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Why should I purchase permanent insurance?

December 10, 2009

A permanent life policy provides lifelong insurance protection. The policy pays a death benefit if you die tomorrow or if you live to be a hundred. There is also a savings element that will grow on a tax-deferred basis and may become substantial over time. Because of the savings element, premiums are generally higher for permanent than for term insurance. However, the premium in a permanent policy remains the same, while term can go up substantially every time you renew it.

There are a number of different types of permanent insurance policies, such as whole (ordinary) life, universal life, variable life, and variable/universal life. In a permanent policy, the cash value is different from its face value amount. The face amount is the money that will be paid at death. Cash value is the amount of money available to you. There are a number of ways that you can use this cash savings. For instance, you can take a loan against it or you can surrender the policy before you die to collect the accumulated savings.

There are unique features to a permanent policy such as:

  • You can lock in premiums when you purchase the policy. By purchasing a permanent policy, the premium will not increase as you age or if your health status changes.
  • The policy will accumulate cash savings. Depending on the policy, you may be able to withdraw some of the money. You also may have these options:
  • Use the cash value to pay premiums. If unexpected expenses occur, you can stop or reduce your premiums. The cash value in the policy can be used toward the premium payment to continue your current insurance protection – providing there is enough money accumulated.
  • Borrow from the insurance company using the cash value in your life insurance as collateral. Like all loans, you will ultimately need to repay the insurer with interest. Otherwise, the policy may lapse or your beneficiaries will receive a reduced death benefit. However, unlike loans from most financial institutions, the loan is not dependent on credit checks or other restrictions.

Written by dberry · Filed Under Life 

How can I save money?

December 10, 2009

The price you pay for your homeowners insurance can vary by hundreds of dollars, depending on the size of your house and the insurance company you buy your policy from. Here are some ways to save money.

Shop around

Prices vary from company to company, so it pays to shop around. Get at least three price quotes. You can call companies directly or access information on the Internet. Your state insurance department may also provide comparisons of prices charged by major insurers.

Check the financial health of insurance companies by using ratings from independent rating agencies and consulting consumer magazines.

Get quotes from different types of insurance companies. Some sell through their own agents. These agencies have the same name as the insurance company. Some sell through independent agents who offer policies from several insurance companies. Others do not use agents. They sell directly to consumers over the phone or via the Internet.

But don’t shop price alone. You want a company that answers your questions and handles claims fairly and efficiently. Ask friends and relatives for their recommendations. Contact your state insurance department to find out whether they make available consumer complaint ratios by company.

Select an agent or company representative that takes the time to answer your questions. Remember, you’ll be dealing with this company if you have an accident or other emergency.

Raise your deductible

A deductible is the amount of money you have to pay toward a loss before your insurance company starts to pay a claim. The higher your deductible, the more money you save on your premium. Consider a deductible of at least $500. If you can afford to raise it to $1,000, you may save as much as 25 percent.

If you live in a disaster-prone area, your insurance policy may have a separate deductible for damage from major disasters. If you live near the coast in the East, you may have a separate windstorm deductible, if you live in a state vulnerable to hail storms, you may have a separate deductible for hail, and if you live in an earthquake-prone area, your earthquake policy may have a deductible.

Buy your home and auto policies from the same insurer

Most companies that sell homeowners insurance also sell auto and umbrella liability insurance. (An umbrella liability policy will give you extra liability coverage.) Some insurance companies will reduce your premium by 5 percent to 15 percent if you buy two or more insurance policies from them. But make certain this combined price is lower than buying the coverages from different companies.
Make your home more disaster-resistant

Find out from your insurance agent or company representative what you can do to make your home more resistant to windstorms and other natural disasters. You may be able to save on your premiums by adding storm shutters and shatter-proof glass, reinforcing your roof or buying stronger roofing materials. Older homes can be retrofitted to make them better able to withstand earthquakes. In addition, consider modernizing your heating, plumbing and electrical systems to reduce the risk of fire and water damage.

Don’t confuse what you paid for your house with rebuilding costs

The land under your house isn’t at risk from theft, windstorm, fire and the other perils covered in your homeowners policy. So don’t include its value in deciding how much homeowners insurance to buy. If you do, you’ll pay a higher premium than you should.
Ask about discounts for home security devices

You can usually get discounts of at least 5 percent for a smoke detector, burglar alarm or dead-bolt locks. Some companies may cut your premiums by as much as 15 or 20 percent if you install a sophisticated sprinkler system and a fire and burglar alarm that rings at the police, fire or other monitoring stations. However, these systems aren’t cheap and not every system qualifies for a discount. Before you buy one, find out what kind your insurer recommends, how much the device would cost and how much you’d save on premiums.
Seek out other discounts

Many companies offer discounts, but they don’t all offer the same types of discounts or the same level of discount in all states. Ask your agent or company representative about discounts available to you. For example, if you’re at least 55 years old and retired, you may qualify for a discount of up to 10 percent at some companies. If you’ve completely modernized your plumbing or electrical system recently, some companies may also provide a price break.

See if you can get group coverage

Does your employer administer a group insurance program? Check to see if a homeowners policy is available and is a better deal than you can find elsewhere. In addition, professional, alumni and business groups may offer an insurance package at a reduced price.

