Is Disability Insurance Necessary for the Average Worker?

Out of all the various kinds of insurance that a person can obtain, not many people consider purchasing disability insurance. This is most likely due to the fact that most employers provide some sort of disability coverage or worker’s compensation. Because of this, most employees feel that they will be sufficiently covered in case something ever happens to them. Other people may shy away from buying disability insurance because of the high cost. However, this type of insurance can play an important part in maintaining stability in your family in the event that you become disabled and are not able to work for an extended period of time.

Do Employees Need Disability Insurance?

In 20ll, the Social Security Administration published a statistic stating that the average employee over the age of 20 has a 30 percent chance of becoming disabled before they reach retirement age. Although most employers offer some form of disability coverage, the payout may be delayed for months and the insurance provider may give you the runaround in the hopes that you will give up on your claim.

There is also the option for workers to apply for disability benefits via Social Security. However, the average monthly benefit payment is around $1200. This may not be enough to cover the living expenses of an entire family in the event the primary financial provider becomes disabled.

How Much Does Disability Insurance Cost?

Most people who have inquired about buying disability insurance find that the cost is surprisingly high. According to the Employee Benefit Research Institute, it costs about $16.30 for $1000 worth of disability coverage under a group policy. Workers who choose to purchase disability insurance on their own will pay about $18.60 for $1000 worth of coverage and are subjected to a 90 day waiting period.

This may not sound like much at first, but when you stop to consider that life insurance only costs around 22 cents for $1000 worth of coverage. The reason for this high cost is because not many people are purchasing disability insurance and because insurance companies face the risk of having to make large long-term payments if you file a successful claim.

It may seem costly, but if you think of it as income protection insurance to ensure that you can provide for your family, in the unfortunate circumstance that you need it, the cost will feel well worth it.

Calculating the Odds

When it comes to deciding whether or not disability insurance, it is important to look at your own situation and determine how likely you are to become disabled. Factors such as job type, age and pre-existing health conditions should also be included in your deliberation. If you are the sole financial provider for your family, think about how your potential disability would affect your lives.


Buying funeral insurance

Insurance related to your funeral and the final expenses of your life is different from other types of insurance. Other forms of insurance are to help financially if a future event occurs. This is true even for life insurance. Term life insurance is for specific period of time, and if death has not occurred, the policy expires. With funeral insurance, you are paying for an event that will occur. In fact, this type of insurance has some attributes of a prepayment.

There are many advantages to this type of insurance. If you die before you have accumulated enough money to pay for everything, it is covered by the policy. However, if you were to make your payments long enough, eventually you will have paid for everything. Another advantage is that your loved ones will not have to worry about the specifics of a funeral. You can plan everything ahead of time. Surviving loved ones are too bereaved to make many of the decisions necessary after your death, but by having everything planned ahead of time, you can provide relief to them at this time. You also can get what you want and not what others will choose for you.

You can decide on the method of burial as well as where you want to be buried. This includes burial or an interment in a mausoleum. You can also choose to be cremated. In some cases, you can lock in certain prices for part or all of your funeral expenses. This is important because the cost of funerals keeps climbing and having funeral insurance is the best way to keep the cost down.

There are some people who choose to buy a small life insurance policy instead of funeral insurance, and to be certain, this is a better idea than doing nothing. However, life insurance will only pay up to the amount of the policy, and this may not be enough. Even if it were enough, there is still the issue burdening you family with all of the details of the funeral, and they may not know what your wishes are.

There are different types of funeral insurance to consider. Some are available from national insurance carriers that have contracts with a local funeral business near your home while other funeral companies may sell insurance directly from their local funeral business.


Understanding Supplemental Medicare Insurance

People over the age of 65 qualify for Medicare Parts A and B. However, this often do not cover all the medical costs that the individual needs. Because of this, a lot of people buy supplemental insurance or Medigap. In order to know what is the best option for you, you need to learn how this options work and what they mean to your specific situation.

