A company may be run by a large group of people with the responsibilities spread out evenly between different departments.
Other companies rely heavily on one or two people.
If one of these highly important people were to pass away, these companies would have difficulties keeping the company in business.
Otherwise stated: They would be screwed!
You would think that most businesses are prepared if something happened to one of its key personnel.
A survey by AMA (America Management Association) says otherwise finding the following:
Only 14% of those surveyed said that their companies were well-prepared for the loss of a key person.
It’s these type of businesses that would benefit from key man life insurance.
What Is Key Man Life Insurance?
The concept of losing a close friend and colleague can be very difficult for business partners to imagine, but they must do so if their plan is to continue operating the business after the death of an important partner.
The key man insurance policy is a life insurance policy that business partners can purchase against the possibility of losing a key partner. If these particular people mean life or death for the company, they are exactly the people who need key man insurance.
Owners of small businesses may have life insurance policies that name their spouses or other family members as beneficiaries. These policies take care of the business partners’ personal expenses, such as the mortgage on the house and other debts.
Business partners often purchase disability insurance and make this available to their employees as well.
The disability insurance pays the expenses in the event that people experience an injury or are diagnosed with an illness that makes it impossible for them to work and earn their salaries.
However, key man insurance covers a completely different area. With the death of a key person, the key man insurance policy covers the company. If you’re one of those essential people in the company, or you’re the owner of the business, then you know how detrimental the death of a key person can be. You’ve been in hours of hard work and sweat into helping your company succeed.
Key man life insurance will protect that from crumbling down if there were anything tragic to happen.
Key man insurance would not be beneficial to every business, but the owners will want to learn more about this insurance coverage to discern whether or not their companies fall under the category of those that would benefit from purchasing a key man insurance policy.
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Does The Company Have One Or Two People Who Are Highly Important?
The owner of the company would certainly fall under this category. The founders of a business may also qualify as key people. If the loss of some employees would cause the organization to experience difficulties in running the business, this company may want to have key man insurance on these employees.
Every company is different, some companies have a whole team of people that they rely on, and if anything tragic were to happen to them, the business would struggle. Other companies have one key person at the top that is essential to the whole operation.
Because every company is different, there is no one-plan-fits-all policy that you can buy.
You will need to look at your organization and decide which kind of coverage is going to work best for you.
Regardless of the setup of your business, it’s vital that your key people have the insurance coverage in place to protect against anything that would happen if they were to pass away.
How Does Key Man Insurance Work?
Key man insurance is a life insurance policy that works much like regular life insurance.
The business will purchase the policy and will also be named as the beneficiary.
This requires that the partners pay premiums that keep the policy active. If one of the key people in the company passes away while the policy is active, the business receives the pre-determined lump sum of money.
This amount may be $100,000, but it could also be as much as several million. The amount that an organization receives will depend on how much the company can afford to pay in premiums. For example, purchasing a policy for a $5,000,000 payment will require that the partners pay more to keep the policy active than if they chose a $100,000 payment.
The partners will not necessarily benefit from a policy that offers them $500,000. The amount of the death benefits will depend on how much money will be required to replace the key person who has died. If the partners in the company believe that $100,000 would suffice, purchasing a policy for this amount is a legitimate choice to make. The partners can also keep their premiums lower if they purchase a term policy that tends to be less expensive than whole life insurance through one the best life insurance companies we have to work with.
What Can the Company Do with the Death Benefits?
What is done with the money will be up to the remaining business partners, but it will be used for the benefit of the business. For example, the business partners can pay any debts that are remaining, or they may offer an amount to their shareholders. Some business partners keep a portion for the business and offer the other to the deceased partner’s spouse.
Who Actually Owns the Policy?
Most key man life insurance policies will have some sort of cash value build-up either a whole life policy for universal life. Here’s the biggest misunderstanding I see: The individual does NOT own the policy. The company does and is also the beneficiary.
The company may get a tax deduction in paying for the key man life insurance policies’ premiums, but they can only do so if they add the premiums paid to the individuals taxable income. This might not sound as attractive if your the individual, but most companies will offer the cash value build up as an added retirement benefit.
I had one client that worked for an old company that had bought a $400,000 cash value life insurance policy on him. He had retired from the company and they let him take the policy with him. The cash value was only around $20,000 which he ended up leaving in the policy to pay for the premiums until it expired.
Are you a business that is need of key man life insurance? Give my office a call and we can give you a free review to see where you might need some coverage.
When you’re looking to get a key man life insurance plan, there are dozens of different factors that you have to consider to ensure that you’re getting the best plan to fit your company’s needs. It can be a long and difficult process, but if you’re one of the main components in a small business, you know the importance of getting insurance protection and not paying more for that coverage than you have to.
Obviously, the most important factors are how much it’s going to cost your organization to replace you if anything tragic were to happen. Each business is different and every person’s responsibilities inside of that organization are going to vary.
For example, if you manage all of the finances of your business, you’ll need to hire another person to handle those or outsource the finances. Depending on how long you need to outsource the job, you could need thousands and thousands of dollars of life insurance.
You’ve worked hard to make your small business flourish. It’s your lifeblood. If you started the organization yourself, you want to be able to protect that business, regardless of what happens to you. The best way to ensure that your employees and business partners have the security that they need is to have a key man life insurance policy that will give the resources that they need, if anything tragic were to happen to you.
Additionally, your family probably relies on the business and the income that comes from it. If something were to happen to you, not only would your business suffer, but your family would struggle as well.
Also worth noting, smart co-owners will set up buy-sell agreements and fund them with life insurance
Getting Better Key Man Life Insurance Rates
Just like any other type of life insurance policy, there are several things that you can do to ensure that you’re getting the best price for your coverage. You should always compare the rates from dozens of companies before you choose the one that works best for you. You compare the prices of TVs, why wouldn’t you do the same for a key man insurance plan?
Every insurance company is different, and all of them are going to have different medical underwriting requires and guidelines for how they determine their premiums amounts, which means that you could get drastically different rates from two separate companies. The best place to start your search is with the insurance company that you already hold policies with. Just about every insurance company gives discounts for having more than one policy. Getting a bundled discount is a great way to save a couple of extra dollars on your key man insurance policy, and could save you money on your other plans as well.
When you apply for a key man life insurance policy, just about every insurance company is going to require a medical exam. The results of the medical exam are going to play a major role in how much you’re going to pay every month for the policy. It’s important that you or the person being insured is in excellent health. One of the best ways to get lower rates for your key man policy is to cut out the tobacco.
If the person that is getting the plan is a smoker, then you’re going to be paying much higher rates. Anyone that uses tobacco is going to have a higher chance of heart attack and cancer, which means the insurance company is taking a great risk. They are going to offset all of that risk by charging you twice as much for that insurance coverage.
Don’t wait any longer to get the key man life insurance policy that your business and family deserve. You can’t predict the future, which means that you never know what’s going to happen tomorrow.
Does this sound disturbingly familiar? Skyrocketing home prices have very suddenly leveled off. Recession fears are swirling. The number of home sales has dropped. Is it 2006—the year that saw the ramp-up to America’s housing crash two years later—all over again?
Just like in the mid-2000s, experts are adamant that the correction in the housing market is simply that: a correction and not a catastrophe. Many news reports from early 2006, which often downplayed the risk of a severe housing crash, seem like they could be written about what’s happening today.
But back then, the pundits were wrong. We all know that a housing bubble burst, ushering in the Great Recession and taking down the global economy with it. Hindsight is 20/20.
So is the housing market in for a repeat performance? Or is this just some temporary pain for both buyers and sellers?
“Parallels can be drawn because of how quickly home prices have risen over the past few years,” says Yelena Maleyev, an economist at KPMG. “But that’s where the comparisons would end.”
