Insurance Made Easy: A Guide For The Consumer

For most of us, insurance coverage represents a love-hate relationship. We hate paying for the premiums, but love having the right kind of coverage when it is needed. We realize that is important to have insurance coverage, but just the thought of contacting different insurance agents, or researching different insurance plans, can not only be a scary experience, but incredibly overwhelming. Knowing what types of insurance are available, and making sure you have the correct coverage for your life's needs is a task that should be given careful consideration.

Using the following suggestions, whether you are a novice or a veteran insurance buyer, will help you to make critical insurance coverage decisions. First and most important, is to ask yourself the question; what kind of insurance do I need? There is auto insurance to protect yourself and others when driving. Health coverage is a vital issue to address, as well as life insurance, disability and long-term health care. If you have a home, you need to protect your most valuable possession with home-owners insurance. There are many types of insurance for each of the categories mentioned. Asking the right questions can make all of the difference in deciding on the policy that fits you best.

Auto Insurance

Auto insurance is required in most states. You may not be required to carry full coverage, which includes collision, comprehensive and medical coverage; but you are required to carry liability coverage. Liability is the foundation of any auto insurance policy. If you are at fault in an accident, your liability insurance will pay for the bodily injury and property damage expenses caused to others in the accident, including your legal bills. However, if your vehicle is damaged, the expense to repair it will not be covered without having a full coverage policy. Collision, comprehensive and medical coverage are for your benefit. Collision will pay for the repair to your vehicle, while comprehensive coverage will pay for damages to your car that weren?t caused by an auto accident. Medical payments coverage will pay for you and your passenger's medical expenses after an accident. This coverage will pay no matter who is at fault.

Collision coverage is usually the most expensive part of a policy, you can choose a higher deductible, say $500 or $1000, and keep your premium costs down. If you have a newer vehicle and have a lien against it, the lending institution will require that you have full coverage. By working with a professional insurance agent, the agent would be able to give you many cost saving suggestions that you could take advantage of to lower your rates, and still give you the coverage you need.

Health Insurance

Health insurance is one of the largest expenses that we face today. Educating yourself about the different types of health insurance available will assist you with your insurance buying decision. There are many types of plans, but essentially two kinds of health insurance: Fee-for Service and Managed Care.

Fee-for-Service assumes that the medical professional will be paid a fee for services provided. Managed Care encompasses various plans and can include: health maintenance organizations (HMOs), preferred provider organizations (PPO), or point-of-service (POS). These plans provide comprehensive health services to their members and offer financial incentives to their members to use providers in their network. Health insurance is one of the least understood types of insurance; many people feel they do not need health coverage, but just one major illness or accident can force you into Bankruptcy when you can?t pay your bills. This is why you need to understand all the different types of plans available and what plan would best suit your needs and budget. Meeting with an insurance professional and asking the right questions, can save you many sleepless nights of worry and provide you with some peace of mind.

Life Insurance

There are some basic things to consider when you are assessing your life insurance needs. You should first consider your financial situation and the standard of living you would want your dependents or survivors to maintain. Would you want a policy that would cover funeral expenses and final medical bills, or do you have a family to consider where your coverage would also pay outstanding debts, child-rearing expenses, and educational costs? There are two main types of life insurance available. They are Term Life and Permanent or Whole Life.

Term provides death benefit protection for a specified period of time. You can buy a policy in increments of 10, 20 or 30 years. These are usually less expensive, but your rates can increase each time you renew your policy. With Permanent, the costs of the policy are stretched out over a longer period of time, usually spread out over your entire life. Permanent can also be used as a savings vehicle. Once the premium has been paid, the company invests the additional funds. It's a very important choice as to what insurance company you choose. A knowledgeable and experienced agent can answer all of these and your personal questions about life insurance.

Disability Insurance

Is disability insurance really necessary? Many of us can easily become sick or disabled tomorrow and not be able to work for two or three months. Would you have enough savings to cover your living expenses? There are two types of disability insurance. Short term and long term disability.

Short term will pay you a percentage of your salary for a short period of time. These policies are usually not very expensive, and usually cover a period of three to six months. Long term disability insurance picks up where your short term leaves off. Long term will pay a percentage of your salary until you are 65 years old. Disability insurance can be costly when you by it on your own, but it should be a part of everyone's financial plan. It could easily be argued that you need disability coverage more than life insurance.

Long-term care Insurance

Another form of insurance that people around 50 years of age should consider is long term care insurance. There are many confusing forms of this insurance, but it essentially covers costs you would incur when you can no longer perform activities of daily living, such as dressing yourself, bathing yourself, or the need of skilled nursing care at home or in a care facility. Medicare and Medicare supplemental insurances don?t cover most long term care expenses. This is a very important insurance, you would need the help of an insurance professional, one who specializes in long term care insurance, to make sure you have the best coverage to fit your long term care needs.

Homeowner's Insurance

If you are a homeowner and you have a mortgage on your home, your lender requires you to have homeowner's insurance. There is much more to consider than how much your coverage will cost, you need an adequate policy that will give you the right level of protection; plus special provisions for your valuables and other possessions. You may need additional coverage for things such as earthquakes or floods. Before you get a policy, you will need to take an inventory of what you have in your home. Know what your insurance limits are, learn the difference between replacement-cost and actual-cash-value coverage. Again, consulting with an insurance professional and one who will listen and understands your specific needs is essential.

With all of the different types of insurances available, it is best to be prepared when selecting a policy. Choosing the wrong insurance policy can have disastrous consequences for both you and your family. There are many decisions that need to be made when looking for insurance, such as deciding what type of insurance you would need, and also considering what you can afford. You want to be able to speak to an insurance agent who will not pressure you or try to sell you insurance coverage you do not need. A professional can suggest and compare different plans and advise you which plan would best fit your own unique needs. All the while, offering this service at no cost to you.

