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Are You Paying for Insurance You Don?t Need?

October 23, 2017 [email protected] Insurance One comment

Insurance, especially health insurance, has been a buzzword for some time.

You know you need it, especially when it comes to home and auto, because you know, fires and car crashes, and stuff.

These disasters can destroy your property, so you need to be insured to protect your belongings!

But, there is a thing as too much insurance. While it?s better to be safe than sorry, it’s also a good idea to have money to pay your bills, instead of paying for insurance you don’t need.

Here are some places where you might already be paying for insurance that you don?t need.

Life Insurance

I want to start saying that life insurance is good to have. It can help your family in case something would happen to you. That being said, you don?t want to buy so much life insurance that your loved ones would rather have the money from the policy than keep you around. I kid, but the point is, you don’t want to be over-insured.

You really only need to cover funeral expenses and any debt that you may have. If you have adult kids who no longer live with you, or if you are young and single, you probably don?t need much life insurance.

Instead of paying for insurance that you don’t need, put that money in your retirement plan. You?ll see a better return on your money.

Extra Auto Policies

For most people, a car is a necessary tool to help them get to where they need to be in life. For example, your car might be your primary way to get to work so you can make money and pay your bills. But, paying for extra insurance you don?t need, plus all of the other costs of owning a car, can really add up over the vehicle?s lifetime.

For example, do you really need towing insurance? Or, what about the collision insurance? Sometimes the premium is almost as much as it would cost to repair your car.

Instead of buying this extra coverage, maybe you could build some extra money into your emergency fund, or set up a separate fund specifically for car repairs. Essentially you’d be self-insuring and you could always use the money for something else since it’s your money in your savings account instead of being paid out to an insurance company.

Extended warranties

It?s great to have a warranty on your appliances. Most have at least a short warranty when you buy them. But, do you really need to extend the warranty? Some of these extended warranties don?t cover the issues you thought they would. Instead of buying an extended warranty that you probably won’t use anyway, save your money.

High Premium/Low Deductible Plans

Is a low deductible really the way to go when you buy insurance? This is what I was always taught growing up, but now I’m not so sure.

If you look at how much you pay in premiums, it really adds up! If you hardly ever use your insurance anyway, you still may not ever hit that deductible. For instance, health insurance. If you’re relatively healthy, it’s probably a better use of your money to pay lower premiums and have a higher deductible. The money saved from not paying high premiums, can help pay for your medical bills if you ever do end up with a large bill.

When it comes to insurance, you are looking at the forest and not the trees. You want to be covered so you can rebuild your home should it go up in flames, not nickel and dime every little thing that breaks.

If you haven’t been thinking this way, you can probably save a lot of money by reviewing your plans with this new frame of mind.

Are you paying for insurance you don’t need? What kind?

Photo courtesy of: Hans

Why You Should Use a Health Savings Account

January 16, 2017 [email protected] Lifestyle 2 comments

As we begin to think about the upcoming tax deadline, we also start to think about ways we can save money and especially ways to take advantage of?tax exemptions.

One thing you might not be taking full advantage of are tax exemptions and other opportunities to save on health care expenses.

Health care is a pricey, but necessary expense. Health insurance premiums, deductibles, co-pays, appointments, medicine, you name it, it all adds up.

One way to potentially save on healthcare and get some tax savings is by opening a health savings account. Here are some advantage of having a health savings account.

It’s Basically Tax-free

Money to fund a health savings account is taken out of your paycheck before taxes. When the money is removed from the account for medical purposes, it cannot be taxed. Even if you contribute money to it after your take-home pay, those contributions can be deducted from the gross income on your?tax return. The bottom line is that using a health savings account means paying less tax.

It?s Your Money

A health savings account stays with you and is made up of your own monetary contributions. Your employer can contribute to it, and some employers do, but they do not own it. If you leave the company you take your health savings account with you.

There is no use it or lose it mentality like there is with a Flexible Spending Account (FSA). If you don?t use all of the money in a health savings?account for the year, it rolls over to the next year. Depending on the type of savings account it may even generate interest, which is another benefit for you.

Non-Taxable Withdrawals

If you remove money from your health savings account to pay for a medical bill, the money is not taxable. You can withdraw funds from your account for things other than medical expenses, but if you are under 65 years old and withdraw money for non-medical purposes, you are charged a 20 percent tax fee. If you are older than 65 you can withdraw it penalty free. Because of the fee, it?s best not to withdraw money from this account for non-medical purposes.