Housing experts are quick to point out that the foundation of today’s housing market is stronger than it was in the mid-2000s. This time the downturn is due to higher mortgage interest rates, which rose rapidly from below 3% in 2021 to the high 6% range.
Today’s buyers have monthly mortgage payments that are basically double what they were just before the COVID-19 pandemic began. So many aren’t buying, or they’re unable to bid up prices like they did over the past few years.
But the most important difference between then and now is there are many more buyers than there are homes available this time around. The acute housing shortage will likely keep prices from falling off a cliff.
During the Great Recession, there were plenty of available homes—and no one to purchase them—so prices dropped about 26% over five years for existing homes. Today, buyers are still willing to bid over the asking price for move-in ready homes in desirable neighborhoods despite the financial challenges they face.
In addition, mortgages made over the past few years are much safer than those made nearly 20 years ago when lenders joke that their dogs could have gotten loans. The worst of the subprime mortgages that got homeowners in trouble when their payments suddenly doubled—or even tripled—have largely been eradicated. Borrowers have been thoroughly vetted, and only the strongest have been approved. And today’s homeowners are generally sitting on record amounts of equity.
“There are a lot of similarities that we should not ignore just because this time is different. … We do have some of our fundamentals that are out of whack,” says Ali Wolf, chief economist of the building consultancy Zonda. “But I don’t think it’s going to be a crash because the undersupply of homes is so different.”
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Watch: The Best Cities in the U.S. for Home Sellers Right Now
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Will home prices crash?
The question on the minds of homebuyers, sellers, and homeowners is what is going to happen with home prices.
They’ve already come down from their peaks last summer, which is typical. But they’ve also dipped a bit in some of the markets that got the most heated during the pandemic.
That’s reflected in the new-construction data from John Burns Real Estate Consulting. The price of newly built homes in Phoenix fell 15% year over year in March, according to the data. (The price includes incentives and concessions.)
In Boise, ID, another pandemic destination, prices were down 14% year over year for newly constructed homes. Prices dropped 10% in San Antonio, TX, just outside of Austin.
“It’s substantial,” says Devyn Bachman, senior vice president of research and operations at John Burns.
These places where prices rose the most or were extremely expensive to begin with might be the most vulnerable to larger price corrections, says Lisa Sturtevant, chief economist of Bright MLS. That includes the priciest parts of many housing markets, such as the downtowns of large cities.
Even with the affordability challenges, more than half of the sellers in the mid-Atlantic region received multiple offers in March, according to Sturtevant. About a third of all of the home sales went for more than the list price.
And home prices could continue to rise in the more affordable markets, such as in the Midwest. Homes in the lower price tiers could also see prices go up. Demand is so high for those more affordable properties that the competition often results in higher prices.
“We should expect some price corrections, not a price crash in these places where prices ran up the fastest,” says Sturtevant. “Everything seems to be slowing down a little bit … but everything still seems very competitive.”
The shortage of homes for sale is also keeping prices high. Builders have slowed down construction as their pool of buyers has dried up. And homeowners who would have listed their homes have been reluctant to do so thanks to the high mortgage rates. Most sellers are also buyers, many of whom will need to get a new mortgage at today’s rates. That means significantly higher monthly payments.
“Are there enough homes on the market for sale today? No,” says Matthew Gardner, chief economist at Windermere Real Estate. The Seattle-based brokerage covers much of the Western U.S. “Who is going to sell their home when they’re comfortably sitting on mortgage rates that are around 3%?”
Could higher mortgage rates deliver a death blow to the housing market?
Low mortgage rates were the fuel that caused the housing market to catch fire during the pandemic. Low rates meant buyers had more purchasing power—and could afford to bid higher than they otherwise would have. But when they rose, and buyers could no longer afford to buy, the housing correction commenced.
If the U.S. Federal Reserve keeps raising its rates to combat high inflation, mortgage rates are likely to keep climbing. That could scare off and price out additional buyers and put pressure on home prices to come down.
But many real estate professionals don’t anticipate mortgage rates to zoom up. They largely expect them to stay about where they are now—in the mid-6% range—at least through this spring.
Important to note: Historically, a 6% mortgage rate is relatively low. It’s a lot better than the peak of about 18.6% in September 1981, according to Freddie Mac data. The problem is home prices are high and memories of rates below 3% are fresh in the minds of many recent homebuyers and sellers. For every percentage point rise in rates, buyers can afford a whole lot less house.
Even though higher rates have led to a correction in the market, there are still buyers around the country queueing up at open houses.
“People have figured out how to make these mortgage rates work. They’re just looking for something to buy,” says Sturtevant.
Could there be another wave of foreclosures?
Foreclosures have been ticking up as pandemic-era moratoriums aimed at preventing homeowners from losing their properties have expired. But another tidal wave of foreclosures, like what happened during the 2000s, isn’t likely.
In the 2000s, “we had a huge amount of people using adjustable-rate mortgages with remarkably low interest rates. And there were also people who quite frankly should not have gotten a mortgage,” says Gardner, of Windermere. But when mortgage rates rose, “people found their mortgage payments doubling overnight and they had next to no equity. So what did they do? They walked away.”’
About 40% of homeowners currently own their homes outright without a mortgage, according to KPMG’s Maleyev. Many homeowners have record amounts of equity in their properties thanks to the rising prices over the past few years. So if they were having trouble making their mortgage payments, they choose to sell their homes instead—and often walk away with a profit. And most homeowners who have mortgages have 30-year fixed-rate loans, which don’t balloon in size over time.
There were more adjustable-rate mortgages in the early 2000s. So when mortgage rates ticked up and borrowers’ payments ballooned, “it didn’t take very much to burst that housing bubble,” says Maleyev.
Now, many real estate experts believe the nation is headed right into a recession—or will it be a near miss? A downturn with steep job losses would likely result in unemployed homeowners losing their abodes.
It would also discourage many folks, even those who remain employed, from purchasing property. Buying a home is typically the largest transaction that most people will ever make. And many people won’t feel comfortable doing so if they’re worried about the stability of their jobs.
“We will likely see some effects on the housing market going forward,” says Bachman, of John Burns. “Any time you lose jobs, there’s less demand for housing, for sale and for rent.”
But few expect another downturn would cut as deep as the Great Recession—or last nearly as long. Once the Fed gets inflation under control, it’s expected to cut rates to combat any turbulence in the economy. That will likely lead to lower mortgage rates, giving the housing market a boost. Many economists believe the housing market will begin recovering as early as next year, if not the year after that.
“It’s not the calm before the storm,” says Gardner. “This was just an important reset in the housing market.”
Dependable Home Warranty was founded in California in 1974. When they became a subsidiary of Old Republic International in 1982, they continued to provide reliable coverage to all of their customers.
They have since earned a spot among the top three home warranty companies in the country with an A+ rating from the Better Business Bureau.
Old Republic offers efficient and friendly service with comprehensive plans and straightforward pricing.
Their goal is to be a long-time service provider for your household by building a relationship with your family and earning your trust.
Old Republic Home Protection Review: Main Features
Table of Contents
Old Republic offers many ways to protect your investment by covering common home repairs to help keep your house safe and sound.
With Old Republic, you can expect to find a variety of plans tailored to meet your coverage needs. Across plans, there are a number of features that stand out.
The following are some of our favorite Old Republic coverage features included in all plans, features which put it on our list of top home warranty companies.
Heating System
Heating units not exceeding five tons are covered under all of Old Republic’s warranty plans, and they don’t limit the number of units you can cover.
Most companies only allow coverage for one unit, and you have to pay extra for additional units, so this is a really excellent coverage option.
If you have multiple heating units in a large house or you have an outbuilding you use for your hobbies and projects, this coverage provides you with a great solution. Heating system coverage includes parts like the heat pump, ducts, thermostat, floor heater, and drain pumps.
