experience the day after Thanksgiving.

3 Kinds of Insurance You Need — and 3 You Don’t

Thursday, April 16th, 2015

There isn’t a lot of talk about insurance in school. So when we become adults, we’re left to consider the dizzying array of insurance policies on our own and wonder if we need all of them, just some, or none of them. It’s almost as confusing as learning the Pythagorean theorem and the periodic table of elements.

So if you’re new to the world of insurance or you could use a brush-up tutorial, here is a somewhat subjective list of the types of insurance you absolutely need, types you may want and those you definitely don’t want to buy.

Insurance You Need

Homeowners insurance. If you own a house, your bank will require you to have homeowners insurance. In fact, “if someone loses their homeowners insurance for some reason – cancellation, nonpayment, nonrenewal, then the bank is notified,” says Dan Weedin, an insurance consultant in Seattle. “They will immediately place their own insurance in it and bill the homeowner. Then they will give the homeowner a chance to get their own. The bank will not allow it to go uninsured for any length of time.”

Unless you’ve paid off your mortgage, there’s really no way out of homeowners insurance.

Auto insurance. This is another must-have. In fact, it’s against the law to drive without some sort of coverage. If you’re caught driving without insurance, you probably won’t go to jail, but your driver’s license will likely be suspended and you’ll be fined.

Health insurance. If you are 25 or younger, you don’t need to buy health insurance, assuming you’re still covered on your parents’ policy. But otherwise, add it to your list. According to Healthcare.gov, in 2014, if you don’t have health insurance, you’ll have to pay whichever is higher: either 1 percent of your yearly household income or $95 per uninsured adult ($47.50 per child under 18). In 2015, the fee will be 2 percent of your income or $325 per person, and in 2016, it’ll be 2.5 percent of your income or $695 per person. In 2017 and beyond, the fee will be adjusted for inflation.

Insurance You May Need

Disability insurance. Regi Armstrong, president of Armstrong Wealth Management Group in Florence, South Carolina, casts his vote for disability insurance as something everyone should consider getting. “Disability insurance replaces one’s income if we become incapacitated during our working years,” he says. “It’s very important when only one person in the household has an income or one has a much larger income than their spouse.”

Life insurance. Generally, people buy a life insurance policy after they’re married or have a child. As Laura Adams, a senior analyst at InsuranceQuotes.com, says, “It’s critical when your death would create a financial hardship for those you leave behind.”

Adams also points out that there may be some unmarried, childless people who should get life insurance. “For instance, if you cosigned a car loan, student loan or credit card with a family member or friend, they would be responsible for the entire debt if you died,” she says.

Umbrella insurance. Think of this as insurance for your insurance. “It’s an extra amount of liability coverage in $1 million increments that protects over and above your personal and auto liabilities if they become exhausted,” says Weedin, who thinks middle-class individuals and families and those in the upper middle class and higher should consider umbrella insurance. “Generally, a family can add this policy for between $250 to $300 a year,” he adds.

Whether you need umbrella insurance depends on what you have to lose and how concerned you are about getting hit with a lawsuit. After all, even if you aren’t worth millions, somebody could sue you as if you were. That worry is why umbrella insurance exists. “It’s very important for those who might be the targets of lawsuits, like physicians and business owners,” Armstrong says.

Insurance You Don’t Need

Credit card insurance. In general, stay away from any type of coverage that would pay off a credit account, whether it’s a credit card, mortgage or car loan, Adams says. “You can get this coverage by having enough regular disability or life insurance and avoid this duplicate coverage,” she says.

True, many homeowners who don’t have a large enough down payment are required to buy private mortgage insurance and pay it monthly until the loan balance reaches 78 percent of the original value of the home. But otherwise, these types of credit insurance are only good deals for the insurer. For instance, credit card insurance, which kicks in if you have trouble making your payments due to, say, job loss, won’t pay off the entire debt on your credit card – it will just make your monthly minimum payment for you. And some people say it’s challenging to get credit card issuers to actually make those payments.

