Tomasz Kaznowski

Archive for December, 2011

An increasing number of companies advertise their willingness to buy your policy, but is this always a good idea?There’s news from Britain where some of these companies are based. It seems some have run into financial difficulty and the national regulator is imposing new limits on the right of British-based companies to buy US life policies. The problem is these companies are forced to guess how long you will live after the deal is made. Put simply, if the buyer makes a good guess, there is a good return on the money invested. But if medical science keeps you alive for more years than expected, the buyer may make a loss.

It will help understanding to put numbers on this. Suppose you are aged 72 and, looking at the current life expectancy statistics, you are expected to live for a further ten years. The guaranteed minimum payment is $500,000 and the annual premium is $18,000. In today’s market, you would expect to sell at around $220,000. If the estimate is correct and you live for a further ten years, this means the buyer will pay $180,000 in installments and make a profit of at least $100,000 less the cost of financing and administration. But if you live for more than fifteen years, the buyer has paid out more than it will receive unless there is a good cash value.

As average life expectancy increases, this makes the decision for the potential buyers much more difficult. Will you be one of the many who will die young or will you be the less common person who lives until more than one-hundred? This decision is easier when the buyer has a medical report prepared, but it is not always convenient and cost-effective to pay for a full report. Faced with this uncertainty, there is increasing pressure on buyers to offer less. Indeed, many informed observers are beginning to describe some of the offers as so low they are potentially fraudulent. All of this should encourage you to approach the life settlement market with some caution. Always know exactly what the insurance company will offer as the surrender value. Then remember it is not a good reason to sell on the secondary market just because you are offered a few thousand more. You should be looking for a substantial improvement over surrender value.

Now comes the really important question. Why are you selling? If there is a financial emergency, you may be rushed into a fire sale situation and feel under pressure to accept low-ball offers. It may be better to look at a loan to tide over your short-term difficulty. Assuming a cash value in the life insurance policy, you can usually borrow some of the investment gain at a competitive rate of interest, or put up the policy as collateral for a third party loan. You must repay or else the interest payments will eat up the remaining value in the policy. Alternatively look at a 1035 exchange described in one of the other articles on this site. All this should produce good results unless the terms and conditions from a cheap life insurance policy make sale or borrowing bad value.

The insurance industry is one of the most profitable and investors, not surprisingly, want to see those dividends continue. This is not to suggest the insurers were ever charitable in their intentions. Insurance has always been a business in the real sense of the word. The result is the wording of the policies allows the claims adjusters some wriggle room when it comes to deciding which claims to honor. In another article on this site, we note the insurers have grown increasingly reluctant to cover flooding. Most of the coastal areas where high tides combined with strong winds can overcome sea defenses, and all areas formally designated flood plains, are now no-go for private insurers. Yet, you will still see standard terms for wind and water damage. This creates the impression you have some protection while allowing the insurers to argue they are not liable at all should you claim or only liable for a small percentage of your losses.

This is all smoke-and-mirrors. You can see a listing of perils covered which will include wind damage but, when you look at the clause on deductibles, you will probably find there’s a mandatory hurricane deduction. Unlike the auto insurance policies, this is not a fixed amount. These deductibles are a percentage of the value of your home and some insurers pitch the deductible up to 5% of your home’s value, e.g. $15,000 if your value is $300,000. For homeowners to have to find 5% as a lump sum to trigger the payment of the rest of the claim can be a major financial strain.

Now let’s comes to the theme of this article. One of the reasons why the claims process can slow down to a snail’s pace is disagreements over the difference between wind damage and water damage. The majority of policies exclude or restrict water damage. So, as an example, suppose a strong gust of wind removes the roof from your home. That’s clearly wind damage and the cost of rebuilding will usually be covered. Why “usually”? When the wind exposes the timber frame of your home, it can get wet and this can cause the frame to warp. Now the question is whether replacing the frame is responding to the damage by the wind or damage caused by the subsequent rain. You argue that the timber would not have gotten wet had the roof not blown off, so the main cause is the wind. The insurer argues the wind did not cause the timber to twist out of shape. That was the rain.

It would be good if all such arguments could be quickly resolved but, after Katrina, insurers are more defensive faced with large weather events. Worse, they have also been reducing the number of claims adjusters and everything now takes longer. This puts a heavy burden on home insurance policyholders. You’re often forced to take emergency measures to protect your property, e.g. when the roof blows off. Keep a detailed photographic record to show the before and after situation, keep all the invoices and bills for the materials and labor, and make sure you keep a constant stream of updating messages going to the home insurancecompany. It must always have the chance to monitor this work.