Plumbing System
When a part of your plumbing isn’t working, it can disrupt your entire routine from dishes to showers to bathroom breaks.
Old Republic’s plumbing system coverage includes the following:
Drain line stoppages
Toilet tanks
Pipe leaks
clogs/leaks: in your water heater, water dispenser, garbage disposal, sump pump, and water pressure regulator parts
Electrical System
You use your electrical system for almost every part of your day. Making toast for breakfast, watching TV in the afternoon, and playing games with your kids in the evening all require electricity.
To keep the lights on, Old Republic covers your outlets, switches, panels, breakers, wiring, fuses, fans, and more.
If something goes wrong with your electrical system, they’ll restore power quickly so you can keep moving.
Home Appliances
Old Republic covers home appliances like your oven, cooktop, range, dishwasher, exhaust fan, built-in microwave, and trash compactor.
Every component of these systems is included in the event you experience normal wear and tear or an unexpected outage.
With this coverage, you can keep your kitchen in proper working order to cook meals, do dishes, or gather with family and friends.
Old Republic Warranty Plans
Old Republic offers customizable warranty plans based on location. While there’s not a standard set of plans for you to preview, Old Republic has brochures available that detail the specific coverage in your area.
Old Republic offers location-based plans to provide better coverage based on common problems in your region.
For instance, you won’t pay for air conditioning coverage when your home doesn’t have an air conditioner.
They can provide superior options and more valuable service by segmenting their warranty plans this way. Experts servicing your location will be more knowledgeable about the problems you encounter and be able to fix them more quickly.
The Good – Old Republic Home Protection
Old Republic offers some benefits in addition to their exceptional features, giving you not only great coverage but fantastic conveniences that make your life easier. Here are just a few of our favorites.
Easy Quotes
You don’t have to call Old Republic to request a quote, and you won’t be hassled by their representatives.
They provide online brochures listing the coverage options in your area so you can do the research on your own and find what’s right for you.
The quoted estimate is highly accurate and lists the service call fee along with the warranty plan price.
Online Claims
Most of your home warranty claims can be handled online, adding convenience to the process. If you find faulty wiring in the basement and you can live without spending time in that space for a few days, the online option is easy to use and eliminates the need for you to pick up the phone.
You should always call instead of filing a claim online in the event of an emergency or if you need to make multiple requests like bringing up previous services or getting the status of an existing claim.
Great Reputation
Old Republic prides themselves on having an outstanding reputation, and they do everything they can to maintain it. They’re reliable, professional, and competent.
The company lists their values online so you can always see how important it is to them to provide you with the best possible service.
They value honesty, and they are always open with their customers. With this kind of transparency, you can rest assured they’ll do whatever they can to give you the best service at the best prices.
Online Resources
Old Republic’s website includes a number of educational tools that can help you make an informed home warranty purchase.
With a blog full of home improvement tips, real estate marketing tools, information about home warranties, and more, you’ll be able to find what you need quickly.
The FAQ page includes answers to the questions that customers ask Old Republic most frequently, so when you’re on the hunt for more information about the company or their plans, it’s all right there.
Real Estate Professional Options
For real estate professionals who prefer to add perks to their sales, Old Republic has packages just for you.
You can cover all of the homes you sell with a fantastic starter warranty, enticing your buyers and giving you an edge.
These plans include extensive tools like customizable e-cards and newsletters, open house kits, and other marketing items.
The Bad – Old Republic Home Protection
As with anything you buy, Old Republic has some downsides, none of which are too significant.
Coverage Areas
They don’t provide nationwide service, so their warranty plans aren’t available everywhere.
However, Old Republic has chosen to focus on areas where they feel they can offer the best value, so in the areas where service is available, it’s the best service you can get.
Customer Support
Old Republic doesn’t offer email or online support. Sometimes the most convenient thing you can do is hop online and chat with someone if you have a quick question.
Support Options Limited
The lack of online support forces you to call in a situation where it would typically be simpler to chat.
However, they do have phone representatives, and their online help section is more comprehensive than many other providers. They have an extensive FAQ section as well as a blog that provides even more advice and answers.
Pros
Cons
Comprehensive Coverage
Old Republic Home Protection offers a wide range of coverage options, including for major appliances, systems, and optional add-ons such as pool and spa coverage.
Ease of Use
Old Republic Home Protection makes it easy to request service and track claims online or through their mobile app. They also have a network of pre-screened contractors to provide service.
Strong Reputation
Old Republic Home Protection has been in business for over 45 years and has a strong reputation for customer service and claims handling.
Customizable Plans
Old Republic Home Protection offers a variety of plans and optional add-ons, allowing customers to tailor their coverage to their specific needs and budget.
Alternatives to Old Republic
Old Republic is one of several great home warranty companies. Take a look at the top alternatives below to decide which provider is best for you.
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The Bottom Line – Old Republic Home Insurance Review
While Old Republic doesn’t have online chat support or coverage in all areas, they do have a fabulous reputation for being honest and upfront with customers.
Their integrity standards are some of the best in the business, giving you peace of mind that your warranty coverage will be honored.
Their quotes are easy to find without having to reach out to a representative, they have a no-pressure sales process, and they offer location-specific coverage for more comprehensive plans and solutions.
When it comes to home warranty coverage, Old Republic provides excellent options for all of your home warranty needs.
FAQs – Old Republic Home Insurance
What does Old Republic Home Protection cover?
Old Republic Home Protection offers a range of coverage options, including for major appliances, heating and cooling systems, plumbing, and electrical systems. Optional add-ons, such as pool and spa coverage, are also available.
How does Old Republic Home Protection work?
If a covered item in your home breaks down, you can file a claim with Old Republic Home Protection either online or over the phone. Old Republic will then send a pre-screened contractor to your home to assess the problem and perform any necessary repairs.
How long does a contract with Old Republic Home Protection last?
Old Republic Home Protection requires a one-year contract. The contract automatically renews each year unless canceled.
Product Description: Old Republic Home Protection is a home warranty company that offers coverage for home systems and appliances.
Summary of Old Republic Home Protection
Old Republic Home Protection is a home warranty service that offers coverage for major repairs and replacements for important home systems and appliances. It provides coverage for items such as heating and cooling systems, plumbing, electrical, water heaters, and more. The company also offers additional services such as repair scheduling, 24/7 emergency service, online account management, and an annual maintenance plan.
Cost and Fees
Customer Service
User Experience
Product Offerings
Overall
3.9
Pros
Predictable Coverage: A one-year contract with automatic renewal means that homeowners can count on having coverage for a set period of time without having to worry about renewing the contract themselves.
Continuous Coverage: Automatic renewal ensures that there is no gap in coverage, which is especially important for homeowners who rely on their home systems and appliances.
Budgeting: With a one-year contract, homeowners can budget for the cost of the home warranty and plan accordingly for the renewal.
Cons
Long-Term Commitment: A one-year contract means that homeowners are locked into the service for a set period of time, even if they are dissatisfied with the coverage or service provided.
Cancellation Restrictions: Cancelling the contract before the end of the term may result in penalties or fees, depending on the terms of the contract.
Automatic Renewal: Automatic renewal means that the contract will renew automatically unless cancelled, which may catch some homeowners off-guard if they forget to cancel before the renewal date.
Roth IRA’s are for retirement, right? Generally speaking, yes.
But because of their general flexibility, they’ve also come to be an increasingly important way to pay for college. .medrectangle-3-multi-633border:none !important;display:block !important;float:none !important;line-height:0px;margin-bottom:15px !important;margin-left:auto !important;margin-right:auto !important;margin-top:15px !important;max-width:100% !important;min-height:250px;min-width:250px;padding:0;text-align:center !important;
A recent GF¢ reader question prompted me to write this article explaining the ins and outs of using a Roth IRA to pay for college.