Credit card fraud insurance. People who worry about credit card theft and are fearful that they’ll be on the hook for thousands of dollars of fraudulent purchases tend to purchase this. But the odds that you’d have to pay in this scenario are virtually nonexistent. “It’s typically overkill,” Adams says. “Your maximum liability is limited to $50.” This applies to all credit cards.

Life insurance for a child. Some people buy these policies in case the unthinkable happens to their child, figuring at least there will be money for a funeral. But your child would be far better off if you had a brighter outlook and put that money into a college savings account.

Look at it this way: Insurance exists to help you replace or recover what you’ve lost. The more expensive that loss is, the more likely you need insurance. That’s why homeowners, auto, health and life insurance are so important, and things like an extended warranty on an appliance are a waste of money.

But life insurance for the loss of a child? No insurance policy will help you recover from that.

7 Insurance Policies You Don’t Need

Thursday, April 16th, 2015

You could almost insure every step you take in life — but you shouldn’t.

You could spend every available dollar you have on insuring against something bad happening. What’s the likelihood of something going wrong? What are the exemptions in the policy? And if you make a claim, will the payout be worth the cost?

That said, insurance can protect you, and having it can put your mind at ease. Life insurance, for example, is important to have if your family relies on your income. There are some exceptions to life insurance, but all depend on your situation and comfort level.

Putting life insurance aside, here are seven insurance policies you should consider canceling. Put money aside in an emergency fund to cover you in the rare event that something does go wrong in these areas:

Rental car insurance. We’ve all been bombarded at the rental car counter by a salesperson trying to get us to buy extra insurance as we rush through a rental agreement. Chances are your credit card covers you if you’re paying with one, or your auto insurer for your car you left at home covers rentals. Check with both companies before you leave home.

If you insist on having rental car insurance in case of an accident, one option is Protect Your Bubble. It sells rental car insurance for $8 a day, compared to the $30 or so the rental agency will charge you at the counter. The catch is you have to buy it ahead of time. The checkout counter, as many insurance companies know, isn’t the best place for a consumer to make an educated decision.

Pet insurance. Read the policy’s fine print for exclusions and coverage. Ask yourself if it’s a worthwhile expense, given that your pet may be old and be in more pain after surgery than without.

John K. Barnes, a certified financial planner for Modern Woodmen of America, says it’s a waste of money for his pet, which would cost $50 to $100 a month to insure, depending on the plan. Putting that money in a savings fund, such as $50 in a college 529 plan each month, would exceed $20,000 in 18 years, Barnes says. While your dog won’t thank you for that savings choice, your kid might.

Travel or evacuation insurance. Traveling to a foreign country can be exciting, but it can also bring trepidation before a trip — especially to somewhere covered by a U.S. Department of State travel warning.

Suzanne Garber, a travel executive who has helped thousands of people out of dangerous situations, says she has never bought travel or evacuation insurance. Medical, security or other travel emergencies can be planned for, she says. “Plans can be as elaborate as researching the destination or packing appropriate safety supplies to taking certain medications that prevent disease or discomfort while traveling.” Plus, many health care policies already cover you when traveling. She also recommends using a carryon bag to make changing flights easier if your flight is cancelled.

Auto collision insurance. If you own an old car that’s paid for, you don’t need collision insurance. It covers repairs after a car accident, but it doesn’t such non-collision events as fire, theft and vandalism. Those are covered by comprehensive auto insurance.

Both types of coverage will likely be required by your lender if you still owe money on the car. But once you own the car outright, collision insurance is optional.

If a car is totaled in an accident, insurers only pay the current value of the vehicle. So if you own an old car that isn’t worth much, you won’t get much money. You’re better off putting that collision premium in a fund to help you buy a car when you need one.

Mortgage insurance. This will pay off your home’s mortgage if you die. While that can be a major benefit to your family, you’ll save money by buying a term-life policy instead to pay off the mortgage and other bills through the length of your mortgage.

Water line insurance. This is one I get every year from my water company, reminding me that I’m responsible for the water and sewer lines between my house and the curb. If something breaks, I’ll have to pay for it. I throw each letter in the recycle bin, knowing that repair costs are a few thousand dollars that are more affordable than the insurance coverage being offered.

