insurance

Why Americans Lack Disability Coverage but Need It.

February 10, 2016 by Frank West

Why Americans Lack Disability Coverage but Need It.

Nearly 30 percent of working American adults believe they are more likely to be targeted by the IRS for an audit than they are to experience an injury or illness resulting in loss of work. In reality, they have about a one percent chance of being audited, but they face about a 25 percent chance of losing work because of an illness or injury. Although the majority of adults consider their income as one of the most important things in their lives, a recent report from the Council for Disability Awareness showed that there are several factors preventing working adults from obtaining insurance to protect it.

Regardless of a person’s age, his or her ability to draw an income is the most valuable resource possessed. However, the report showed that more than 55 percent of adults said they did not have disability insurance. This is an important insurance product for every working American to have, and it protects against the loss of income if the policyholder is unable to work for months or years following an injury or illness. When asked why they did not have this vital form of coverage, nearly 35 percent of adults said they could not afford it. Another 30 percent said they had never considered it, and nearly 25 percent said they did not know enough about it.

While people cited being unable to afford coverage as a reason not to have it, they should actually see it as something they cannot afford to go without. On average, a long-term disability lasts more than two years. This leaves helpless workers to try to find ways to compensate for lost income and pay living expenses. Government disability benefits alone will not even come close to replacing prior income. More than 40 percent of respondents said they would purchase disability coverage if it were cheaper, but about 60 percent said they had less than six months of income saved.

About 25 percent of today’s adults who are 20 years old will face a disability before they reach retirement age. Adults underestimate the risk they face of losing their ability to work. Although accidents are what most people think cause disabilities, the main causes are actually depression, back pain and absence requests for cancer treatment. About 50 percent of respondents said they would have to drain their savings if they faced a disability. Younger respondents said they would ask family or friends for loans, but older respondents said they would seek government programs. However, both solutions are only temporary and would not suffice for a long period of time.

It is important to consider how the bills would be paid in the event of a disability lasting more than three months, and people should consider how long they would be able to cover their expenses. Couples should also consider whether they could survive on one partner’s paycheck if the other became ill or was injured. Anyone who cannot answer these questions quickly with a viable solution should seek professional advice.

People who have disability insurance options offered by an employer may find more affordable solutions in their benefits package than they would by searching independently. There are more types of coverage than just disability alone in the marketplace, so all options are worth considering. Some companies may offer more than others, but employees who do not have access to this type of coverage at work should still seek it independently. To learn what options are available, discuss concerns with an agent.

Should I Skip Insurance to Save Money?

July 8, 2015 by Frank West

When money is tight, you may be looking for easy ways to save money. One item that can be especially frustrating is your insurance bill each month. You send the money in, but then you rarely if ever use it. You may be tempted to try to go without insurance because it is something that you rarely use. However, insurance is there to protect you from the overwhelming catastrophes.

Should I Cancel Insurance Completely?

The simple answer is no. There are three basic types of insurances you need to have no matter what. You need to have health insurance, car insurance, and home or renter’s insurance. Law requires car insurance and you can choose to get just the bare minimum requirements. If you have a car loan make sure you have enough coverage to pay off the loan.

What’s a Life Insurance Premium?

If you have a mortgage, the company will require you to carry the insurance. Health insurance is also required under the Affordable Care Act, and can protect your from financial disaster. If you have any dependents you really should have life insurance, as well.

What If I Never Use It?

If you never use health insurance or make a claim on your car or home owner’s insurance, that is great. However, it does feel like you may be wasting your money. The simple fact is that you do not know when you will need the insurance. No one wakes up and plans to get an appendectomy or to get in a car accident. No one wakes up and thinks it would be great to be robbed today. These things happen everyday to all over the world, and your insurance is your protection so these events are easier to mange. Insurance makes it easier to move forward.

How Can I Save?

One of the ways you can save money is by increasing your deductible. If you rarely use your insurance, you can set aside money each month to cover your deductible.

With a high deductible health insurance policy, you will pay out of pocket until you reach your deductible. However, you will be covered when you become seriously ill, and you will better be able to manage your bills. You can also lower you car and home insurance policy premiums by increasing your deductible. You need to be sure that you can afford to pay the difference. Another way you can save is by shopping for a new policy every few years. Most insurance companies will charge new customers less for their premiums. You can also take advantage of discounts through your job and alumni association to help reduce costs.

Is There Any Insurance I Can Do Without?

There are some options that you may not need right now. One easy example is cancer insurance, which usually offers a one time lump payment when you are diagnosed with cancer. Unless you have an extremely high chance of getting cancer due to family history, you can likely skip this option. When you are in your twenties, you do not need to purchase long-term care insurance, since you will likely not need it until you are a bit older. Finally, you may not need an umbrella policy when you are in your twenties, because you do not have a large number of assets that you need to protect.