Here was the question…
“Jeff, we have an 8 and a 6-year-old and are a little behind in saving for their college education. But the kicker is we’re also a little behind in saving for our own retirement. We know how much you love the Roth IRA so we’re very interested in starting one. A friend of ours had mentioned we could also use the Roth IRA to pay for college? Curious to know your thoughts. Love the blog!!”
Okay, let’s see if we answer the readers question on using a Roth IRA to pay for college. But a first a quick primer on my favorite retirement too, the Roth IRA…
The Basics on Roth IRA’s
Roth IRAs are like traditional IRAs, with a couple of twists. One is that the contributions that you make to the plan are not tax-deductible when made. Another is that funds can be withdrawn from the plan tax-free, as long as you’re at least 59 1/2 years old, and have participated in a Roth plan for at least five years.
Like a traditional IRA, for both 2015 and 2016, the most you can contribute to a Roth IRA is $5,500, or $6,500 if you are 50 or older.
There are income limits in order to be able to participate in the plan. The Roth IRA income limitation for married taxpayers filing a joint return is $183,000 for 2015, and $184,000 for 2016. For all others (other than married filing separate) it’s $116,000 for 2015, and $117,000 for 2016.
There’s no tax deduction on the contributions, but that is more than offset by the fact that withdrawals can be taken on a tax-free basis. That’s the biggest advantage of the plan.
Since a Roth IRA is first and foremost a retirement plan, why should you even consider it for funding a college education?
The Benefits of Using a Roth IRA to Pay for College
Even though the Roth IRA was never intended to fund a college education, it has gradually developed into an important secondary purpose. And there are a lot of smart reasons why this is happening.
Here are a few:
Roth IRAs grow faster than taxable accounts. Investment income accumulates on a tax-deferred basis in a Roth IRA. That means that the investment earnings grow much more quickly in a Roth then they will in a taxable account, such as brokerage account or mutual fund.
Roth IRAs are self-directed accounts. This means that you can invest your account anywhere you like, and in any investments that you prefer.
You can withdraw money any time.This, of course, is a mixed bag. Your contributions can be withdrawn at any time without being subject to tax since there was no tax deduction taken when they were made. The distributions will be pro-rated between your contributions and investment earnings. That means that at least some of the distribution will be taxable if the money is withdrawn prior to your turning 59 1/2, and being invested in the plan for at least five years.
No restrictions on how the money is spent. Dedicated college savings plans, like 529 plans, restrict distributions for educational purposes only. There are no such restrictions on distributions from a Roth IRA. You could use the money to pay for college – or you could use it for retirement – it’s your choice.
No tax penalty for education-related withdrawals. If you withdraw the money before reaching age 59 1/2, you’ll generally have to pay a 10% penalty tax. However, the penalty tax is waived if the funds are used for education.
So far, so good.
The Downsides of Using a Roth IRA to Pay for College
In the interest of balance, I should also disclose that using a Roth IRA to pay for college is not without a few drawbacks.
The distributions will be partially taxable if taken early. There’s good news and bad news here – let’s start with the good news. Since there is no tax deduction for making contributions into a Roth IRA, the portion that is withdrawn that represents the contributions will not be subject to income tax.
Also, the 10% penalty tax for early withdrawals can be waived if the money used to fund a college education. And if you are at least age 59 1/2, and have been participating in your plan for at least five years, the entire distribution – including investment earnings on your contributions – can be withdrawn tax-free. The downside is if you are not 59 1/2, and/or have not been participating in the plan for at least five years, in which case the earnings will be fully taxable, even if the 10% penalty is waived.
Roth distributions can inflate your income. Speaking of distributions, the amount of the withdrawal will be added to your regular income, and must be reported on your FAFSA application. That will increase your income, and could hurt your ability to obtain financial aid and other benefits.
You may not be eligible to start a Roth IRA. Not everyone is eligible to participate in a Roth IRA, as I noted with the income limitations described earlier in this post. Even if you are eligible right now, if you start a Roth IRA for the purpose of funding your children’s education when they are very young, it’s entirely possible that you will exceed the income threshold at some point in the future, at which point you’ll be forced to stop the contributions.
Low contribution limits. As noted at the beginning of this post, your contributions are limited to $5,500 or $6,500 per year. That will probably be inadequate if you’re trying to fund college for multiple children, and especially if there are only a few years left before college begins.
You may be compromising your own retirement. The primary purpose of a Roth IRA is of course retirement, not college funding. If your Roth IRA is a major component of your retirement plan, you may want to seriously consider whether you want to divert money into education, and away from retirement. There are, after all, other ways to finance a college education.
Speaking of which –
Using a 529 Plan Instead
529 plans are specifically designed to fund a college education, and they are generally more effective for that purpose than Roth IRA’s. 529 plans are actually state-sponsored and state-specific, so there will be some limits on how and where you can hold the accounts.
A 529 plan functions much like a retirement plan, and very close to the Roth IRA. Just as is the case with a Roth, the contributions you make to the plan are not tax-deductible, however, the money in the account earns tax-free investment income for federal income tax purposes.
Funds that are later withdrawn for qualified higher education expenses can be taken without being subject income tax. If however funds are withdrawn and used for purposes other than qualified higher education expenses, the distribution will be subject to both federal income tax and the 10% penalty tax. Both the tax and the penalty apply only to investment income in the account, and not to your actual contributions.
One of the biggest advantages of a 529 plan compared to a Roth IRA is that there are no income restrictions limiting your participation in the program.
And the contributions are also a lot more generous. Currently, you can contribute up to $14,000 per year, per taxpayer, per beneficiary. That means that you and your spouse can contribute up to $28,000 to a 529 plan established for each of your children.
You can actually contribute more than this, however, $14,000 is the threshold that triggers the federal gift tax. If you plan to exceed the threshold, you’ll need to consult with your tax advisor as to the best way to proceed, as well as the specific returns that will need to be filed.
So Should You Use a Roth IRA to Pay for College?
In a perfect world, you have a 529 plan set up for each of your children, that would represent the foundation of your education planning. But if you can’t afford to do that, and you still want to make at least loose plans to fund their education in advance, a Roth IRA is an excellent way to go.
If you are in a position to do so, having both a 529 – as the base plan – supplemented by a Roth IRA, is solid financial planning. The Roth IRA can be set up primarily for retirement, but still be available as a secondary source of college education funding, should it be necessary.
If you do elect to use the Roth IRA for college savings, please don’t make the mistake of saving more for your kids and not enough for your retirement.
Whatever you choose to do, make sure you discuss all of the details and ramifications with your tax advisor. Since everyone’s financial lives and tax situations are different, you need to know if either or both plans will be a good fit for your family.
Life insurance is an important part of most any financial plan. This is the case regardless of one’s occupation. When obtaining life insurance coverage, there are some professions – such as those who are members of the military – who may have a harder time in getting all of the benefits that they may need. For example, numerous life insurance policies will not pay out a benefit to beneficiaries if an insured is killed in the act of war.
Likewise, most life insurance providers will charge an additional amount of premium to cover those who are in “hazardous duty” occupations. And, even if an individual in such an occupation can obtain coverage, there may be a long list of restrictions that can make the coverage difficult to collect from in the event of a claim. This, however, is not the case for those who get their life insurance and other various benefits through Navy Mutual.
The History of Navy Mutual Life Insurance
Navy Mutual has been in the business of offering insurance and annuity benefits to military members since 1879 – often without fees, fine print, or frustration on the part of the policy holders regarding securing coverage.
This insurer, which is the Navy Mutual Aid Association (but referred to as Navy Mutual for short), is a non-profit entity that offers benefits to Navy and other military veterans. As a non-profit, Navy Mutual has acted as a mutual insurer, with payments going towards improving member services, and for reducing its overall costs.