Credit card insurance. Your credit card company may try to sell you this, playing on your fear of losing your job and being unable to pay your credit card bill. A better idea is to not use your credit cards so much to begin with. Insurance is also sold to cover you if your credit card is stolen. Don’t buy it. Federal law limits your liability to $50 if your card is used by a thief, as long as you report it promptly.

Insurance isn’t meant to cover the little problems of life. It’s meant for the big problems that could devastate you or your family. Don’t let these small issues get in the way.

Want to Pay Twice as Much for Your Car Insurance? Have a Kid

Thursday, April 16th, 2015

It’s no great secret that across the nation, insurance premiums are on the rise. Over the past five years, the cost of insuring a home against fire and other casualty has crept up about 10 percent a year — every year. Health insurance increases, while they’ve been muted of late, still rose 4 percent this year.

But if you think those hikes are steep, get a load of this next one.

Congratulations! You’re a Father! (Now Open Your Wallet)

Kids are expensive. If you’re a parent, you know this already. If you’re a parent of a kid who hasn’t turned 16 just yet, you’re on track to get another lesson in how expensive they can be. Because once your offspring passes the driver’s test and receive a license to drive from the state, he’s going to need to be insured — and that will cost you an extra $2,000 a year, on average.

(By the way, if your kid is getting her driver’s license, your wallet won’t take quite as big a hit, girls being 25 percent less expensive to insure than boys on average. But it’ll still be some serious coin.)

According to the National Highway Traffic Safety Administration, driving is a risky activity for teens. The are more prone to get into accidents — about four times as likely as older, more experienced drivers, according to the Centers for Disease Control. And traffic accidents are the leading causes of death for Americans ages 16 to 19.

Between lives lost and property destroyed, this all makes insurance companies very wary of insuring teen drivers. And when they do agree to insure a teen, they make you pay through the nose.

According to a recent report posted on Bankrate.com’s (RATE) InsuranceQuotes.com, across both genders, all age categories, and all 50 states, parents pay an average 84 percent more for their car insurance after adding a teen to their policy.

Stay Between the (State) Lines

Think that’s bad? It might get worse.

Unless you’re fortunate enough to live in a state like North Carolina or Hawaii, where legislators have passed laws that ban setting insurance rates based on factors such as age or gender, your rates may rise by more than the average 84 percent.

How much more? Take a look at the top 10 states hiking rates on teenage drivers by 100 percent and higher: •New Hampshire: 100.56 percent
•Louisiana: 100.58 percent
•Arizona: 103.65 percent
•Washington: 104.66 percent
•Maine: 105.23 percent
•Idaho: 106.74 percent
•Alabama: 110.61 percent
•Wyoming: 112.11 percent
•Utah: 114.62 percent
•Arkansas: 116.34 percent

That’s right. Put a teenage driver on your policy in any one of these states, and you can expect to see your insurance cost for the whole family more than double.

The news is even worse for parents in Louisiana. Although its teen drivers bring “only” the ninth highest rate hikes with them when they join a policy, Louisiana car insurance in general is already the most expensive in the land — averaging $2,699 annually for a single male driver, according to Insure.com. Add a kid to that policy, and you’ll be shelling out upwards of $5,400 a year.

What’s to Be Done?

Is there any way to beat the system, and avoid these hikes? Not entirely, no.

Sure, you could move to Hawaii, where insurance rates rise least. Then again, Hawaii also has the honor of hosting the nation’s most expensive housing market — so you’ll end up seriously out of pocket, one way or the other. On the other hand, North Carolinian insurance rates don’t rise so much when you put a teen on your policy. That market might be worth a look, if you’re willing to move to save money.

Patience Is a Virtue… That Pays

One solution suggests itself from InsuranceQuotes.com’s offhand observation that certain teens cost more to insure than others.

In particular, if you put a kid on your policy as soon as he hits 16, well, new 16-year-old drivers tend to double an insurance bill no matter where they live, averaging 99 percent rate hikes.