Family Benefits

The money in your health savings account can also be used toward expenses for your spouse, children and dependents. This account is available for your use and for the use of your family. If you child needs medicine, you can take money out of your health savings account and use it.

A health savings account helps with budgeting for medical expenses. It’s in a separate account instead of included in a lump sum with money for other things in your monthly budget. This makes it easy to save up for costly medical procedures you may not need right away, or to have as a medical emergency fund of sorts.

Keep in mind, using a health savings account only works with a high-deductible health plan. You also have to pay your full deductible out-of-pocket before you can take money out of your health savings account for a bill. Health savings accounts can save you money and lessen your taxes. But make sure you know if it’s the right choice for you. A high deductible insurance plan may not be a good idea for your family’s financial or medical situation.

Do you use a health savings account? What are other benefits?

Photo courtesy of: Day Donaldson

What Makes Vehicles so Costly to Insure?

October 27, 2016 [email protected] Insurance No comments

Are you in the market for a new car? You may be considering factors, such as the style, size and cost of the vehicle. You may also be considering long-term costs associated with maintenance of the vehicle as well as its fuel economy. But there?s one more item you need to consider in your list: the cost of insuring the car you choose.

There are various factors that car insurance companies consider to determine how much you pay for your premium. Such as if you need car insurance in Maryland, Gaithersburg since it?s capital the associated risks are increased than surrounding cities. These include marital status, age, driving history, credit history as well as geographical location. However, according to a recent study by WalletHub, the type of car you?re driving also plays an important role in determining the cost of your car insurance.

What Influences Insurers

When it comes to types of cars, there are several factors that go into determining how much premium will be charged.

The following are some points to consider when choosing a car:

The Size of the Car

The size of the vehicle influences the cost of insurance. Smaller cars are considered higher risk to insure since they are more likely to be in an accident. This is because younger people prefer smaller cars and are riskier drivers. Accidents involving smaller cars are also more likely to result in fatalities. This makes small fast cars more expensive to insure.

On the other hand, large cars such as SUVs aren?t cheap to insure either. This is because they are likely to cause more damage to property and other cars when involved in an accident, not to mention they?re costlier to repair themselves. If you want cheap car insurance, you?d be safer sticking to the mid-sized cars.

Value of the Vehicle

High-end cars cost a lot more to replace or repair in case of an accident. It therefore makes sense that high-end cars attract higher premiums. High-end cars produced by foreign companies are especially costly to insure. This is because parts are not readily available locally. It can also be difficult replacing the vehicle in case it is written off.

If you?re looking for cheaper insurance premiums, avoid an expensive sticker price. You?ll also cut back on the cost of your maintenance.

Chances of the Car Being Stolen

When your car is stolen, your insurance will cater (if you have comprehensive coverage) the cost of replacing it. Insurance companies are therefore cautious about covering cars that are common targets amongst thieves. Aside from cars that are easy to break into (e.g. Honda Accord) thieves target cars that they can get rid of quickly. They also target cars whose parts are in high demand.

The Size of the Motor

How powerful is your car? Many people who invest in cars with powerful motors like to drive fast. The higher the horsepower on your vehicle the more likely it is to be involved in an accident. Cars with more powerful motors therefore attract higher insurance premiums.

So, Convertible, Hatchback or Minivan?

To start, you?ll want to take your time researching car insurance comparison sites to see what each vehicle type is fetching premium wise.

Minivans are among the cheapest cars to insure. These cars are commonly purchased by families because of their seating capacity and safety features. Married people with children are also thought to be safer drivers.

Hatchbacks attract relatively low insurance rates. Although they are smaller vehicles, they are affordable and often feature mid-sized motors.

Convertibles are considered high-end vehicles. They are often small and fast vehicles. While not heavily targeted for thefts, the horsepower, vehicle value, and size alone easily give convertibles the highest insurance rate out of these three types of vehicles.

What type of vehicle would you choose? Have you found other factors to influence the cost of insurance?

Photo courtesy of: BKD

6 Ways to Save Money on Health Care Costs

February 9, 2015 [email protected] Budgeting, Insurance 13 comments

With the ever-changing health care coverage in today’s world, it’s more important than ever that we as citizens learn how to save money on health care costs. Rising prescription drug costs and higher co-pays in the medical world mean more money out of the pockets of most citizens.

There are ways, however, that we as citizens can help minimize the amount of dollars that leave our pockets for health care costs. Today I’ll share six ways you can save money on health care costs yet still provide for a healthier you.

