Is Your Employer’s Group Life Insurance Enough?

For How Long Should You Maintain Your Life Insurance?

7 Tips for Cutting Car Insurance Costs

3 Ways to Protect Your Personal Assets

What Does General Liability Insurance Cover?

The following is a guest post. Enjoy!

General liability insurance can help cover the expenses as a result of an injury happening to a non-employee in your business’ property. It also includes damages you or your business might have caused to another person or business’ property. Day-to-day business activities are covered with this insurance. If your business is sued and you have this insurance, it can help pay for the legal expenses. This includes the fees for the lawyers and potential settlements. Continue reading

Why Universal Life Insurance Premiums Are Rapidly Rising

The following is a post by MPFJ staff writer, Toi Williams, who is a professional personal finance blogger of American Consumer News. She has backgrounds in personal finance, sales, and real estate.

Many people holding universal life insurance policies received an unpleasant surprise this year, as the premiums for many of these policies skyrocketed. Some consumers who purchased their policies decades ago saw their premiums increase by 20 – 40 percent, leaving them with few options other than to pay the higher cost or let their insurance policy lapse. Policyholders are understandably frustrated, with some taking to the courts to try to halt or limit the premium increases.

So why are the premiums for universal life insurance policies rising so quickly?

The main reason for the dramatic premium increases is the long-running, low-interest rate environment. Low interest rates lower the income insurers make from high-grade corporate bonds and U.S. Treasuries, which insurers hold to maturity. This income pays for most of the cost of insurance. As life insurers’ assumptions about interest rates are falling short of economic reality, it becomes harder for them to pay the benefits for the policies. Insurers have few options to deal with the shortfall other than hiking the amount the policyholder pays into their policies via premiums.

Universal life insurance policies are already more expensive than term life insurance policies because they typically last for the policyholder’s life, guaranteeing a death benefit regardless of when the policyholder dies. These types of insurance policies also have a savings component that accrues value over time, making them attractive for use in saving for retirement. The policies were widely popular in the 1980s and 1990s, when interest rates were higher. In the early 1980s, when interest rates rose to about 15 percent, universal life insurance policies accounted for a quarter of all life insurance sold to individuals.

Premiums for universal life insurance policies are based on multiple factors, including interest, mortality, taxes and expenses associated with the policy. Because of the numerous variables that go into calculating the premium price, the premiums can vary over the life of the policy. Many of the customers affected by the latest rate hikes say that their monthly payments on the policies rose before, but always in relatively small increments.

Some universal life insurance policyholders who bought their policies from the Transamerica Life Insurance Company were notified last year that their rates would increase by an estimated 38 percent. Other companies, including the AXA Equitable Life Insurance Company and Voya Financial, have also been notifying customers of large rate increases for universal life policies. The National Association of Insurance Commissioners is now examining whether the increases were justified.

What options do holders of these universal life policies have?

Universal life insurance policyholders are left with few options to cope with the premium increases. If policyholders don’t pay the higher rate imposed by their insurer, the higher deduction amount will eventually deplete the policy’s cash value account, and the policy will lapse. For policy holders that are near retirement, finding affordable replacement policies would be difficult now because they are much older.

Holders of universal life insurance policies could reduce the death benefit of their policy, increasing their period of coverage in return for less of a payout. Policyholders also have the option to surrender the policies and take whatever cash value remains. However, taxes would probably be owed on the cash, reducing the amount the policyholder receives even further. Roughly a decade of low-interest rates has already made it hard for savers trying to preserve their nest eggs in low-risk fixed-income investments.

In theory, premiums could drop if a sharp and sustained increase in interest rates occurs. However, there is no indication from the Federal Reserve, which sets benchmark interest rates, that rates will be rising anytime soon. The agency raised interest rates by a modest amount last December after nearly a decade of historic lows, with further rate increases expected throughout 2016. Subsequent economic headwinds have delayed those plans for the foreseeable future.

