Buy insurance
Insurance to Avoid:
1. Comprehensive and collision coverage on your car insurance: This is not necessary for automobiles that have little or no value.
2. Maximum personal injury protection coverage (PIP) on your car insurance: If you have a when you have a good health insurance policy, your injuries should be covered. If you prefer some protection, just buy the minimum.
3. Roadside assistance: If you already belong to an automobile club like AAA, you don't need this included with your car insurance.
4. Mechanical breakdown insurance: If you currently own a new car or have a leased vehicle that is still under warranty, you don't need this added to your car insurance.
5. Rental car insurance: If you have a current full coverage policy, check with your agent to see whether you're covered. Also, check with your credit card provider - it may offer coverage if you use the card when renting.
6. Life insurance: If you are single and have no dependents (this includes avoiding life insurance for children!). Find out if your are covered through your employer.
7. Travel insurance: If your current health insurance policy covers you abroad, you probably don't need further coverage.
8. Extended Warranties on Appliances: In the end, these can cost more than just buying a replacement appliance.
9. Insurance on outstanding credit card balances: This type of insurance can be costly, and there are a lot of loopholes to go through before any benefit is paid.
10. Credit Insurance: This is voluntary insurance on your mortgage. A typical life insurance policy would be a better option.
By avoiding the above policies, you will not reduce your risk and you still may experience a loss in any or all of the above categories, but the risk for most is so small it's just not worth the price of the insurance.
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How to Buy Your Own Health Insurance
If you're freelancing, between jobs, or otherwise without long-term health insurance, The Wall Street Journal offers some tips on how to buy health insurance on your own without getting ripped off.
The first step is getting to know all your options, the Journal writes, and one way to do so is by logging on to web-based brokerages that sell health insurance to secure tentative quotes. You often don't have to do more than provide limited, anonymous information about yourself to get a ballpark sense for how much a certain plan will cost. The Journal also advises factoring in other costs beyond premiums, such as related doctor visit charges as well as any annual out-of-pocket maximum fees and benefit limits.
If you're considering working with an agent (which they strongly recommended for first-time purchasers), make sure you know how they'll be compensated.
Agents get commissions from insurers for each policy they sell, often calculated as a percentage of a customer's premiums. These can range from around 3% to as high as 20%, agents and insurance officials say. You want to know if your agent will make more money from selling you a certain plan. Also, commissions can be higher in the first year of a policy, an incentive for unscrupulous agents to "churn" clients, or try to get them to switch policies.
Hit up the full post for other health insurance buying tips. If you've purchased health insurance on your own, let us know about your experience in the comments below. For those who can't afford insurance, browse our related post on staying healthy without it.
Going It Alone When Buying a Health Policy
Buying Life Insurance: What Kind and How Much?
Finding the middle ground between being "insurance poor" and unprotected requires assessing real needs and choosing products that are affordable. This article introduces different types of insurance products and the role that they can play in a personal financial plan.
Buying Life Insurance
Conventional wisdom says that life insurance is sold, not purchased. In other words, some people are reluctant to discuss the importance of owning life insurance, and others are simply unaware of the need to have life insurance. Although many large companies provide life insurance as part of their benefits package, this coverage may be insufficient.
Who needs life insurance? If there are individuals who depend on you for financial support, or if you work at home providing your family with such services as child care, cooking, and cleaning, you need life insurance. Older couples also may need life insurance to protect a surviving spouse against the possibility of the couple's retirement savings being depleted by unexpected medical expenses. And individuals with substantial assets may need life insurance to help reduce the effects of estate taxes or to transfer wealth to future generations.
Types of Insurance
Term insurance is the most basic, and generally least expensive, form of life insurance for people under age 50. A term policy is written for a specific period of time, typically 1 to 10 years, and may be renewable at the end of each term. Also, the premiums increase at the end of each term and can become prohibitively expensive for older individuals. A level term policy locks in the annual premium for periods of up to 30 years.
Declining Balance Term insurance, a variation on this theme, is often used as mortgage insurance since it can be written to match the amortization of your mortgage principal. While the premium stays constant over the term, the face value steadily declines. Once the mortgage is paid off, the insurance is no longer needed and the policy expires. Unlike many other policies, term insurance has no cash value. In this sense, it is "pure" insurance without any investment options. Benefits are paid only if you die during the policy's term. After the term ends, your coverage expires unless you choose to renew the policy. When buying term insurance, you might look for a policy that is renewable up to age 70 and convertible to permanent insurance without a medical exam.
Whole Life combines permanent protection with a savings component. As long as you continue to pay the premiums, you are able to lock in coverage at a level premium rate. Part of that premium accrues as cash value. As the policy gains value, you may be able to borrow up to 90% of your policy's cash value tax-free.
Universal Life is similar to whole life with the added benefit of potentially higher earnings on the savings component. Universal life policies are also highly flexible in regard to premiums and face value. Premiums can be increased, decreased or deferred, and cash values can be withdrawn. You may also have the option to change face values. Universal life policies typically offer a guaranteed return on cash value, usually at least 4%. You'll receive an annual statement that details cash value, total protection, earnings, and fees.