For more than a century, this insurer has fulfilled its duty of supporting military families by offering numerous life insurance and retirement annuity options so that they can also experience the financial security they deserve.
In addition to offering life insurance and annuities, Navy Mutual offers other helpful services, as well, such as assistance with obtaining government benefits to which military members are legally entitled, and educating veterans and their families on matters of insurance and financial security.
Also, beneficiary service and support is an important aspect of what is offered by Navy Mutual, as is the representation to the Department of Veterans Affairs. As a chartered Veteran Service Organization, Navy Mutual can provide its members with assistance that they need with their benefits. An added service is free secure vault storage of valuable documents for its members.
Navy Mutual Life Insurance Review
In addition to the financial and insurance related benefits it offers, Navy Mutual is well known for being a leader in community service, as well as in civic responsibility. The company is very active within the communities that it serves – particularly with those that pertain to military (current and former) members.
Just some of the areas in which Navy Mutual serves include the following:
Terminal Illness Options Counseling – Navy Mutual offers to counsel to military families – regardless of their membership status – at no charge or obligation, when an active duty military member has been diagnosed with a terminal illness. The company also presents various financing options to the survivors of those military members who die during active duty versus those who die during retirement. Also, the company provides survivors and military members with an explanation of various benefit election options that are available.
Help for Military Families in Need – Navy Mutual also helps military members and their families in times of need by contributing to the Toys for Tots program, as well as to the Navy Marine Corps Relief Society, on a yearly basis.
As it pertains to benefits, the plans that are offered through Navy Mutual offer some unique components, such as the following:
No war clauses. Regardless of where a member serves, he/she does not have to worry about benefits being denied due to a war clause.
No military service restrictions. Most life insurance providers will charge an additional amount of premium to those who serve in the military – if they even cover military personnel at all – to provide benefits for hazardous duty situations, aviation, and acts of terrorism. At Navy Mutual, insureds do not need to worry about this, either.
Maximum coverage is available. Navy Mutual allows its members to purchase their maximum amount of life insurance coverage – which is currently up to $1 million – regardless of where the individual is currently, or where he or she is going.
No sales fees or commissions. Because Navy Mutual is not a commercial life insurance company, there are no shareholders to keep satisfied, and members can enjoy the benefits of low costs.
Portable coverage. Unlike some other insurers that cater to military members, the insurance coverage that is obtained through Navy Mutual can stay with the individual – even as he or she transitions from the military.
Fast application for the process for members who are preparing to deploy. Navy Mutual also offers expedited processing of insurance and annuity applications for those members who are preparing to deploy. This can help them to get a plan in place – often within just a few days.
Online application process. Navy Mutual also offers a convenient application process, so members do not need to meet in person with an insurance agent to get their information completed, and their policy in place. It can also help those members who are already stationed in war zones and other remote areas to still apply for coverage.
Navy Mutual is secure and stable from a financial standpoint, and the company is known for making timely payments of its policy holders’ claims. The company has more than $25 billion of total insurance in force and receives more than $80 million in total direct premiums. As of year-end 2016, the company had more than 114,000 policy holders in its book of business and more than $2.9 billion in total cash and invested assets.
Insurer Ratings and Better Business Bureau (BBB) Grade
Over the years, Navy Mutual has kept a high level of financial stability. One of the key reasons behind this is the company’s low overhead, as well as its consistently increasing number of new members.
The company also has substantial financial reserves so that it can pay out its policy holder claims promptly. Due in large part to its stable financial footing, Navy Mutual has received high ratings from the insurer rating agencies. This includes an A+ rating from Fitch Ratings Agency.
Also, even though Navy Mutual is not an accredited life insurance company through the Better Business Bureau (BBB), it has been given a grade of A+ by the BBB. This is on an overall grading scale of A+ to F.
Over the past three years, Navy Mutual has only had to close out one single customer complaint through the Better Business Bureau. This criticism centered on the company’s advertising and sales issues. (No complaints have had to be closed out with the BBB within the past 12 months).
Life Insurance Coverage Offered Through Navy Mutual Life
Navy Mutual Life Insurance offers an extensive list of different life insurance policy options to choose from. These include both term and permanent life insurance options. These include the following:
Flex Term Life Insurance – The Flex Term policy offers a way to obtain level term insurance coverage for a set period of time, along with small premiums. This coverage is guaranteed up to the insured’s age 50 (or to age 40, if the insured is a smoker). There are no restrictions, and the coverage can continue even after the insured is not longer in the military. This plan provides death benefit coverage from $50,000 up to $1 million – and there are no military service restrictions, war clauses, terrorism clauses, aviation restrictions, or travel restrictions. There are several additional notable features on this coverage, including a guaranteed convertibility option, accelerated death benefit option, and a child benefit rider that can be added.
Express Term Life Insurance – The Express Term plan is a term life insurance policy that members can secure immediately, without having to take a physical as a requirement for approval. This policy offers $250,000 in life insurance coverage for a full ten years at a fixed monthly premium. This can be a viable option for those who are preparing to deploy soon and need to secure life insurance protection for those they care about.
Level ll Term Life Insurance – The Level ll term life insurance product essentially takes over where the company’s Flex Term plan ends by providing level life insurance coverage – and stable premiums – for members up to the age of 85. This policy is offered in benefit increments of $10,000 – with a maximum coverage amount of $1 million. This policy is purchased in one-year increments, for a minimum duration of five years. There are actually three different underwriting categories for this policy – which can impact the amount of premium that is due. These underwriting classes include the Standard, the Select, and the Super Select. This plan can also be converted over to a whole life insurance policy with no physical required in order to prove evidence of insurability.
Flagship Whole Life Insurance – The Flagship Whole Life insurance policy option through Navy Mutual offers coverage for the member’s entire lifetime – provided that the premium is paid. This participating whole life insurance plan combines the protection of a permanent life insurance policy with the flexibility of tax advantaged cash value growth. This means that the funds inside of the policy’s cash value can grow and compound over time without the gain being taxed (unless the funds are withdrawn). The policy holder can borrow against the cash value for any reason, such as paying off higher interest debt, or even supplementing his or her retirement income. The death benefit on the Flagship Whole Life plan starts at $10,000 and goes up to $1 million. This program offers guaranteed lifetime death benefit protection, as well as a chronic / terminal illness rider. In addition, because Navy Mutual is a mutual entity, policy holders may also be eligible to receive dividends with this policy.
Other Products and Services Available
Navy Mutual also offers retirement annuities, which can help to ensure that members will have an ongoing lifetime income in retirement, as well as a way to save and grow money in a tax advantaged manner.
The company offers three annuity options, including a:
Single Premium Immediate Annuity
Single Premium Deferred Annuity
Flexible Premium Retirement Annuity
To deposit money into an annuity, members may use current savings, and funds that are already invested in a retirement account, such as an IRA (Individual Retirement Account) or 401(k).
How to Get the Best Premium Rates on Life Insurance Coverage Through Navy Mutual
When searching for the best premium rates on life insurance, it can be important to shop and compare to determine that the coverage you need is priced to meet your budget. If you are interested in comparing policies and premium quotes from several top insurers, we can help. We are an independent insurance brokerage, and we work with many of the best life insurance carriers in the industry today. That means we can provide you with detailed information about multiple options, and from there, you can choose which will be the best one for you and your specific needs. To see the policies and quotes geared towards your situation, just click here to fill out our quote form.
Despite signs that the economy might be slowing, mortgage rates crept higher for the second week in a row.
The interest rate on a 30-year fixed-rate mortgage averaged 6.43% in the week ending April 27, according to Freddie Mac. That’s up a little from last week’s 6.39%, and up a lot from last year’s 5.10%.