Breaking down the Transamerica lawsuit

Angry consumers have filed a lawsuit against Transamerica over the premium increases imposed on their policies. The lawsuit, which is seeking class action status, accuses Transamerica of trying to “impermissibly shift to the policyholders its own, independent obligation to make good on the interest rate guarantees in the policies.” Plaintiffs allege that the premium hikes constitute a breach of obligations under the policies and have led to damages against contract holders.

The cost increases by Transamerica began in August 2015 on universal life insurance contracts sold in the late 1980s and early 1990s. Most of these policies guaranteed an interest rate of no less than 5.5 percent annually. The complaint says that Transamerica raised monthly charges by as much as 38 percent “to subsidize its cost of meeting its interest guarantee, to recoup past losses on the policies and on its investment portfolio, and to make the policies more profitable by inducing policy terminations by those policyholders who could not afford the increase.”

The lawsuit, filed in Los Angeles, alleges that Transamerica breached its contract and acted in bad faith. It notes that the insurer is raising its rates as the time nears when policyholders will begin collecting on the policies. Harvey Rosenfield, founder of Consumer Watchdog and one of the lawyers working on the case, said in a statement, “After taking their premiums for many years, Transamerica is attempting to dump its elderly and retired policyholders at a time in their lives when they are counting on the policies.”

A Transamerica spokesman says that the increases were permissible under the policies and that no policyholders are being charged more than the maximum rates specified in their policies. Another said the firm has communicated with policyholders about expected changes based on what it forecasts future costs to provide coverage will be. Further rate increases can be expected in the future if interest rates remain low.

How about you all? Are you familiar with or have any experience with universal life insurance or know someone involved with the Transamerica lawsuit?

Share your experiences by commenting below!

***Photo courtesy https://www.flickr.com/photos/68751915@N05/6551520247/

Take These Steps to Protect Your Family and Assets from Fire

The following post is by MPFJ staff writer, Melissa Batai.  Melissa is a freelance writer who covers topics ranging from personal finance to business to organics to food.  She blogs at Mom’s Plans where she shares her family’s journey to healthier living and paying down debt.

Fire.  We all hope a fire doesn’t happen in our homes, especially at night when we’re sleeping.

We hope that it doesn’t happen to us, we may live in fear of it, but we do very little to protect ourselves.  A surprising number of us don’t even have fire extinguishers in our homes.  We don’t know how to put out a grease fire in the kitchen.  Sometimes we don’t change the batteries in our smoke alarms, or worse yet, we don’t have smoke alarms.  We don’t go over a fire escape plan with our children.

And yet, for all of our lack of precautions, or maybe because of it, household fires are fairly common.  According to the National Fire Protection Association, “Between 350,000 and 400,000. . .house fires occur in the United States each year.  Households can expect a fire every 15 years on average. . .Your household has a one in four chance of having a fire large enough to be reported to a fire department during an average lifetime” (CBS5AZ).

Are you scared by those statistics, or do you think, “We’re careful.  That won’t happen to us.”

Hopefully none of us reading this post will have to experience a house fire, but as the statistics say, some of us will.  However, there are important steps you can take to protect your family and your assets:

Install smoke alarms

Don’t kid yourself—you need smoke alarms.  According to the National Fire Protection Association, “Almost two-thirds of home fire deaths resulted from fires in homes with no smoke alarms or no working smoke alarms.”

How many smoke alarms do you have in your house?

You should have one on every floor.  In addition, you need one inside every bedroom and outside the bedroom, such as in the hallway.  The National Fire Protection Association recommends that you change your smoke alarms every 10 years.  If you can interconnect your smoke alarms so that when one goes off all the other ones go off, that’s the best protection.

Replace smoke alarm batteries every time there is a time change

Every time we switch to daylight savings time and then back again, in the spring and in the fall, replace your smoke alarm batteries.  This is a small price to pay for your safety.

Have a fire extinguisher on every floor of the house

If there’s a small fire in the bedroom upstairs, you don’t want to have to run downstairs to the kitchen to grab the fire extinguisher.  Have one on every floor, and make sure there is one in the kitchen.