Private insurance companies are the ones who will sell you Medigap policies. Medigap works with both parts of Medicare to pay for what Medicare does not cover. Some of these costs include deductibles and co-insurance payments. There are many different kinds of Medigap policies, so you should understand how each one works before you choose a policy for yourself.  One of the better ways is to work with an independent agent.  These insurance agents work with you to look at all the medicare choices you have.

When you incur medical expenses, Medicare is the insurance that takes care of paying the cost first. What is not covered at the end is covered by your Medigap policy. This is how Medigap acts as a supplement to your main Medicare insurance. If Medigap does not pay for the leftover expenses, you will need to pay for it out of your own pockets. So, when you think about what other medical servics you may require in the future as you age, getting a Medigap policy may be a good choice for you.

Keep in mind that Medigap policies usually do not cover dental costs or vision costs. However, there are other insurance options available for such expenses. Consult with your insurance company to find out what your alternatives are.

To get Medigap, you first have to qualify for Medicare parts A and B. The supplemental insurance must be associated with Medicare as a supplement to it. One Medigap policy only covers one person, so your spouse will need to get a separate one for him or herself.

Compare your options and understand what you are purchasing before you sign anything. Get advice from your insurance representative if you have any questions.


Key Facts About Life Insurance Coverage

Life insurance represents a truly effective method of safeguarding your family’s finances in the event you are no longer around to provide for them. There are life insurance policies to suit just about every circumstance, budget and priority. However, this article will focus on two broad distinctions within the topic of life insurance.

One of the main categories of life insurance is the term life policy. Term policies are, in essence, policies that are valid for a determined period of time with a set ending point. The coverage is in place for the duration of the specified time and no longer than that.

Term life insurance policies are favored by many individuals because they come at a lower price tag than other types of insurance and generally provide fairly large coverage amounts. However, this sort of insurance does not leave policyholders with any type of asset once the term expires. Thus, premium payments made over the course of the term do not build lasting value.

These are frequently thought of as the best life insurance policies for smokers and other high risk lifestyles.  This is because term life insurance policies are the most inexpensive of any type of life insurance.  This means that, even though smokers will pay more than a non-smoker, they will still pay much less than with other forms of life insurance.

The other broad category of life insurance is that known as the whole life policy. The coverage principles are the same as with term life policies, but whole life policies actually build cash value that can be leveraged once the policy reaches its stated maturity date.

Some people steer clear of whole life policies simply because they are considerably more expensive than term policies, and they tend to provide less coverage as well. But, other buyers see great advantage in the ability to build real monetary value and to come away with an asset in exchange for premium payments made.

Whichever way you decide to go when shopping for insurance, it is advisable to seek the advice and guidance of an insurance industry expert. Sitting down and talking about your family’s unique needs and financial parameters is the very best way to come away with exactly the type of coverage you need.


Medicare Supplemental Insurance – Filling in Your Coverage Gaps

If you are over 65 years old the chances are good that you receive Medicare health benefits. Medicare can be imperative in helping you with the costs of medical care, covering doctor visits, hospital stays, preventative care and even home health care. Unfortunately, there are times when you require services that are not covered by your Medicare plan. If you find yourself in this situation you may want to consider enrolling in a one of the  Medicare supplemental plans available, also known as “Medigap”. This type of coverage is offered by private insurance companies, and provides payment for services in the amount that is in excess of what has been approved by Medicare.
Medicare supplemental insurance can be very helpful when you find yourself in need of certain care that is not approved by your medical plan. For example, if you happen to travel to a different company and require medical attention Medicare will not cover the cost of your services. There are options for Medigap insurance that will provide coverage abroad. A Medical supplemental plan can also assist in more common situations. This type of coverage can help you with co-pays and deductibles that you may be responsible for under Medicare. It also can help pay for extended hospital stays after your basic coverage has run out.
In order to qualify for Medicare supplemental insurance you must be currently enrolled in Medicare Part A and Medicare Part B. The Medigap insurance is then paid in a monthly premium that is in addition to any premiums you pay for Medicare part B. Each policy covers one person, meaning spouses will each have to purchase their own separate policy. There are many different options for coverage, which can be purchased from any licensed provider in your state. It is also important to note that this coverage is guaranteed renewable as long as the premiums are payed, regardless of any health problems that may arise.
Medicare is a great program that provides help with medical bills to those 65 and older, however it does not always provide all of the coverage necessary for a continuously healthy life. Medicare supplemental insurance can provide you with peace of mind in knowing that if you need more than what Medicare offers it will be available to you.