The current hype for custom shop vehicles heavily promoted by dozens of TV shows and thousands of professionals all around the country has made a lot of people think that their generic cars can be used as a means to reflect their individuality and lifestyle. For some people it’s just a matter of body color or custom paint job but for others only radical customization is the right solution. There’s plenty of room to make your car look unique and the only limit is your imagination and your wallet, of course. Yet, not many people realize that by taking their car to a customization service they also need to customize their insurance policies. Why? Because without doing so you risk being rejected once you file a claim after customization.

When you insure a vehicle with an insurance company you sign a contract for a particular object with particular features. These features are uniform across the same car make and model, and usually varies through minor features that are usually mentioned additionally. And when you file a claim the insurance company covers your repair costs so that you could replace the manufacturer installed parts according to their current market price. And guess what happens when you replace the default parts with custom ones, which often cost more? The company can actually refuse to cover the claim because you’ve introduced modifications to your vehicle that could change its driving characteristics and alter the risk posed to the insurance company. So, as a result you can be left with a broken car that you will have to repair out of own pocket and which will cost you more to repair because of the custom parts. So how do you avoid such an unpleasant situation and keep your car insurance relevant and valid?

It’s really simple. All you have to do in terms of car insurance is to inform your insurer about the customization right after performing it. Your insurance company representative then will evaluate the modification and decide whether you can keep the current policy intact or have to buy additional weavers in order to cover all the custom parts. Usually, if your customization only concerns the exterior such as a paint job then you are likely to keep your current policy. But if you install a powerful stereo system or tweak your engine for additional HP then get ready cash in for keeping your car insurance relevant. That’s because you alter the characteristics of your car and add to its actual value that should be covered.

So as you see there’s no problem with vehicle customization form the insurance point of view if you do your paperwork on time. Just keep your insurance company informed about all the modifications and you can rest assured that the policy will pay out when you file a claim. Yet, if you tend to think that the coverage will be altered automatically and you don’t have to tell anyone about your visit to the custom shop then you’re in for a rather unpleasant surprise once you file a claim.

As we all know, car insurance serves the purpose of protecting us financially from numerous perils we may face as drivers on the road. The most common perils are obvious: car accidents, auto theft and damage due to bad weather and other circumstances. All insurance providers offer different types of policies that let you cover such perils effectively and it all boils down to comparing auto insurance quotes in order to get the most affordable deal for your wallet. However, sometimes car owners can face perils that are not so common and that don’t make part of the usual comprehensive coverage list. If you want to protect your car from such perils let’s take a look at them and explore your options.

Earthquake

Earthquake damage can often make the part of exclusion clause list in many policies even if you purchase comprehensive coverage. It is more likely to have this type of coverage excluded if you live in an area with a high risk of such peril (think California for example) and the insurance company will require you to purchase a weaver to include this coverage option. Earthquakes can be a serious threat to the car, especially when stationed, with the potential of totaling the vehicle beyond repair if it happens to stay near elements of infrastructure that are prone to collapsing. So make sure to ask your provider if you can purchase this coverage as an additional weaver.

Flood

Flood is also one of those things that can seriously damage your vehicle and cause a serious financial impact if you’re not insured against it. As in case of earthquake damage flood can be excluded from the list of circumstances covered by comprehensive coverage in areas and states where the risk of such peril is higher. So if you live in designated flood area (near rivers, lakes, dams and other bodies of water) it would be useful to get this coverage type as a weaver. Sure, it will give you higher auto insurance quotes in the first place but you will be able to protect your car against a significant.

Tornado

Tornadoes are a very devastating act of nature that causes billion dollar losses annually and destroys thousands of homes in several states of the US. With the power to shatter a typical wooden house an lift cars off the ground this peril is one of the least liked by insurance companies because they know how devastating these things can be. Tornadoes are never included into comprehensive coverage and you have to buy the coverage separately. Moreover, you should do it prematurely because if you start looking for tornado coverage right before the tornado season (April, May, June) most insurers will deny your application because of the high risk.

Car contents during theft

Another aspect of comprehensive coverage that doesn’t get covered in most cases are the contents of the car being stolen. If you happen to have any valuable things in your car their cost won’t be reimbursed by the insurance company even if you get comprehensive coverage. The insurer will pay the value of the stolen car but all the things that were in it won’t be paid for. There’s only one opportunity to cover these things as well – check if your home insurance policy includes the items on your property, not only in your house. So if you’re unlucky to have the car stolen from your garage or front yard you will be paid by the home insurance policy for the contents of the car.