In addition, know that there are different types of fire extinguishers, A, B, and C, that put out different types of fires.  Ideally, get a fire extinguisher that is Type ABC and can put out any small fire you may have in your home.  In addition, replace the fire extinguisher every 10 to 12 years, even if it hasn’t been used.  If it has been used, it will also have to be replaced.

Have an escape plan and practice it

You and your family members should plan two different ways to get out of the home.  You should also practice your escape plan regularly so that if there is a fire, your natural tendency to panic is overcome with your prior preparation.

Make sure younger children know how to open the windows and doors so they can get out.  If you have an infant or someone with mobility problems, make sure someone is assigned to help them out of the house.  Mark a spot to meet outside.   The National Fire Protection Association has a detailed list and sample map to use when making your escape plan.

Keep a flashlight and a phone by your bedside

If there is a fire in your home, you will likely want to call 9-1-1 immediately, and you’ll also need a flashlight to help you navigate the darkness, especially if you’ve already lost electricity.

Take pictures of your assets yearly

Imagine, if everything you owned was gone, would you be able to remember all that was missing and the value of everything?  Likely not.  Instead, today, go around your house taking pictures of everything that you own.  Open closet doors; open dresser drawers; take pictures of all of it.  Then, put those pictures somewhere safe so that if there is a fire and you lose most of your belongings, you’ll have documentation of them.

However, doing this once is not enough.  You’ll need to repeat the process every 12 to 24 months.

Have home or renters’ insurance

Your home and belongings are too valuable to risk losing.  Indeed, losing your home to a house fire and not having home insurance can be financially devastating.

If you’re renting, don’t assume that your landlord’s insurance covers you.  The landlord’s insurance covers his loss from the building.  You’ll need renter’s insurance to cover the cost of replacing your belongings.  When we rented, our renter’s insurance was only $100 a year.  That’s less than $10 a month and well worth the cost.

When you take out your home or renter’s insurance, make sure that the insurance is for the replacement value of your items (called replacement cost insurance), not the depreciated value (called actual cash value by the insurance company).  The latter type of coverage may be a bit cheaper annually, but if you have a catastrophe like a fire, it could cost you much more.

Say you lose your computer in a fire.  If you paid $800 for the computer but you’ve had it for two years, your insurance may only pay you half the amount you paid or less.  Consider this being done for all of the items that you lost, and insurance suddenly becomes inadequate.  However, if you sign up for replacement cost insurance, you’ll be given an amount to cover the cost of the item in today’s dollars, without depreciation.

Regularly update your insurance

As you stay in your house longer, you tend to accumulate more valuable items and your house also likely appreciates.  Make sure every two years or so you reevaluate your insurance.  You may find that you need to increase your insurance coverage for the items in your home, and determine if you have enough to cover the replacement value of your home now, after it has appreciated.

Have and use a fireproof safe deposit box

Finally, make sure you have a fireproof safe deposit box somewhere in your home.  Use it to store the photos you took of your valuable items as well as any valuable paperwork like birth, marriage, and death certificates, passports, licenses, etc.   You may also consider storing heirloom items in here like your grandmother’s wedding ring or older pictures that you wouldn’t want to lose.

No one thinks about the fine details of going through a house fire, but every year hundreds of thousands of people have house fires.  In fact, in 2013, there were 369, 500 reported house fires (NFPA).  Hopefully, you’ll never experience such a devastating event, but if you do and you’ve taken the steps above, you’ll likely reduce the possible damage.

How about you all? Have you or someone you know ever experienced a house fire?  What other tips would you give?

Share your experiences by commenting below!

***Photo courtesy https://pixabay.com/en/flame-fire-orange-flammable-heat-1013280/

Hidden Costs of Owning a Pet

The following post is by MPFJ staff writer, Chonce. You can read more articles by Chonce over at her personal blog, My Debt Epiphany. Enjoy! 

A pet can be a great companion and a wonderful addition to your family. While it may not cost $250,000 to own a pet over the years while some sources claim that’s how much it costs to take care of a child to the age of 18, there are some notable expenses that need to be considered before you decide to get a pet.