Life Insurance: The Basics

Having a life insurance policy to cover both you and your family members is the best thing you can ever do. Life insurance helps protect a grieving family from spending lots of money when disaster strikes, because all bills are covered by the policy.  Different types of life insurance policies are available for people to choose from. Discussed here are the most common insurance policies in use today.

For people seeking a life insurance policy for a short time, a term life policy is the best plan to choose.   Persons who apply for this cover often have a higher risk of losing their life within that period and choose it for that reason and the low cost.  It can cover 5 – 30 years depending on a person’s preference.  Some people despise this insurance coverage, especially when nothing happens, and see it as a way of paying for something not worth the price, which isn’t true.

A full life insurance policy is the most common, and covers a person for as long as he/she lives. This type of insurance coverage has a maturity date, and one can receive dividends once the maturity date sets in. Many people  prefer full life cover to term life insurance coverage that doesn’t have any financial gain after it has expired.  One of the factors that make some people avoid a full life insurance policy is because it can be costly. The monetary benefit at the end of the day is what makes people use this coverage.

If you are still looking for a life insurance policy to use, it would be best if you have a financial or insurance advisor help you choose the best plan for your situation.  I have had great result from from local agents and everyone has thanked me for referring them.  Through their experience and work, you can be assured that whatever choices they recommend for you is trustworthy and will benefit you.


Best Online Money-Management Tools

No matter what your personal finance style, one of these online money-management tools will help you stay in control.

By Stacy Rapacon, From Kiplinger’s Personal Finance, October 2012

As the economy continues to sputter — along with the balance sheets of many families — the Internet has supplied an abundance of online tools to help repair the damage. Competition has been fierce, and many promising sites, including a few that we’ve recommended in the past, have bowed out of the budgeting game.

From that first crop of contenders, Mint.com remains the best overall money-management site. Not only has it survived, it’s earned a powerful sponsor: Intuit acquired Mint in 2009, two years after it launched. Since then, it has gained the confidence of the mainstream and multiplied its number of users by a factor of seven, to 10 million.

In general, Mint has gotten better with age (save for a few hiccups during the ownership transition period). It has improved original features and periodically added new ones, including the popular budgeting tool. On your budget page, you can add sliding bars — each bar represents an expense category you want to track — and set dollar limits for how much you can spend within a selected timeframe. Mint even starts you off with a recommended amount based on your spending history. Your budget bars fill up with each transaction you make; as they approach the limits, they go from green to yellow to red.

But the king of online money-management sites shouldn’t rest on its laurels. Many contenders, old and new, are looking to take its crown. Like Mint, they each offer their own brand of budgeting tool and track your cash flow by collecting your financial information in one place, providing access to your complete financial picture anywhere you have Internet access. Some even let you do your budgeting on the go with their mobile apps. And others let you export data and work off­line when you’re grounded.

Most help you streamline the budgeting process by automatically updating your numbers and labeling your transactions by spending category. You’ll need to keep an eye on mislabeling issues, which can throw off your budget tracking. But the tools can be taught; with certain businesses, you can create rules to categorize transactions automatically.

Which Budgeting Site Is Best for You?