Remember that insurance is designed to protect you. The protection it offers is worth the amount that you are paying in premiums each month. It only takes one accident or unexpected event to put your finances in a tailspin. While it may seem like you are throwing money away, you will find at some point just how much your insurance gives you, including peace of mind. Take the time to review your policies each year to make sure that you have the right amount of coverage for your current needs.

Filed Under: Health Insurance, insurance, Life Insurance Tagged With: Health Insurance Self Employed, Term Life Insurance

5 Dangerous Myths About Insurance.

May 21, 2015 by Frank West

When it comes to insurance, I generally find that people are either over-insured or woefully under-insured. This is tragic as insurance is one of the most important aspects of most people’s financial plan. Being adequately insured is also arguably more urgent than other financial goals because you never know when the need will arise, and not having it can completely devastate a family.

There’s plenty of blame to go around. Financial advisors tend to focus more on investing because that’s where they tend to be compensated the most. The financial media also tends to give short shrift to insurance because it’s not as “interesting” as investing. This leaves most people either learning about insurance from over-zealous insurance agents or avoiding the topic altogether due to denial, procrastination, the desire to avoid said over-zealous agents, or some combination of these. As a result, here are some of the most common and dangerous myths I’ve seen about insurance:

1) Health insurance is too expensive.

According to a recent study, 15% of Americans still lack health insurance. Forty-six percent of them didn’t know they now face fines for being uninsured and 43% didn’t know they could qualify for subsidies that can make insurance more affordable, especially for the uninsured who tend to have lower incomes. Many don’t realize how affordable health insurance can be with the subsidy and how expensive it can be not to have insurance between the tax penalty and higher out-of-pocket medical costs. According to this calculator, a 26-year old non-smoking couple in my home city of San Diego earning the median uninsured household income of $37,300 would pay about $238 a month total for a mid-level plan in the exchange, just more than half the $503 cost of a plan without the subsidy.

This doesn’t just apply to the young. Many employees we speak to are afraid of retiring before they qualify for Medicare at age 65. Yet, many of them are eligible for even greater subsidies and lower health insurance costs than a lower-income American. That’s because the amount of the subsidies are based on taxable income and retirees can often reduce their taxable income by using tax-free Roth accounts and post-tax savings and investment accounts for income before age 65. If their income is low enough, their Social Security income may not be taxable either.

2) You don’t need disability insurance.

Most of us understand the need for life insurance, but did you know that you have a greater likelihood of becoming disabled than you do of dying before you retire? Think you’re covered? According to Life Happens, most long-term disabilities are not work-related and so they’re ineligible for workers compensation, and 70% of private employers don’t offer long-term disability insurance. In addition, research shows that less than half of employees have an emergency fund to pay their bills for a few months if they couldn’t work.

Even if you are covered at work, you may need a supplemental policy. That’s because any benefits paid for by your employer are fully taxable to you and you generally can’t take them with you after you leave the job. If anything happens to your health, you may no longer be insurable after you leave your job.

3) Your employer-provided life insurance is enough coverage.

These policies typically pay your beneficiaries your annual salary, which of course is enough to replace your income for about one year. Unless that’s really all your family needs, you probably need more life insurance. (On the other hand, you may not even need life insurance at all if you have no dependents.) You can use this calculator to estimate how much insurance you should have, and you can shop for low-cost term policies here.

4) Medicare covers long-term care.

No, it doesn’t. Nor do private health insurance policies. Medicaid does cover long-term care but the catch is that you have to spend down all of your assets (and anything you gave away in the previous 5 years) before Medicaid will kick in. Considering how expensive long-term care is, one incident can wipe out a lifetime of saving and investing.

Unfortunately, long-term care insurance is expensive as well. One way to reduce the cost is to see if your state offers a long-term care partnership program. If you purchase a policy through one of these programs and use up all the benefits, you get to keep an additional amount of assets equal to the insurance coverage you purchased and Medicaid will pick up the rest of the bill. This way you can purchase just enough insurance to cya – cover your assets. Find an experienced agent to learn more and get a quote.

5) Umbrella liability insurance is only for the super wealthy.

The fact is that if your assets (including retirement accounts and, in many states, your home equity) and your future income exceeds the liability limits on your auto and renter’s or homeowner’s policy, you could be in big trouble should you ever find yourself hit by a big lawsuit. It’s not unheard of for middle-class families to lose almost everything and even have their wages garnished to satisfy a lawsuit arising from a car accident, injury at their home, or accusation of libel or defamation of character. Even if you win the suit, an umbrella policy can help cover your legal costs. Talk to your home and auto insurance agent to get a quote.

Filed Under: insurance Tagged With: insurance

Why Americans Lack Disability Coverage but Need It.

Should I Skip Insurance to Save Money?

5 Dangerous Myths About Insurance.

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