According to the ASPCA, the first year of pet ownership if you have a dog or cat exceeds $1,000 and that doesn’t even cover unexpected expenses. Regular expenses you can expect to pay for a cat or dog include shots and veterinary expenses, food, grooming supplies, a bed, toys, liter and a litter box (for a cat), spaying or neutering and so on.

For hidden costs associated with pet ownership, here are a few things you’ll have to consider and how to budget for them.

Extra Medical and Preventative Care

Everyone wants a healthy pet, but there may be some underlying issues beyond your control. Taking your pet to regular vet appointments can help rule out or highlight any medical issues that require extra care.

You may need to pay for additional vaccinations or preventative care for issues like fleas or parasites along with any pre-existing conditions your pet may have. Not to mention, any accidents could range from $1,000 to $5,000 depending on if your animal needs surgery or not.

Babysitting and Training

If you travel quite a bit or spend a few nights away from home each month, be sure to budget for a pet sitter. Most animals shouldn’t be left alone in the house for long periods of time because they could run out of food and dogs especially need to be checked on and walked frequently.

Even if you have a day where you work long hours away from your home, you may need to find a dog walker who can help care for your dog.

If you’d like your animal to be trained, pet trainers and group classes range from $50 to $125 per hour in most cases.

Housing Fees

Homeowners have an advantage when choosing a pet because they can choose from a wider variety and don’t have to worry about paying a fee in order to keep their pet at home. Renters on the other hand, are often required by their landlord to pay a deposit or non-refundable fee for their pet and in some cases ‘pet rent’ which causes an increase in their monthly rent rate. Landlords do this to protect their property from any damage your animal may cause whether it’s to the carpet, the window screens, etc.

Replacing Items in your Home

If you have a smaller or low maintenance pet like a hamster or fish, you may not have to worry about this unexpected expense much, but if you pet is mobile, they can get into mischief. Scratched up furniture and chewed up shoes are common for dog and cat owners who will need to replace those items sooner or later.

Will Pet Insurance Help?

Pet insurance is another expense if you decide to utilize it, but it can help protect your pet in the event of a medical emergency along with your wallet. On average, the cost of pet insurance is around $384 per year with deductibles ranging from $100 to $500.

If your pet is diagnosed with a serious condition or needs quick medical attention, pet insurance can really come in handy. In most cases, pet insurance is a reasonable option as long as you find a carrier that meets your needs and requirements. If you have an older animal, you can probably expect to pay more but keep in mind there are special plans and insurance companies that cater to owners with older animals so that is who you should gravitate toward.

Some companies will have age requirements and other guidelines to follow like requiring your pet to be spayed or neutered before enrolling in a policy.

Pet insurance may not be as beneficial if your animal has a pre-existing condition because most policies will not cover those. For example, if your cat was diagnosed with diabetes before you enrolled in an insurance policy, they may or may not cover those expenses. With pet insurance, it’s best to weigh your options and get started early so you have reliable protection long-term.

Starting a Pet Emergency Fund

Another alternative to pet insurance or something you can do in conjunction with your insurance policy is opening a pet emergency fund and contributing to it regularly. Some expenses just can’t be predicted, but you can prepare for them by setting aside at least $1,000 to $2,000 in a high-yield savings account to cover unexpected expenses for your pet.

Start by setting aside $50-100 per month if you can and work that expense into your regular budget so it becomes a habit. An emergency fund always offers peace-of-mind and the same goes for the safety and wellbeing of your pet.

How about you all? Are you a pet owner? What unexpected expenses have you been faced with?

Share your experiences by commenting below!

***Photo courtesy https://pixabay.com/en/chihuahua-dog-puppy-cute-pet-624924/

Winter Driving Tips

Winter time has come once again to us in the Northern Hemisphere!  All that snow may look pretty from the comfort of your home, but now is as good a time as any to remind you that driving in the stuff can be dangerous if you don’t take precautions.