Save Money on Health Care Costs by Opening a FSA

A medical expense FSA, or “flexible spending account”, allows you to take pre-tax dollars from your paycheck and set it aside to cover medical expenses for the year. This allows you to save money?that you use for medical expenses from being taxed, and it makes your net income lower as well. The caveat, though, is that any FSA funds that you put aside that are not used during the calendar year in which they were deducted from your paycheck “disappear” at year’s end.

If you choose to utilize the benefits of a medical expense FSA in order to save money on health care costs, make sure to estimate the amount of money you’ll need conservatively so you don’t lose that money altogether at year end if it’s not needed.?(Editor’s note…something very similar can be done through an HSA, which my family has. I believe it’s one of the best ways to save money on healthcare costs. The tax savings aren’t too bad either.)

Be Choosy About Doctor Visits

It’s wise to see a doctor when you have concerns about your health, however, many people make trips to the doctor for things that are unnecessary, such as for a mild cold or the occasional bout of constipation. Making unnecessary trips to the doctor costs you money that might not need to be spent.

If you’re unsure about whether or not you need a doctor visit, call your doctor’s office nurse triage line and ask to speak to a triage nurse, who can properly assess whether or not a visit to the doctor is needed.

Talk to Your Doctor About Reducing Co-Pay Bills

A friend of mine recently found out that, as of January 1st, one of the prescription drugs she needs for a family member increased their patient co-pay up to $850 per month, and this is with good insurance! Unable to pay that kind of money, she called her doctor and asked if there was another medicine that will do the same job and cost less. Her doctor did his research and switched the family member to a drug that did the same job, but has a copay of $125 as opposed to $850 each month.

When choosing medical tests and necessary prescription drugs, be sure to ask about co-pays and also have your doctor check and see if there are less expensive alternatives, thereby putting more money into your pocket each month and spending less on medical care when a quality alternative is available.

Eat Well

Study after study has proven that a healthy, whole foods diet that minimizes consumption of processed foods and high-sugar foods can do a great job at not only maintaining your health, but improving your health as well. Diseases such as Type II Diabetes and Heart Disease can often be controlled with a diet that is high in vegetables and fruits, and low in unhealthy fats and processed grains.

Educate yourself on what particular types of foods do to the human body, learn how to make healthy meals?to eat, and work to do what you can to improve your health through a clean diet.

Exercise

Exercise, even in small doses, goes a long way in maintaining and increasing good health. Even low-impact exercises such as stretching, Pilates, yoga and swimming are wonderfully beneficial to the human body. Make a commitment to get moving, even if it’s as simple as parking further away from the door, doing simple stretches each day or taking the stairs as opposed to the elevator.

All of these health improvement techniques add up to a healthier you, and create a potential breeding ground for lower medical care costs. Don’t give in to the belief either that you need to have a high priced gym membership to work out either as there are many ways you can get fit at home?that cost little to nothing.

Never Settle for Subpar Care

While this may seem like an anti-money-saving tip, the truth is that settling for subpar care and medicines might actually lead to worse health and increased health care costs. While subpar care might save you money initially, it has the potential to cost much more money in the long run. Your health is precious.? Never settle for anything less than great medical care by your medical care provider.

Even with rising health care costs, we do have some control over how much we spend on health care. Choose to educate yourself on what it means to improve your health and cut costs where you can on health care without compromising your health. Your body will be healthier, and your savings account, will be healthier too.

What do you do in order to save money on health care costs? Do you have access to and save money in a FSA or HSA? How do you balance saving money without giving up on quality care?

Photo courtesy of:?401kcalculator.org

When is the Best Time to Buy Life Insurance?

May 28, 2014 [email protected] Insurance 16 comments

I don?t talk about it much on Frugal Rules, but I spent five years in the life insurance industry prior to becoming a stockbroker. My wife also spent nearly ten years in the industry. Due to that, we commonly get asked when is the best time to buy life insurance and our answer is always the same ? it?s going to be different for each individual.

We?re all going to die at some point, and need to do what we can to make sure family members are prepared in the event of our passing and life insurance is a major piece to that.

The best time to buy life insurance is a common debate and it?s clouded by the fact there is so much misinformation about it. You have sales representatives who sell policies to be things they?re not as well as the belief that you absolutely don?t need it if you don?t have a family.

With that in mind, I?m going to be running a series here on Wise Dollar that will not only go over when is the right time to buy life insurance but also things to look out for so you can keep more money in your pocket while also being wise in what you purchase.