But premiums tend to rise less when teens wait a bit before trying to drive. 17-year-olds joining their parents’ policies average a 90 percent increase. 18-year-olds cost 82 percent more. By the time Junior is age 19 and ready for college, the rate hike is “only” 65 percent.

Meanwhile, the standard caveats still apply: No one’s forcing you to accept “average” rate hikes, so now that you know the “average” scenario, shop around to see if someone will offer you a better deal. Ask if taking (and passing) a safe driver course might reduce your teen’s rate. And of course, since we’re talking student-age kids here, make sure to inquire about discounts for good students. Whether or not it makes sense, insurance companies — like grandparents — often favor kids who bring home A’s.

Filing a Car Insurance Claim? Better Scour Your Social Networks First

Thursday, April 16th, 2015

What you Tweet can and will be used against you in a court of law.

That’s what insurance attorneys are saying when it comes to social networking and car accidents: By no means should you be Facebooking, Instagramming, Pinteresting, LinkedIn-ing or otherwise socially broadcasting details at the scene of the accident.

“Checking social media accounts has become one of the first things an insurance company or adjuster will do when you file a claim,” Frank Darras, an insurance attorney in Ontario, Calif., told the automotive information and pricing provider Edmunds.com in an interview published last week.

Darras and other lawyers who represent people fighting insurance companies who deny claims say that in recent years it has become an industry standard for claims adjustors to sift through publicly available content of their customers, seeking out any information that might build a case for them to deny claims or lower payouts.

In some cases the claims adjustors find outright fraud based on Facebook or Twitter posts that contradict details given on claims reports. For example, someone might file a hit-and-run with the insurer but then post contradictory details on Facebook admitting fault.

But insurers go even further. They scour claimants’ social networks for clues to driving habits. Post a ton of drifting videos on your profile? It could hint that you’re a fan of reckless driving. Post on Foursquare a photo of yourself in a bar parking lot, it could suggest a penchant for drinking and driving. Even bad reviews on eBay could provide hints about the type of person you are.

While a lot of this content doesn’t necessarily provide definitive proof of insurance fraud, the material can be used in court in the event of a legal battle, especially in cases involving personal injury.

Jaclyn S. Millner, an attorney at Fitch, Johnson, Larson & Held, P.A., and Gregory M. Duhl, associate professor of law at the William Mitchell College of Law in St. Paul, Minn., pointed out to the Association of Certified Fraud Examiners in a report last year that investigating social networking content that’s not protected with privacy settings is not considered an ethical breach.

Furthermore, while ethical codes prevent attorneys and their investigators from clandestine “friending” of targets in order to access content protected by privacy settings , these ethical codes do not extend to investigators not hired by attorneys or by insurance companies themselves. As long as attorneys representing insurance companies do not instruct non-attorney investigators to try to access private content by successfully initiating contact with the target, then any content behind privacy settings may be used in any legal proceedings.

Because of employers’ increased scrutiny of social networks, people have started managing their public profiles more carefully. Now that insurance claims adjustors are making it standard operating procedure to scour the Web for reasons to deny claims, people have more reason to be more discreet with the content they share.

Who Lies More About Dings, Crashes and Tickets — Husbands or Wives?

Thursday, April 16th, 2015

Men and women already bicker about which sex drives better than the other. Now they have another topic of automotive contention: who lies more about dings, crashes, and tickets?

Well, now we have an answer: A recent survey of 1,000 married adults by Insure.com revealed that men lie more than women when it comes to the car, regardless of whether the issue is as minor as a tiny dent in the fender or as big as letting the insurance lapse.

Let’s take a look five lies spouses tell.

The car got dinged? Wasn’t me! While 35 percent of survey respondents said they blamed someone else even if it was their fault that the car got damaged, 42 percent of men had lied about it, versus only 27 percent of women.

Ticket? What ticket? More than twice as many men kept tickets a secret from their spouse: 16 percent of women had gotten a ticket that they didn’t tell their husbands about, but 34 percent of ticketed husbands kept mum.