Stay with the same insurer

If you’ve been insured with the same company for several years, you may receive a discount for being a long-term policyholder. Some insurers will reduce premiums by 5 percent if you stay with them for three-to-five years and by 10percent if you’re a policyholder for six years or more. To ensure you’re getting a good deal, periodically compare this price with the prices of policies from other insurers.
Review policy limits and the value of your possessions annually

You want your policy to cover any major purchases or additions to your home. But you don’t want to spend money for coverage you don’t need. If your five-year-old fur coat is no longer worth the $5,000 you paid for it, you’ll want to reduce or cancel your floater (extra insurance for items whose full value is not covered by standard homeowners policies) and pocket the difference.
Look for private insurance if you are in a government plan

If you live in a high-risk area—one that is especially vulnerable to coastal storms, fires or crime—and you’ve been buying your homeowners insurance through a government plan, find out from insurance agents, company representatives or your state insurance department which insurance companies might be interested in your business. You may find there are steps you can take that will allow you to buy insurance at a lower price in the private market.
When you’re buying a home, consider the cost of homeowners insurance

The price you pay for homeowners insurance depends in part on the cost of rebuilding your home and the likelihood that it will be damaged by natural disasters or that it will burn down. You may pay less if you buy a house close to a fire hydrant or in a community that has a professional rather than a volunteer fire department. You may also pay less if your home’s electrical, heating and plumbing systems are less than 10 years old. If you live in the East, consider a brick home because it’s more wind-resistant. If you live in an earthquake-prone area, look for a wooden frame house because it is more likely to withstand this type of disaster. Choosing wisely could cut your premiums by 5 percent to 15 percent.

Remember that flood and earthquake damage are not covered by a standard homeowners policy. If you buy a house in a flood-prone area, you’ll have to pay for a flood insurance policy that costs an average of $400 a year. The National Flood Insurance Program provides useful information on flood insurance on its Web site at http://www.floodsmart.gov . A separate earthquake policy is available from most insurance companies. The cost of the coverage will depend on the likelihood of earthquakes in your area and the construction features.

If you have questions about insurance for any of your possessions, be sure to ask your agent or company representative. For example, if you run a business out of your home, be sure you have adequate coverage. Most homeowners policies cover business equipment in the home, but only up to $2,500 and they offer no business liability insurance. For more information, see Business Insurance.

Written by dberry · Filed Under Home 

How can I save money on my business insurance?

December 10, 2009

Here are five ways to save money on business insurance:

1. Shop around.
Prices vary from company to company, so it pays to shop around. Get the names of companies or brokers who specialize in your type of business. Call several so that you can compare prices and get a feel for the types of services they would provide.

It’s also important to pick a company that is financially stable. Check the financial health of insurers with rating companies such as A.M. Best and Standard & Poor’s and consult consumer magazines.
2.Choose a higher deductible.
Deductibles represent the amount of money you pay before your insurance policy kicks in. The higher the deductible, the less you will pay for the policy.

3. Buy a package policy.
It can sometimes be cheaper to purchase a package policy, such as a Businessowners Policy (BOP), rather than individual coverages. A package policy provides standard coverages and limits of liability that are appropriate for typical small-to-medium-sized businesses.

4. Work closely with your agent or broker.
Your insurance professional can provide invaluable advice to help protect your business from unexpected disasters. But you need to keep him or her informed about any major changes in your business. This includes major purchases, expansions or changes in hiring or the nature of your operation. Also, get your agent’s advice in terms of disaster planning. Ask what you can do to both reduce risks like fire or work-related accidents, as well as the procedures that should be in place in case your business does suffer a major catastrophe.

Having the right coverage and a well thought out disaster plan can save you money in the long run. It may even save your business from going under.

5. Ask about ways to prevent losses.
You may be able to reduce your premium for certain coverages by following your insurer’s recommendations. These can include workplace safety, disaster preparation, and human resource intervention.

Written by dberry · Filed Under Business 

How much coverage do I need?

December 10, 2009

Almost every state requires you to buy a minimum amount of liability coverage. Chances are that you will need more liability insurance than the state requires because accidents cost more than the minimum limits. If you’re found legally responsible for bills that are more than your insurance covers, you will have to pay the difference out of your own pocket. These costs could wipe you out!

You may want to talk to your agent or company representative about purchasing higher liability limits to reflect your personal needs. You may also consider purchasing an umbrella or excess liability policy. These policies pay when your underlying coverages are exhausted. Typically, these policies cost between $200 and $300 per year for a million dollars in coverage. If you have your homeowners and auto insurance with the same company, check out the cost of coverage with this company first. If you have coverage with different companies, it may be easier to buy it from your auto insurance company.

In addition to liability coverage, consider buying collision and comprehensive coverage. You don’t decide how much to buy. Your coverage reflects the market value of your car and the cost of repairing it.

Decide on a deductible—the amount of money you pay on a claim before the insurance company reimburses you. Typically, deductibles are $500 or $1,000; the higher your deductible, the lower your premium.

Written by dberry · Filed Under Auto