Instead of competing head-on with Mint, our other favorite online money-management tools focus on offering added value. For example, the granddaddy of financial Web tools, Yodlee, offers customization capabilities with its MoneyCenter. Newcomer ReadyForZero homes in on the debt portion of your financial picture. It motivates you to go debt-free by monitoring and sending you messages about your progress. When you manage to pay off a debt, it even posts a golden trophy icon beside your filled-in progress bar.

Although all of these free sites aim to help you with your money, they need to make money, too. Mint and ReadyForZero push products and services of paid sponsors to help you save, such as credit cards that can get you lower interest rates. Mvelopes and LearnVest offer premium, paid subscriptions in addition to their free services. Yodlee’s MoneyCenter is a small portion of its business; the company makes money working with institutional clients. (See Which Budgeting Site Is Best for You? for more about our favorite free picks.)

Weighing the Risks

To maximize their benefits, most budgeting sites require that you link them to your financial accounts by providing your online user names and passwords. Although that “statistically increases the odds of your information being breached,” says Paul Stephens, director of policy and advocacy with the Privacy Rights Clearinghouse, none of our favorite online money-management tools has experienced security problems. BudgetPulse.com does not ask you to supply your private data. The rest of our picks guard your information from hackers with bank-level security; they encrypt your user names and passwords, meaning they cannot be viewed anywhere in plain text without a key.

And in the case of Mint, the servers that hold all of its users’ data are protected in Bond-movie-like fashion — caged away from the company’s other servers and under constant surveillance in an unmarked building requiring a biometric palm scan for entry. The key to decrypt the stored data is divided among several smart cards and carried by different people entrusted with their safekeeping. Periodically, Intuit calls in so-called white knights, or good-guy hackers, to test the security and spot where there’s room for improvement. “Mint has done a really exceptional job developing these security measures and protocols,” says Karen Barney, program director with the Identity Theft Resource Center. “I don’t really see that there is much of a risk in using it.”

Even if your account with a money-management site were hijacked, your finances couldn’t be tampered with directly. None of your bank account or credit card numbers are accessible. Unfortunately, intruders would be able to view your account transactions — making you a prime target for phishing scams (when would-be identity thieves send you e-mails falsely claiming to be from a legitimate business). But they would not be able to execute any money moves because the sites access your fin­ancial accounts on a read-only basis.

Another wrinkle: If your account were compromised and it resulted in a financial loss, the consequences are unclear. Typically, your bank or credit card company would cover your losses in cases of fraud. But sharing your account’s user name and password with a third party, such as a money-management site, may be a violation of your online services or user agreement with the financial institution. So the bank may not be legally responsible for recovering your cash. Because the situation has never come up, liability has not yet been determined by a court of law. If it were to happen, says Stephens, “you as the consumer would potentially have to suffer that loss.”

But you don’t have to forgo the benefits of budgeting sites to keep from becoming the first such case. You just need to be a careful consumer. To avoid the hook of phishing scams, never click on the links provided in a questionable message; go directly to the company’s site or give the company a ring.


How to Keep Student-Loan Debt Under Control

Families shouldn’t borrow more than their child’s expected salary after graduation.

By Janet Bodnar, September 5, 2013

Over the past few months, I’ve been following two college-loan stories. The first was the debate in Congress about how high the federal student-loan interest rate should be. The second involved an acquaintance of mine — I’ll call her Debbie — who’s trying to find a way out of student-loan hell.

Back in the late 1980s, Debbie borrowed money to go to a four-year college. After struggling with her grades and being put on academic probation, she switched to a community college. Readmitted to her four-year school, she borrowed even more money and ended up with $17,000 in federal loans.

After graduation, Debbie held a series of low-paying jobs and never made regular payments on her loans, sending in money sporadically. Eventually, the Department of Education turned over the unpaid debt to a collection agency and began garnishing Debbie’s wages. With her personal finances in disarray, she declared bankruptcy. But her loans continued to accrue interest and fees.