Buy Life Insurance Sooner Rather than Later

The best time to buy life insurance, generally speaking, is sooner rather than later. Earth shattering I know, but very true. ?:-) The simple fact is that the earlier you buy your life insurance, the cheaper it?s going to be. We?d love to think that we?re better as we age, though the actuarial tables insurance companies use will tell you differently.

I know that those without families or who are younger will question why they need to purchase life insurance when they have no ?need? at the moment. I get that, I really do, and held it at one point, but it?s a shortsighted view in my opinion. It?s a simple fact that the younger you are when you buy life insurance, the cheaper it?s going to be for you.

Ultimately, it means that you will be saving money?over the long run. That?s also not to mention the fact that you?re likely going to be able to afford more life insurance coverage than you would if you wait years to get it. Take that with the fact that you never know what?s going to happen in life and it generally makes sense to buy life insurance sooner rather than later.

There is also a misconception that it?s not the right time to buy life insurance if you have 10-20 pounds to lose or are working on quitting smoking, or other things like that. That is an understandable belief, but you shouldn?t allow that to hold you back from purchasing coverage. Many don’t know that you can buy life insurance without the exam or you can simply get your rates re-evaluated once you lose that weight or stop smoking. Instead, buy insurance coverage now and use the hope of lowered premiums to motivate you to reach your goal.

Know Your Options

If determining when a good time to buy life insurance isn?t difficult enough, there are a myriad of options available, such as:

Term Life insurance
Whole Life insurance
Universal Life insurance
Group Life insurance

While variety is usually a good thing to have, the misinformation is big when it comes to the different types of insurance coverage available. With that in mind, below is a basic explanation of how each of the aforementioned life insurance products work:

Term Life: Term Life provides coverage for a specific period of time. The most common are 10, 20 and 30 year terms. These are generally the cheapest life insurance policies to buy and once the term is over your coverage expires.

Whole Life: Whole Life varies from Term in that it provides coverage for the entirety of your life, or until you surrender the coverage. As a result, Whole Life premiums are generally more expensive but they do allow you to build a small cash value in addition to the coverage. Whole Life insurance is commonly referred to as ?burial insurance? for older individuals who are looking for ways to cover the final expenses.

Universal Life: Universal Life is a step up from Whole Life and is generally viewed as permanent insurance as well. Universal Life allows you the possibility to build a larger cash value and is often sold as an investment product, although life insurance should truly not be considered an investment.

Group Life: Group Life is usually the cheapest and easiest to get as many employers offer Group Life coverage. Having Group Life is a great option, but only as a compliment or supplement to other coverage that more fully replaces your income. This is due to the fact that you?re generally not able to take it with you when you leave an employer. That said, at the very least, you should purchase this if it is available.

Now that we?ve covered the major types of life insurance, the great thing to know is that there are many avenues by which you can buy life insurance coverage today. You have the traditional insurance representatives you can buy from as well as online purchasing opportunities.

You can easily find life insurance rates and purchase policies through companies online. Personally speaking, I like to have a mix of different policies and amounts as it is cost advantageous for us. For example, we have $50,000 in coverage for my wife through USAA for $5 per month, which isn?t too bad in my opinion.

Life Insurance is not an Investment, But it?s Vital

By now, you should know when it?s a good time to buy life insurance and what to buy. You want to buy young and buy cheap. As I said earlier, there is a lot of misinformation when it comes to life insurance. One of the main areas that comes from is the belief that life insurance should be treated as an investment vehicle.

Listen, I understand why many insurance representatives sell it as such. It?s because they get nice fat commissions out of selling those types of products to you as a client! I saw it every day for five years and it?s a shame that it happens it much as it does. The situation is made worse when fear is used to sell such products to uninformed clients. It might be an effective sales strategy, but it?s not the best one in my opinion.

That being said, that is not at all to say that buying life insurance is not important. In fact, it?s an incredibly vital to proper retirement and estate planning. Think of life insurance coverage as a compliment to what you?re already doing in regards to saving for retirement. It may not be as important as saving and investing, but it still plays a vital role in planning for the future of your family. With that in mind, the answer to when is the best time to buy life insurance is?now! ?:-)

When do you believe is the best time to buy life insurance? When was the first time you bought life insurance coverage?

Photo courtesy of: David Amsler

This post was featured on Your PF Pro, Money Smart Guides, Finance With Reason?and Money Smart Guides.

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