There are a lot of ways you can prevent (or significantly decrease your chances of) getting into an accident in the winter, which includes the following steps:

• When accelerating or decelerating, do so slowly. No need to step on the gas or the breaks hard in the winter—if you do, you’ll be much more likely to skid out of control.
• Keep your following distance longer than you would on dry roads. You should increase the distance between you and the car in front of you to 8-10 seconds, instead of the usual 3-4 seconds on dry roads.
• Try to avoid powering up a hill. Stepping on the gas hard to get up a hill can cause skidding/slipping in the snow, so getting a little inertia going before you hit the hill so you have a “running start” would be better.
• Don’t stop going up a hill. Once you stop on the uphill in the snow/ice, it’ll be very tough to get going again without skidding/slipping.

What happens to your insurance if you do get in an accident because of snowy weather?

Hopefully, it never happens to you, but let’s say you do get into an accident during a snowstorm or other bad winter weather.  Say you’re coming up to a stop light but because of the snowy weather you skid into the car waiting just in front of you.  Is it your fault?  Or the weather’s fault?  How will your insurance be affected?

Well, unfortunately, there is almost always someone at fault, and it’s almost always not the weather.  According to most auto insurance companies, it is the driver’s responsibility to adjust his/her driving to avoid an accident in inclement weather, and if you do happen to skid into another car, it’s likely your fault since you should have known to take steps X, Y, and Z to avoid it in the first place.

If you are deemed at-fault in the accident, you can always fight the ruling, though simply citing the weather as the culprit likely won’t get you very far.

Depending upon your particular insurance, your premiums could go up after the accident, leaving you to not only pay for the damages done but also more out of pocket every month as a result.

The best thing you can do to avoid getting into an accident and having your insurance premiums go up is to follow safe winter driving practices and learn all you can about adjusting your driving habits when you go out in the snow.  Ideally, if you are able to just stay put instead of driving that would be the best thing, but if you have to drive in the snow, learn how to do so safely to avoid an accident.

How Much Money Are You Wasting on Insurance?

The following is a post by MPFJ staff writer, Derek Sall. Derek is the owner of the blog, LifeAndMyFinances.com, where he teaches people how to get out of debt, save money, and become wealthy.

In my opinion, insurance is a necessary evil. Many of us shell out thousands of dollars a year for that ‘just in case’ disastrous moment, and it might never come. All those payments seem like a waste, but we all know that without it, we could be devastated in a moment. For this reason many of us have a wide variety of insurance policies, and it makes us feel responsible and secure in our everyday lives. However, so many of us are overpaying these insurance companies that it’s flat out ridiculous. Just last year I discovered I was overpaying, and I bet you might be too.

How I Made My Discovery

A wise man once said that ‘you can’t get to where you’re going if you don’t first know where you are.’ I mean think about that. If you wanted to drive to Chattanooga, Tennessee, but you didn’t know if you were currently in Cleveland, Ohio or St. Louis, Missouri, you’d have a pretty tough time finding your way wouldn’t you?

The same is true with your insurance. If you don’t know how much you’re paying in each month or what your coverage details are, then how on earth can you expect to save money on your insurance? I never thought about this until I actually started budgeting last year. By budgeting, I was forcing myself to look at all the dollar figures and gain an understanding of why each expense was the amount it was. To say the least, this was an eye-opening experience.

Escrow

When I first dug into the numbers, I discovered that a portion of my house payment was going toward an escrow account that was set up by my bank. This is simply an account where the bank stock-piles your money for your property tax payments, which means that you don’t get hit with a hefty bill once a year. And, it gives the bank the assurance that you’ll have the funds to pay the tax and continue to make your mortgage payment rather than defaulting on your loan.

The whole set up sounds well and good, but many of these banks take a small cut to manage this escrow account for you. Plus, this means that a portion of your money (often to the tune of thousands of dollars) is inaccessible by you for an entire year. Finally, to cover their butts, the banks often overcharge you each month to make sure that the account has enough money when tax time rolls around. It’s something that no one really thinks about, but it’s quite the raw deal for you, the customer.