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Long Term Care Insurance (ltci): Riders Or Not

The last thing you need from an insurance company is a packet of confusing brochures and tables. The best companies know that sending you more 'stuff? will just add to your trash can without helping you figure out the intricacies of LTCi. It isn't as difficult as it seems, but understanding a company's language and procedures is crucial to getting the policy that fits your needs. To help simplify this language I have compiled?in plain english?many of the basic definitions of the features and optional riders of a LTCi policy.

LTCi basics
Long term care insurance, an insurance program that pays the bill when you need extended care in your home, assisted living facility or nursing home, consists of basic coverage and features plus riders. The basic coverage is the maximum dollar amount per day times the number of days of coverage for which your company will pay for care. It includes an elimination period?which is simply the number of days that you will have to pay for care. Basic coverage should include nursing home and assisted living along with an option of receiving care in your own home.

LTCi features
Features are benefits that are included with your basic coverage. A feature?with the exception of home care?neither adds to your cost nor takes anything out of your "pot of money." The following benefits should be included in your policy as features, not riders. You might pay a few dollars more, but it will be worth the cost when you need care.

Home health care at 50% or 100%. HHC is the only feature that should add cost to your policy.
Help with activities of daily living, various therapies, skilled nursing, assistance from home health aid or medical social worker
Domestic services
Waiver of premium/spouse discount
Restoration of benefits
Adult day care
Prescription drugs of type given in nursing home or hospital
Rental of hospital equipment
Care giver training
Respite
Hospice/ambulance
Patient Care Coordinator
Home modifications
Bed reservation
LTCi Riders
A rider is an extra benefit that will increase the premium on your policy, often substantially. A certified agent can be indispensable as he/she will help assess your situation to determine which, if any, riders you need.

Don't refuse LTCi insurance just because you can't afford the riders. If the initial price seems too high, ask the agent what riders he has included, as agents often include inflation riders without asking. Also, be aware that companies that appear to have lower premiums may simply be listing several of the features as riders. If so, by the time you include those benefits, you will be paying as much as you would to a company that simply includes them as features.

Waiver of premium for spouse
Nearly all legitimate companies waive the premium for the person who goes on claim. However, only the best waive the premium for both when one person needs care. Others add the second waiver as a rider.

Inflation rider
All companies will urge you to include an inflation rider with your policy. This rider will increase your daily maximum as well as your total pot of money by 3%, 4%, 5% compounded, or by 5 percent simple each year. On a 5% compounded, if you start with a $100 per day benefit, you will have $200 per day in 15 years without increasing your premium each year.

Since nursing home costs increase faster than inflation, it's a good idea to take some sort of inflation rider if you can afford it. It does nearly double the cost of the policy. An alternative is to start with a higher daily benefit in the first place; for example, starting with $200 a day will be much less than $100 a day with an inflation rider. The draw back is that your ceiling is then $200 a day.

If your health is still good, you will have the option of adding the inflation rider at a later date. Keep in mind, however, that the price of it will be based on your attained age. Your agent can do the math to help you determine which approach will save the most money. LTCi without the inflation rider is better than not having LTCi at all.

Optional Increase
Even if you cannot afford an inflation rider, some companies will offer as much as a 15% increase in your benefit every three years. This will increase your premium at the time you add the increase, and you will not receive the offer again once you have turned it down. The increase will be based on your attained age but will not require medical underwriting.

Return of Premium
Return of premium gives your money back after a certain number of years if you have never needed care. If you do not claim it yourself, the premium goes to your beneficiary. However, this rider increases your premium substantially?as much as double or triple the basic premium. Furthermore, neither you nor your beneficiary will receive the entire premium in one lump sum. It is given back over time at approximately the same rate at which you paid it. Most people do not purchase the ROP rider.

Shared benefit
The shared benefit rider is only for a married couple. With some companies, it simply allows a spouse who has spent all the money in his policy to draw out of his wife's policy, providing she is not on care herself. With others, the rider purchases a third pot of money, equal to the pot of one spouse, that either spouse can draw from when his or her own pot is exhausted. The spouses must have equal benefits to get this rider, and the extra pot does not receive the "restoration of benefit" if the user goes off claim. An inflation protection option will usually apply to the shared benefit amount, however.

Paid-up Survivor benefit
The survivor benefit is one of the best riders a married couple could choose and is very inexpensive, adding as little as $5 or $10 to the basic premium. If husband and wife are on the same policy, and have owned it for at least 10 years, the remaining spouse will receive a life time waiver of premium?with no reduction in benefits?when the first spouse dies. This waiver is priceless to the living spouse, but not all companies offer it.

Non-forfeiture rider
The non-forfeiture rider provides you with a reduced benefit if you should ever become unable to pay your premium and be forced to drop your coverage. Generally, if you have owned your policy for a certain number of years'depending on the company?what you have already paid will be applied toward a paid up policy of up to three years. This prevents you from losing several years of premium and is a relatively inexpensive rider.

Survivor maximum benefit increase
Upon one spouse's death, a company will increase the surviving spouse's maximum benefit by one half the deceased's maximum benefit at the time of his or her death. This one is usually less expensive than an inflation rider or a shared benefit rider, but more than a paid-up survivor benefit.

Don't assume that any rider can be added to your policy later. Any company will require proof of insurability unless you have a clause that says otherwise; for example, the guaranteed purchase option does not require medical underwriting. The inflation rider can be added later, with proof of insurability, with some companies. If you choose to try to sort out various company brochures on your own prior to sitting down with an agent, be sure to write down a list of questions. There is a lot to know about LTCi; understanding what you are getting in the beginning will save you both dollars and frustration later.

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