Must have been a hit-and-run. Wives may be just a little too trusting of their spouses: 23 percent said they knew or thought it was possible that their husband had been in an accident without telling them, even though 31 percent of husbands admitted that they had in fact hidden a car accident from their spouse. On the flip side, men are more suspicious of their wives than they should be: 38 percent of men said they think it’s possible that their spouse kept a car accident secret, but only 17 percent of wives say they lied about an accident.

Of course, an accident may be tough to keep a secret if your car is damaged. But even if you get the repairs done before your spouse notices, the hike in your insurance costs will be pretty telling. Accidents will almost always cause your car insurance costs to rise; if you get a reckless driving ticket along with it, your rates could go up as much as 22 percent.

I don’t recall forgetting to pay the car insurance bill. Twenty-three percent of men say they’ve kept silent about neglecting to pay the car insurance premium, while only 15 percent of wives say they didn’t tell their spouse about the bill they forgot. In this case maybe a little nagging would be good; if your policy lapses, your rates are likely to go up by 6 percent when it’s reinstated.

I’m sure the insurance hasn’t lapsed yet. Twenty-one percent of men said they’d driven without car insurance without telling their spouse, while just 9 percent of women said they’d kept quiet about driving without insurance protection.

You’re Rich! 5 Strategies for Staying That Way

Thursday, April 16th, 2015

Most people believe that striking it rich will instantly solve all their financial problems forever. Yet as rich people know all too well, it can be just as hard to hang onto your wealth as it was to earn it in the first place.

There are countless stories of lottery winners, high-paid professional athletes, and celebrities showing that the trip from rags to riches often proves to be a round-trip back to rags.

If you have aspirations to get rich in the future or are fortunate enough to already be well off, there are steps you can take to avoid becoming another rags-to-riches-to-rags story. It mostly boils down to protecting your money from five common fortune killers.

Challenge 1: Fight Off the IRS.

The threat: High-income individuals pay the highest rates on their income taxes. Moreover, after you die, the IRS will be waiting to collect their share from your heirs, with estate tax rates currently as high as 40 percent for those with assets worth more than $5.25 million.

The solution: Take advantage of tax-favored retirement accounts like IRAs and 401(k)s to shelter income from tax. In addition, consult an estate-planning attorney who can help you structure your legal affairs to minimize the amount of estate tax you’ll owe. A good pro can steer you toward a combination of current gifts and complex financial strategies that will get as much of your money as possible to your loved ones.

Challenge 2: Steer Clear of Legal Liabilities and Fortune Hunters.

The threat: The richer you are, the more you have to lose from a potential lawsuit. Simple incidents like car accidents or household slips and falls can turn into a search for a target with deep pockets.

The solution: Be sure that you have adequate insurance coverage to handle the full extent of any damage award. At a minimum, be sure your auto policy gives you more than the legal minimum coverage for your state, and look at your homeowners’ policy limits to make sure they’re adequate. In addition, consider an umbrella liability policy to cover additional extraordinary claims.

Challenge 3: Don’t Be Tempted by Exotic Investments.

The threat: Rich people often get access to high-risk investments that offer the promise of even greater wealth. All too often, though, these investment opportunities turn out to be overhyped or even fraudulent, resulting in big losses.

The solution: Trying to get richer is a hard habit to break, even for the wealthy. But if you have enough money to meet all your needs, it doesn’t pay to take big risks with your portfolio. Rein in your risk-taking and give yourself a core of safe investments that will provide for your financial needs. If you have money left over and can afford to lose it, then dabbling in high-risk opportunities can let you stay excited about your investments without putting your lifestyle in jeopardy.

Challenge 4: Pay Off Those IOUs.

The threat: The way many people get wealthy is by borrowing money cheaply and making a bigger profit on it. Yet rather than paying down their debt once they strike it rich, successful people often keep using the same strategies to find even more wealth, taking out loans on their newly acquired assets and putting their entire fortunes at risk.

The solution: Reorganizing your finances once you’re well off is essential to avoid losing everything you’ve gained. By paying down debt and establishing a baseline of wealth below which even the worst-case scenarios won’t take you, you’ll avoid the trap of using too much leverage and suffering big losses as a result.