These rising rates, combined with higher home prices, have taken a toll on homebuyers’ budgets, with the cost of financing a typical house costing $611 more per month than it did a year ago, according to the Realtor.com® March housing trends report.
Yet homebuyers might find that the crushing affordability crisis they’re facing may soon ease up a little, particularly if the economy and inflation continue cooling.
“With the rate of inflation decelerating, rates should gently decline over the course of 2023,” predicts Sam Khater, chief economist of Freddie Mac. “The prospect of lower mortgage rates for the remainder of the year should be welcome news to borrowers who are looking to purchase a home.”
We’ll explore what it all means for hopeful homebuyers and prospective sellers on this latest edition of our column “How’s the Housing Market This Week?”
The latest trend in home prices
In addition to the prospect of lower mortgage rates, home prices—currently hovering at $424,000 in March—might also soon be on the wane. For the week ending April 22, listing prices were just 2.4% higher than a year ago. That’s the slowest growth rate we’ve seen since May 2020.
Plus, listing prices are simply what home sellers hope to get, and cash-strapped buyers these days are driving a harder bargain than ever.
“Even though potential sellers are still listing homes at higher prices, they aren’t necessarily getting what they’re asking for,” notes Realtor.com Chief Economist Danielle Hale in her weekly analysis.
In fact, the national median sale price of homes that actually reached the closing table declined on a yearly basis for the second straight month in March, the National Association of Realtors® said last week.
But that data is a bit deceptive, Hale points out, because the March decline “was driven entirely by declines in the West,” where prices have grown so much that many homebuyers set their sights elsewhere.
“Median home sale prices actually rose modestly in the Northeast, Midwest, and South,” Hale adds. This reflects migration to areas that remain relatively affordable by comparison.
Is it still a seller’s market?
Yet until mortgage rates start falling, homeowners who are thinking of selling seem to be stuck in wait-and-see mode. For the week ending April 22, the number of homeowners who’ve just listed their homes for sale is down by 21% compared with a year earlier.
“We are not seeing as many new home sellers as one year ago,” says Hale.
The reason for this standoff is yet again mortgage rates, with 82% of home sellers who hope to buy admitting that they feel “locked in” by the mortgage rate they have on their current property, which is often several percentage points lower than what they’d get now.
Granted, there are more homes for sale in total—39% more, to be exact—but much of that supply is either new construction or stale listings, which have been lingering on the market for months with no takers.
Plus, the pace of home sales has been slowing for the past 38 weeks, with homes spending an average of 17 days longer on the market for the week ending April 22 than at this time last year.
However, now that spring is slowly giving way to summer, the homebuying season is bound to pick up.
“We expect to see a growing number of home sellers, consistent with typical seasonal trends,” Hale predicts. And as supply expands, this translates into “better opportunities for buyers.”
Years ago, I discovered cockroaches in my Chicago apartment. I spent money on sprays, traps, and other pest control gadgets to rid my place of the disgusting rent-free tenants, but I was no match for them.
So I turned to my landlord for help. If he refused, I’d withhold rent or break my lease—I was justified, right?
Maybe. Maybe not. Rental laws and tenant rights vary from city to city, and it actually might not have been OK for me to up and leave—even if my landlord wasn’t getting the job done. (Thankfully, it didn’t come to that: He quickly hired an exterminator, and I lived out the remainder of my lease roach-free.)
But like I did, many tenants believe that you can simply deduct or skip rent for problems or repairs—which is just not true. And there are other myths about renting that are widely believed. Here are some of the most common ones—and the truth behind them.
1. You’ll never land an apartment with a bad credit score
Yes, bad credit can make things more challenging, especially in a competitive rental market. But it doesn’t automatically disqualify you as a rental candidate.
When you fill out an application for housing, you’ll undergo a credit and background check. But other factors—such as applying with a roommate, proof of pay stubs, or letters of recommendation from your previous landlords—may help seal the deal.
2. The longer you’ve lived somewhere, the greater the chances you’ll lose your security deposit
So you’ve lived in a place for only a year, and there’s no damage to speak of—you’ll probably get your security deposit back, right? But if you’ve lived there longer, you’re probably thinking you can kiss that deposit goodbye.
It isn’t always so cut and dried, says Megan Perkins Roldan, property manager at Chestnut Tower Apartments in Chicago.
“We definitely take into account the length of tenancy when assessing wear-and-tear damages and expect that longer-term residents will need more work from us at move-out,” Roldan says. “But it’s not necessarily [considered] damage.”
The best way to avoid charges is to leave the unit in the condition it was when you moved in, whenever that was. Do a deep clean, patch large holes, and repaint any custom-colored walls.
3. Your landlord can evict you for any reason
If you’re on a signed lease, a landlord typically can’t evict you for any reason. The landlord must show sufficient evidence that you’ve broken the lease agreement, and your eviction is justifiable. (If you’re renting month to month, however, the rules get a little fuzzy.)
What’s more: You shouldn’t come home to find the locks changed and your stuff out on the street. To evict a resident, landlords or property management companies must provide sufficient and specific written notice, according to Nolo, one of the largest online libraries of legal information for consumers.
If you fail to move or change your behavior after receiving the notice, the landlord has the legal right to proceed with a lawsuit to evict you.
4. A landlord is responsible for all repairs and maintenance
The responsibilities of the landlord or property manager vary depending on where you live and the terms of your lease. In general, your landlord is on the hook to handle such things as general maintenance, noise complaints, plumbing issues, and pest control.
But there are some things that simply aren’t your landlord’s problem—usually if it’s something caused by you.
“If the damage is due to the tenant’s negligence, the landlord might choose to address the repairs and withhold the cost of the repairs out of the tenant’s security deposit,” says Daniel L. Staley, associate broker at Staley Real Estate in Rhinebeck, NY.
And, if damages are severe enough, it could cost you more than your security deposit—we’re talking lawsuits.
5. You can deduct rent when you do your own repairs or maintenance
While it might seem easiest to just subtract the money you spent on repairs, this could get you into trouble down the road—especially if you haven’t discussed this arrangement with your landlord.
Leave the work to your landlord, and make sure to send him an itemized list of what needs to be done. That way, if the landlord refuses to do the repairs, you have ammo to take to a higher power.
Renters can call their local building inspectors “to inspect [the place] and force the landlord to make the repairs that are required by code,” says Alicia Bosben, broker property manager at the Realty Tree in Madison, WI.
6. Rental prices are set in stone
We won’t lie: You don’t typically have much bargaining power when it comes to how much you’ll pay—especially in a hot rental market. But each landlord is different, and you do have a few tricks up your sleeve.
First, consider a longer lease. Landlords don’t usually want to deal with turnover. If you can commit to being in for the long(er) haul, they might be more willing to negotiate the rental price and lease terms.
Second, consider your time frame. There are typically more rental vacancies in winter, so landlords might be more inclined to strike a deal at that time.
Finally, arm yourself with info to help your case: Know the vacancy rate and the going rate for similar units in the area, and bring recommendation letters from your current landlord to show you’re a good tenant.
7. Landlords can enter your place whenever they want
A landlord may need to enter your unit for a variety of reasons—to show your unit to prospective tenants, to check the fire alarms, or simply to do routine maintenance.
But legally, a landlord can’t enter your apartment whenever he wants. He must provide you with sufficient warning, generally 24 hours.
There are some exceptions, of course: If there’s an emergency—like fire or a sever water leak—landlords can enter without notice.
8. You’re flushing away money by renting
Sure, buying a home is a good investment. But there are a ton of reasons why renting isn’t a bad investment.
It might be better for you financially, you might like having someone on call for maintenance and repairs, or perhaps you simply want the flexibility to up and move whenever you want. Plus, renting can allow you time to save for a down payment on that house.