About a year ago, Debbie got a notice from the Education Department saying that if she didn’t increase her payments, she would be subject to tax offset and her refunds would be seized. She figured that it couldn’t apply to her because her wages were already being garnished, so she disregarded the notice — and lost her tax refund. That was the wakeup call she needed to seek help from a friend of mine, who called me (and my Kiplinger colleagues) for guidance.

Although Debbie’s wages have been garnished for a decade, she still owes $24,390 in principal, interest and fees. Now she’s talking with a credit counselor, who, we hope, will be able to tell her what she needs to do to square herself with the feds and set up a payment plan she can afford.

Deeper issues. While all this was playing out, members of Congress were trying to figure out how interest rates should be set on student loans. They eventually agreed that for new undergraduate loans, the rate would be tied to the government’s borrowing costs — about two percentage points higher than the rate on the ten-year Treasury note — to make the process less political and more fiscally sensible. To protect borrowers, the rate would be capped at 8.25%.

It was a welcome political compromise, but the debate didn’t address fundamental issues involving student loans. As I’ve written in the past (see Avoid the Student-Loan Debt Trap), student borrowing is a vicious cycle: The very loans that are supposed to help students pay for college also contribute to driving up costs, which prompts students to borrow even more. And the simple fact that loans are available can encourage students like Debbie to borrow more than they should without considering the consequences. Debbie didn’t realize what she was getting into, didn’t take responsibility for repaying her loans or seeking help to handle them, and was eventually overwhelmed by the system.

Run the numbers. Choosing a college is often an emotional decision for students and parents, and I don’t mind being the bad guy who intervenes to bring everyone down to earth. When my son recently went online to apply for federal loans for grad school, he was impressed that the Web site made it abundantly clear he had to pay back the money. “It would likely be expensive, and there would be consequences if I didn’t,” he says. Unfortunately, he points out, the warning probably came too late. “You’re filling out the form to get loans for a school you’ve already decided to go to.”

That’s why it’s critical for families to run the numbers early to see how much it will cost to pay off college loans and to emphasize to students that the debt must be repaid. One rule of thumb is to limit borrowing to no more than your child’s expected starting salary, or even less. FinAid.org has a simple loan-repayment calculator based on average starting salaries in various professions.

Nowadays, a number of loan-repayment programs tie payments to a student’s income, which offers some relief to students in low-wage jobs (see 5 New Rules on Federal Student Loans). But ultimately the solution lies with a student’s initial decision to choose an affordable education.

Radical ideas. Making the right upfront decision is key to controlling your borrowing costs. But on a broader level, I think we also need out-of-the-box thinking to tackle spiraling college costs and student-loan debt.

President Obama has proposed a new college ratings system so that students and families can select schools that provide the best value. We’re happy to say that Kiplinger already focuses on affordability in our annual rankings of the best values in private and public colleges. Among other measures, we include graduation rates, financial aid (both need-based and non-need-based) and average debt at graduation.

Other proposals have the potential to shake up the system. On the cost side, for example, Georgia Tech recently announced a three-year master’s degree program in computer science that will cost less than $7,000. Classes will be taught entirely through massive open online courses, or MOOCs. MOOCs are catching on as a way of delivering a low-cost education, but the fact that a prestigious institution such as Georgia Tech is offering a degree at a sticker price far below traditional tuition could be a game-changer.

Skin in the game. On the loan side, a number of online money-lending platforms let students borrow now and repay a cut of their income later. Two members of Congress have introduced a bill that would automatically enroll graduates in an income-based repayment plan and withhold payments automatically.

Glenn Harlan Reynolds, a law professor at the University of Tennessee, argues that schools themselves need skin in the game. He suggests, for example, that federal aid could be tied to an index, and that schools could be on the hook for a percentage of a loan if a student defaults.

That’s a radical idea. But I can’t help thinking that if, instead of readmitting my friend Debbie after her probation, her four-year school had told her politely that she would be more successful, both academically and financially, by remaining in community college, she wouldn’t be in the fix she’s in today.