Challenge 5: Plan to Live Forever — or at Least to Stick Around for a Long While.

The threat: With life expectancies longer than ever and medical costs skyrocketing, even the well-off can outlive their money and end up spending all their assets on nursing homes and hospital care in their old age. Even the more basic living expenses often rise after you retire, and if you overspend early in retirement, you can end up in a downward spiral and run out of money.

The solution: A combination of strategies can help you preserve at least a baseline of income no matter what the future brings. Long-term care insurance specifically addresses nursing-home and home-health care costs, while buying an immediate annuity converts a lump sum of wealth into regular monthly income that’s guaranteed to last the rest of your life.

Don’t Blow It

As hard as it is to get rich, staying rich is no easier. But by taking these simple steps, you’ll put yourself in the best position to hang onto your wealth as long as you can.

Why Your Insurance Premiums Just Went Up (and What to Do About It)

Thursday, April 16th, 2015

Have you noticed that your insurance premiums are going up lately? Going up a lot?

You’re not alone. According to a new report out from Bankrate.com, more than one-third of U.S. consumers say their insurance costs grew in 2012. In a few cases, this was because people had more things to insure — they bought a new house, or a second car, or perhaps brought home a new baby, who needed some health insurance. But in the majority of cases — 62 percent — consumers say they’re paying more simply because their insurance company is charging more.

Insurance professionals estimate the average homeowner’s insurance premium has risen 10 percent per year every year since 2008.

What’s Behind the Hikes

But is this a case of insurers price-gouging their customers? Or are there legitimate reasons for the rising rates? Actually, it’s the latter.

Insurance Information Institute spokesman Michael Barry points out that between “Hurricane Irene, the Joplin tornado that was the single biggest insurance event in Missouri history, and widespread winter storms, tornadoes and flooding in interior states like Minnesota,” the past decade has been one of the costliest in terms of natural disasters in U.S. history. And because insurance companies bear a large portion of that cost, it only makes sense that they might need to charge higher premiums to pay for all the claims they’ve been receiving.

Health care costs, too, are on the rise — leading to higher premiums for that flavor of insurance as well. Consumer Federation of America insurance director J. Robert Hunter blames health insurance for much of the inflation indicated in the Bankrate survey.

But the real reason is bigger than either of these explanations.

The Float is Sinking

On one hand, yes, insurance companies of all stripes are spending more to satisfy customer claims. The increased costs these companies face drive them to raise their rates to recoup their expenditures. But that’s only half of the problem.

To understand the other half, you need to understand how insurance companies work — how they make their money. This basically consists of three steps:

Step 1 is, of course, to collect premiums.

Step 2 is to invest the money from those premiums until it comes time to pay out on a claim. An insurance company doesn’t just put the money under a mattress after cashing your premium check. Rather, it takes this money — called “float” in industry parlance — and invests it in the corporate bond market, in federal savings bonds, and in the stock market.

Here’s where the problem begins: The interest rates insurers have been getting on their bond investments have been frightfully low these past few years. Similarly, the stock market is in a funk. It’s been doing well these past few weeks, true. But the bigger picture shows that the Dow Jones Industrial Average, for example, still hasn’t regained its highs of October 2007. That means that for more than five straight years, insurers haven’t earned anything on their stock holdings.

And this brings us to Step 3, which is the real problem. Insurance companies were counting on profits from the stock market (and the interest on those bonds) to help cover their costs when it finally came time to pay out cash to satisfy insurance claims. Those profits simply haven’t materialized, and as a result, insurers need to find money somewhere else in order to make good on insurance claims from their customers.

Guess where they found it?

That’s right. They found it in your wallet. In order to make up the difference between the money they thought they would have, and the amount they actually wound up with, insurers are raising prices. It’s really the only solution for them — and even then, insurance professionals say that there’s been little or no profit for insurance companies in homeowners insurance since about 2008.

What Can You Do?

Of course, that’s small consolation for those of us footing the bill for the insurers’ miscalculation. So what’s the solution?