To get out of your escrow (which means you’ll have to budget and save for your taxes on your own), many banks require you to own at least 20% of your home. When you get to this point, you can simply make a phone call to the bank, have them close the account, and then mail you a check for the account balance. In my experience, this small move saved me about a hundred bucks a year.

Private Mortgage Insurance

Private Mortgage Insurance (PMI) is another way that the banks cover their butts. They’ll allow you to take out a loan by paying only 10% down (or less) on your house, but by paying less than 20% of your home’s value, you’re allowing the bank to charge you extra as an insurance policy to your default. In other words, they’re trying to get as much money out of you now because they’re not so sure that you’re going to pay them all that you promised. If you end up defaulting on your loan, then they hope that your PMI will cover the expenses of them repossessing the house and reselling it to the public.

Want to stop paying PMI? It’s simple. Just pay off enough so that the bank owns less than 80% of your home’s value. Then, let them know it and by law they need to stop charging you for private mortgage insurance.

Auto Insurance

Everyone has auto insurance, but very few of us shop around regularly. I even admit that I went a couple of years before considering another insurance company to cover me and my Honda Civic. When I looked at my monthly bill and realized that in one year, I was paying nearly half of my car’s value just for insurance, I quickly searched around for something else. Sure enough, I was getting screwed. By getting just two quotes, I was able to reduce my payment of $85 a month down to $55 a month. That was an easy annual savings of more than $300, just with a few minutes of my time.

Home Owners Insurance

Home owners insurance is pretty standard and is typically paid once a year. Asking around for quotes is simple, but if you still have an escrow account, switching insurance providers can be a pain in the butt (which is another great reason to just pay your tax bills yourself) since you have to coordinate the switch with more than one entity. First ditch your escrow, then see what kind of deal you can find out there.

Life Insurance

If you don’t have a spouse or kids or anyone that depends on you or your income, then you don’t need life insurance. If you are married with no kids and both you and your spouse work, then you probably still don’t need much life insurance. So when do you need it? The answer to that is simple. If someone would be financially impacted upon your death and would have a difficult time surviving if you were gone, then you likely need life insurance.

The next question is typically, “What type of life insurance should I get?” Almost always, the answer is, “Term Insurance.” At this point in my life, I’m 30 years old and have a spouse. We both earn enough to take care of the bills on either one of our incomes and therefore wouldn’t be financially strapped if one of us tragically passed away. Therefore, there’s no need for us to have insurance.

If however, we had two kids, then the answer changes. If I passed away, my wife would still have to work, but she would also need to put them in daycare while she was away during the day. Due to this expense, I might take out a 20 year, $300,000 term insurance policy to take care of those many years’ worth of expenses.

To reduce your insurance costs severely, do your best to put yourself in a position where you don’t need it – either by living cheaply or by having a large net worth.

Medical Insurance

Everyone should have medical insurance, but how much should one be paying for it? Just like in the auto insurance example, you should choose the type of coverage that works best for you. If you have a bunch of money stashed away for a rainy day and you are never sick, then get the high-deductible insurance. You’ll almost certainly save yourself money in the long run and you might even get the benefit of some HSA funds from your company.

If you’re constantly sick or have a history of medical problems, then you might want to get some better coverage and pay a little extra per month. It can sometimes be tough to save money on your medical insurance, especially if you only have the option of one company through your workplace, but you can still alter the deductible to attempt to save some money here and there.

The Extras

Having a lot of stuff can be expensive. Not only does it cost more in maintenance, payments, and storage, but it can also cost you in insurance! That boat, snowmobile, and sports car are adding to the amount of money that you’re throwing away in insurance. The more stuff you own, the more expensive and stressful life can get. Sometimes it’s best to wait on all the toys until you’re actually wealthy and can afford it. That’s what we’re doing, and let me tell you, it’s allowing us to get wealthy quite quickly.

How about you all? Have you saved money on your insurance costs lately? What did you do?

Share your experiences by commenting below!

***Photo courtesy https://www.flickr.com/photos/pictures-of-money/17307624302/