So the next time well-intentioned friends or family members try to tell you that renting is a bad move, tell them it’s a myth—and you can debunk it.
Home warranty services like Advanced Home Warranty offer to shield you from unexpected repair bills in exchange for $400 to $600 a year plus service fees.
You could sign up within minutes online and have coverage in place after a 30-day waiting period.
But do you really need to?
Would the warranty protect you from out-of-control expenses or would it be just another bill to worry about?
Could you find another way to pay for repairs?
To answer these questions with any certainty, you’d need to know the future, and we can’t help with that. You’ll have to settle for the next best thing: Studying the warranty to find out how it works and how it might (or might not) help you.
About Advanced Home Warranty
Advanced Home Warranty hasn’t been around very long, but its sister company, Choice Home Warranty, has provided warranties for decades. The companies offer very similar warranty plans.
Both companies offer lower-priced options compared to other warranty companies. You can save on premiums and service call fees.
You can also save by opting only for coverage on the systems you need, within certain parameters.
Advanced Home Warranty does not let you build your own customized warranty, but its plan structure lends itself to some customization.
Advanced Home Warranty’s Basic Plan
Advanced’s Basic option will cover the fundamental systems in your home with a couple of notable exceptions. The plan covers:
Cooktop
Ceiling and exhaust fans
Dishwasher
Ductwork
Oven / range / stove
Heating system
Electrical system
Plumbing system
Plumbing stoppages
Water heater
Whirlpool bathtub
Built-in microwave
Garbage disposal
Garage door opener
The Basic plan is a bargain at about $400 a year. But it does not cover your refrigerator, your clothes washer and dryer, or your air conditioner.
If you don’t need coverage for these systems, you could save with Advanced’s Basic Plan. If you do need this coverage, you’ll need the Total Plan.
Advanced Home Warranty’s Total Plan
The Total Plan includes everything in the Basic plan, along with your:
Air conditioner
Refrigerator
Clothes washer/dryer
The Total Plan starts around $550 a year.
Optional Coverage: Add Flexibility
With either the Basic or Total Plan, you could add coverage as needed in any combination to protect your:
Each of these add-ons could cost between $20 and $50 extra a year. This flexibility allows you to include only the coverage you need without paying to protect a system you don’t even have.
When warranties bundle more coverage together, you’re more likely to pay for services you don’t need, like a central vacuum system when all you have is an old upright Hoover, or a sump pump when your home is built on a concrete slab.
How Advanced Home Warranty Works
Advanced Home Warranty gets high marks for giving you more control over how you build your warranty coverage.
But we’re still in the hypothetical phase of the shopping process. How would this translate if you bought a plan that meets your specific needs?
Filing a Warranty Claim
You can buy a warranty on your home right now without needing a home inspection or any documentation. Unless your home exceeds 5,000 square feet, you’ll get a standard pricing plan based on your ZIP code.
Like most warranties, you’d have to wait 30 days after signing the contract before you can file a claim with Advanced Home. After your 30-day waiting period, you could call the company’s toll-free service number 24 hours a day.
Paying Your Service Fee
Assuming your warranty covers your faulty system, the company will send out a technician within two days (four days on weekends or holidays).
The technician will charge you $60 to diagnose the problem. Service fee amounts vary between warranty companies, but charging this fee is standard practice. It works like a deductible on your homeowners insurance policy or a co-pay on your health insurance.
The technician will either:
Fix the problem for no additional charge: This is the best case scenario, and if this happens you’ll feel good about your decision to buy the warranty.
Have a more specialized contractor come out: You’re still getting the problem fixed, but it’ll take a little longer.
Recommend replacing the system: As long as a replacement falls within your warranty’s annual spending caps, which we’ll get into below, you can get the system replaced at no charge.
Inform you the warranty won’t fix your problem: This can be infuriating after you’ve already paid the premiums and the service fee. Prevent this scenario by reading the contract carefully before signing.
Your Contract’s Exclusions
Any home warranty comes with some exclusions which could deny coverage even to a covered system in your home.
Many new homeowners who buy a warranty feel surprised when the warranty denies their claims. Advanced Home Warranty’s sample contract spells out the exclusions, which are far too numerous to list here.
Exclusions include:
For a refrigerator: Advanced won’t fix racks, shelves, lighting problems, ice makers, Freon, ice crushers, beverage dispensers, door hinges and gaskets, glass, Internet-connected features, spoiled food.
For a clothes washer: The warranty won’t fix problems with door seals, filter screens, leveling and balancing, glass, soap dispensers, knobs and dials, hinges, damage to clothing.
For an air conditioner: The warranty won’t cover condenser casings, electronic air cleaners, filters, humidifiers, gas air conditioning systems, registers and grills, non-ducted wall units, window units, water towers, improperly sized units, chillers, roof mounts, jacks, stands or supports, commercial grade equipment — this list goes on and on.
Electrical system: The warranty won’t help with alarm systems, attic or exhaust fans, DC wiring, doorbells, fixtures, CO2 alarms, smoke detectors, inadequate wiring capacity, solar power panels or components, running new wires, damage due to power failure or surge. Again, this isn’t all.
The list of exclusions goes on for page after page, but the sampling above should show you the importance of checking the contract thoroughly before signing.
Annual Spending Caps
Your warranty’s contract should also tell you the maximum amount your warranty would pay each year. If your repair exceeds the spending cap, you’ll have to make up the difference out of pocket.
Most warranties have a comprehensive cap and/or a per-system cap.
Here’s a sampling of Advanced Home Warranty’s spending caps:
Heating system: $1,500 per year.
Electrical system: $500 per year.
Plumbing system: $500 per year.
Ductwork: $500 per year.
Other Reasons for Non-Payment
Advanced Home Warranty will provide details in your contract about several other conditions which could prevent the company from paying to fix your system.
For example, the warranty won’t pay for damage resulting from:
Known or unknown pre-existing conditions
Rust or corrosion
Mildew or mold
Sedentary build-up
Also, expect to cover the cost out of pocket for cutting through concrete or walls to access damaged systems. The company also won’t pay to repair cosmetic damage resulting from this kind of repair.
Alternatives to Advanced Home Warranty
Take a look at some of Advanced Home Warranty’s top competitors to ensure you get one of the best home warranties to protect your home.
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Should You Get a Home Warranty?
At this point, many shoppers ask themselves, “Why even bother with a warranty? Why would anyone pay into a plan with so many exclusions?”
These are good questions. Yet thousands of homeowners buy warranty coverage every year because they like the idea of paying about $500 a year in exchange for a few thousand dollars worth of home repairs.
The key is knowing how to use a warranty: The warranty should repair or replace home systems that wear out from normal wear and tear.
A warranty won’t fix a system which faltered because of misuse, over-use, lack of regular maintenance, or improper installation. A warranty also won’t help with cosmetic issues or personal preferences. It won’t pay for maintenance, inspections, or to get your system up to code.
Warranties vs. Homeowners Insurance
Sometimes your homeowners insurance policy could help you repair system damage that a home warranty will exclude. If lightning strikes your home and fries the electrical panel, for instance, your warranty won’t pay but your homeowners policy should.
It’s easy to confuse these two sources of help. Basically, a warranty can help when a system in your home wears out from normal use. Your insurance should help when an outside force — wind, hail, lightning, a tree, a burglar, or fire — damages or destroys your property.
Understanding this difference can help place a home warranty in context.
Who Needs a Home Warranty?
Whether a home warranty makes sense for you depends partly on your home. In a home where systems will be less likely to wear out, a warranty makes less sense.
In a brand-new construction, for example, you’re less likely to need work on your electrical system or your plumbing system. Something could go wrong, of course, but statistically speaking, you’re less likely to face high repair bills than someone in a 35-year-old home.