Bankrate offers several ideas for cutting costs, ranging from raising the deductible on your homeowners and auto insurance policies, to dropping collision coverage on an old car, to buying home and auto insurance from the same company. (When you “bundle,” insurers will often give you a discount.)

Probably the best thing you can do to mitigate rising insurance costs, though, is shop around for a better deal. Bankrate notes that in some cases, an hour spent on the phone calling insurers and comparing rates can save you in excess of $200 a year. Even if you don’t have an hour to spare, though, you can still shop around by asking an insurance broker to do the comparisons for you.

It could “save you 15 percent or more on your car insurance,” as one famous lizard famously promised. With any luck, it could even get you back to the prices you were paying before the lizard — and everyone else — began raising their rates.

Motley Fool contributor Rich Smith does not own shares of any company named above. The Motley Fool has no position in any of the stocks mentioned.

Insurance Review: Are Your Policies Protecting You at the Right Price?

Thursday, April 16th, 2015

Having the right insurance policies in place can soften the blows from unexpected events that would otherwise mean financial catastrophe for you and your family. But if you’re like many people, you may not fully understand all the policies you have, let alone whether they’re adequate to meet your needs.

As part of your annual financial checkup, here are some tips to help you assess your current coverage and decide whether you need to make any changes.

Home Is Where the Risk Is

Homeowners insurance may protect you financially in the event of everything from natural disasters to household mishaps. But as millions of homeowners affected by Hurricane Sandy found out the hard way, standard homeowners insurance doesn’t protect you against every type of danger.

One of the most common mistakes people make about homeowners insurance is thinking that it covers flood damage. But typical policies specifically exclude flood damage from their coverage. To get flood protection, you have to obtain additional insurance from the National Flood Insurance Program. Similarly, in earthquake-prone areas, you may need to get special earthquake coverage added to your policy, or else it won’t necessarily cover damage from a quake.

Even if you have good homeowners insurance, it may not cover all of your belongings. Often, insurers will only cover up to a certain amount for high-value items like jewelry, cash, and artwork as part of their base policies. You’ll need to add special provisions for protection above that amount. So if you’ve obtained any particularly valuable items in the past year, talk to your insurance company about what you need to do to get them covered.

A Matter of Life and Death

The reason we need life insurance is something no one likes to think about, but a policy can be invaluable in providing for your family if something happens to you. Even if you already have coverage, though, doing an annual insurance checkup can lead to cost savings.

As life expectancy has risen over the years, prices of term life insurance policies have generally fallen. So for instance, if you bought a 20-year term life policy 10 years ago, you may find that rates have fallen enough that obtaining a new 10-year policy could actually be cheaper than continuing to pay to retain your existing coverage.

The major area where people make insurance adjustments is in how much coverage to have. Family events like getting married or having a child can boost your insurance needs, so talk to your agent about whether your current policies provide enough benefits to overcome the financial burden your family would face if something happened to you.

Taking a Healthy Interest

Another area where a beginning-of-the-year review makes sense is in health insurance. By now, you should have most of your 2012 medical bills in, and looking at what you spent on health care over the past 12 months can give you valuable information about what type of health insurance is best for you.

Many people pay for expensive insurance plans even when they never use the vast majority of the benefits they provide. By looking at your expenses now, you’ll be ready the next time open enrollment season comes around to make smart decisions about your health insurance choices — potentially saving you a boatload in insurance premium savings while still getting the same benefits you currently use.

What Are Your Wheels Worth?

Auto insurance is expensive, but it’s vital to protect you from liability and injury in an accident. Still, you can produce substantial savings by making regular adjustments to your coverage.

One of the easiest ways to save big comes from dropping collision and comprehensive coverage from your policy. Typically, when you have a new car, having collision and comprehensive coverage is smart to protect you from a major loss. Yet as your vehicle ages, the value of collision and comprehensive coverage goes down. Giving that coverage up once your vehicle’s value drops below a certain point will produce noticeable monthly savings that you can apply toward a new vehicle or other savings goals.