There’s a major irony in this question. Let’s take it step by step. In population terms, the US is still growing. It’s not as fast as some of the developing countries, but it’s doing rather better than many of the other developed countries. It’s an age phenomenon. In some countries like Japan, there will soon be population loss as the birth rate fails to keep pace with the deaths. More generally, the percentage of the population retired and not contributing to the tax system also means the cost of running each country will fall on a declining number of taxpayers when the medical costs of caring for an aging population are at their highest. Anyway, back to the irony: we used to have a high percentage of doctors per head of population. Governments used to ensure there were always enough doctors to build the health of our nation. As the Boomers worked their way through the education system, large numbers went into medicine and they have been keeping us going ever since. Except, along with all the other Boomers, most of these doctors are retiring and there are not enough coming through the medical schools to keep up the numbers. What makes this irony all the more sharp is the effect of the Affordable Care Act. This will bring millions more people into the healthcare system only to find there are not enough doctors to treat them.

The Association of American Medical Colleges estimates that, by 2020, we will be short about 90,000 doctors. As if his was not a serious enough problem, the reality is significantly worse in some states. If you are lucky enough to live in the northeastern states, there’s a good ratio of doctors per 100,000 population. Put the other way round, Mississippi has less than half the number of doctors practicing in Massachusetts. This reflects capitalism at work. There are more wealthy people to treat in Massachusetts. Doctors go where they can make the most money. Putting profit to one side, it’s always been more difficult to persuade doctors to work in rural states. As an example, Texas released 1,200 trained doctors from college last year. This is the second highest number of graduates in the US but Texas has one of the lowest numbers of doctors per head of population, i.e. assuming most newly qualified doctors stay in the state where they graduate, Texas is failing to train enough doctors. Were it not for the foreign-trained doctors, the shortage in Texas would be a crisis – another reason for allowing more immigration.

We need to see a major culture change with double the current medical colleges training thousands more doctors. Since some are deterred from practice by the cost of insurance, there’s a need to look again at the laws on medical negligence and medical malpractice. If the maximum number of people are to be encouraged into the profession, pay and conditions must encourage people to move into states where there’s already a dangerous shortage. Unless this happens, enlarging the number of people with health insurance plans will just produce frustration as they realize there are not enough physicians to treat them. So before you buy individual health insurance, ensure there are enough doctors to treat you in your state.

Are you tired of wondering whether you’re paying too much for your car insurance? It’s hard not to wonder when you see all the television commercials that promise you can save hundreds by switching to their company. But you can spend hours researching different companies only to find out in the end that you already had the best deal around.

What Does Determine Your Rates?

Insurance companies look at a lot of factors when they determine what your car insurance rates will be.
Did you know that even the weather at your location can affect your insurance? Drivers in areas of ice and snow will obviously be expected to pay higher rates than those living in warm, dry locations. Areas with more rain are also a cause for higher rates. If you live in a city, you’ll pay more than drivers in less populated areas.

Age is a factor: we all know insurance is higher for teenage drivers. But so is marital status. If you are divorced or single, you are going to pay more for your auto insurance, because the companies assume that you will be out more. Doesn’t seem fair, does it?

Then there’s your driving record. If you have a safe driver record, your rates will be lower. If you have accidents and points or tickets on your license, you will pay for them.

Your car is a consideration, too. Do you drive a car with a good safety record? That can lower your rates.
You can take a driver safety course to lower your rates, or move your homeowner’s insurance policy to your auto insurance company. Having all of your cars with the same company may get you a multiple car discount.

Some companies now consider how much you drive and when you drive when they fix your rates. If you drive infrequently, you may be able to get a lower rate. This is also true if you don’t drive during “rush” hours, when accidents are more likely to happen.

Choosing a Good Auto Insurance Company

After considering all of these factors, maybe you feel you could do better than your current rates.
So what do you do then? Most of us don’t have the time to shop around for insurance companies. But fortunately today there are websites you can go to where you can compare different companies advantages and rates quickly and efficiently. Problem solved.

This leaves you with only one more thing to consider. And that is how to choose the best insurance company for your needs.
With insurance, as with so many other things, cheaper is not always better. First and foremost you need a reputable company. If you are going with a company whose name you don’t recognize because they offer amazingly low rates, stop and think. How can they offer those rates? They may be a fly-by-night company that takes your money and then closes as fast as they opened. They may be a company with a reputation, but a reputation for not paying claims. What good is that? The point of auto insurance is to have the money you need to fix your car and pay your medical bills if something unforeseen arises. So go with a reputable company.