However, if you bring your older refrigerator and clothes washer into your new home, those systems will be more likely to need repairs this year. Your warranty should reflect this reality.
Reasons Not To Get a Home Warranty
Along with the condition of your home, your overall financial situation can also help you decide whether to buy into a plan like the one Advanced Home Warranty provides.
If you have several vulnerable systems in your home and you have no idea where you’d come up with a couple thousand dollars if needed, a home warranty could be useful. I’m assuming, of course, the $400 to $600 in premiums wouldn’t be too much of a hardship.
If you have money saved or you have another plan for coming up with repair money, such as a low-interest line of credit, you could rely less on the protection of a warranty.
Also, if you know how to fix just about anything in your home, you’d probably be OK without a warranty. You’ll still need to save some money for parts, perhaps, but you’d have less need for a technician to come out and assess your ailing system.
Bottom Line: Follow the Rules
Home warranty companies like Advanced Home Warranty provide a concrete service: home system repairs.
But they tend to sell customers on an abstract concept: a sense of security.
This sales pitch taps into your sense of fear as you enter homeownership. The pitch gives you an action to take (buying a warranty) to ease your fears of out-of-control repair bills.
To make the best decision as a consumer, you have to look beyond this sales pitch to see exactly how the warranty would (and when it wouldn’t) help you. These four rules can help:
Understand What You’re Buying: We call these plans “home warranties,” but they hardly resemble a manufacturer’s warranty which will replace your phone or food processor. Instead, you’re buying a service contract which doesn’t come with very many guarantees. It can offer convenience and it should help replace or repair worn out systems.
Read The Contract: Read and understand every word of your actual contract before you sign it. A sample contract like the one Advanced Home Warranty provides on its site will give you a good idea how the company works. But it’s not the same as the contract you’ll need to sign. If you don’t understand a clause, call customer service. If the rep can’t help you understand, consider moving on to another company.
Customize Your Coverage: Advanced Home Warranty allows for more warranty customization than many companies. Try to avoid paying for coverage you couldn’t possibly use. Sometimes you’ll have to include a system or two you don’t need, but often you can create a customized plan.
Have a Backup Plan: But wait, you might say, the warranty is my backup plan. Since warranties have so many limitations on service, you should still set aside some money for home system repairs. This can also help if your repair exceeds your warranty’s annual spending cap.
No, you can’t see the future and know for certain whether a warranty could save you money in the coming year. But learning as much as you can about Advanced Home Warranty in the present should help you avoid a lot of future frustration.
One reason that it’s so difficult to keep up with Medicare is that it’s constantly changing. The government is always adding or taking away restrictions on health care. Not only does Medicare coverage continue to change, but supplemental insurance continues to cover as well.
Medicare is an excellent government program, and it help provide health care coverage to millions of seniors across the nation, but it doesn’t cover everything. In fact, there are a dozen different expense categories that Medicare Parts A and B don’t cover. Those expenses could leave you with massive medical bills and hospital fees.
Those massive bills could turn your retirement dream into a nightmare. It’s important that you get the health care coverage that you need to ensure that you aren’t responsible for hospital bills that would drain your bank account.
Every year, I get a lot of questions about Medigap Plan J, which is no longer available. It’s important that you understand all of the plans, and if you have a Plan J, you will need to understand your coverage and some other similar options.
What is a Medicare Supplemental Plan J?
Medigap plans are sold by private insurance companies, and they work together with your original Medicare Parts A and B to give you additional coverage that you wouldn’t get with just your traditional coverage. There are ten different supplemental plans that you can choose from, all of them are going to have different coverages and gaps that they fill.
Some plans are going to be more basic than others. A Medigap Plan A is going to be one of the most basic, and it’s going to leave more gaps in coverage than other plans, like supplemental Plan F, which is the most comprehensive policy.
Plan J was one of the most popular options for Medigap coverage because of the additional insurance protection that it provided to enrollees. If you have a Plan J still, then you have the most coverage that you can buy. In fact, the law no longer allows you to get some of the coverage.
With your Plan J, you will get the basic coverage categories, like Part A coinsurance and hospital costs for an additional 365 days after your original Medicare coverage has expired. If you’ve ever stayed the night in a hospital for whatever reason, you know that it can be an expensive stay. With traditional Medicare, you will get some hospital fee coverage, but after that coverage ends, you’ll be responsible for all of those bills out-of-pocket. With a Medicare Plan J (or any supplemental plan for that matter), you will get additional coverage that can protect your savings if you’re ever in the hospital for several weeks.
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Some of the additional coverage that came with a Plan J was paying the Part A and B deductible. The deductible is the amount that you have to reach before your Medicare coverage kicks in. If you had a Plan J, then you wouldn’t be responsible for paying that bill. Every year, the Part B deductible changes. In 2017, this threshold is $183.
Plan J would also pay for any Part B excess charges. When you go to the doctor or hospital to get any service, there is a pre-determined amount that Medicare B will pay. The doctor is legally allowed to charge 15% more than that amount. Anything about that pre-determined amount is considered excess charges. If you don’t have supplemental coverage, you will have to pay for all of those excess bills out of your pocket.
One of the unique coverage categories of Plan J was the prescription coverage that it provided. Plan J will help cover some of the rising costs of medications. The prescription coverage was one of the main reasons that Plan J was so popular.
What Happened to Medigap Plan J?
As I’ve already mentioned, Medigap Plan J is no longer available. There were several changes in the early 2000s that make these plans unavailable for new enrollees. Congress passed the Medicare Prescription Drug, Improvement, and Modernization Act, which changed the way that Medicare was structured. When this act was completed, the started Medicare Part D prescription drug coverage.
Once Part D began, it meant that Plan J was providing duplicated coverage, and that Plan J was now obsolete. The new law made it illegal for any supplemental coverage to pay for medication expenses, which meant like Plan J was identical to Plan F, and there was no reason for having two identical plans. If you held a Plan J at that point, you could keep your supplemental coverage, and you weren’t required to switch policies.
After that point, nobody else was able to enroll in Plan J, but there were several other quality options that you could choose from. It’s vital that you get the perfect supplemental insurance for your health care needs.
Alternatives
The obvious alternative to Plan J is to purchase a Plan F. The plans are identical minus the prescription coverage that Plan J is no longer allow to give to its enrollees. Plan F will give you all of the comprehensive coverage that the other plans won’t provide. If you want to get the most coverage possible, then a Plan F is going to be the best choice.
On the other hand, if you decide that you don’t want as much coverage, and you would rather save money, then a smaller plan is going to be a much better option. A Medigap Plan A or B will fill in a few of the gaps that Medicare doesn’t pay for. With a smaller plan, you won’t get as much additional coverage, but you are going to save money every month.
Deciding Which Plan
There are several different factors that you will need to consider when you’re shopping for supplemental insurance coverage. The first factor that you will need to look at is your finances. Everyone would love to have a Plan F which gives the most coverage, but not everyone can afford that comprehensive plan. Before you purchase any additional coverage, take a look at your budget and decide how much you can spend every month on that supplemental protection. The goal of your Medigap policy is to protect your savings, but the plan shouldn’t break your bank every month.
The next factor that you need to answer is your medical history and your family tree. The older that you get, the more that you’re going to spend on health care, and those expenses could drain your savings account, but that’s where your Medigap plan comes in. If you’re in poor health, then you will need to purchase a comprehensive policy that gives you the most coverage possible.
Medigap Open Enrollment
One of the most important things to realize about Medigap plans is when you should purchase one of these plans. Once the month that you turn 65 begins, your Medigap Open Enrollment Period begins. During this time, the insurance company can’t decline your application, regardless of your health or any health complications that you may have. If you’re in terrible health, this could be the only chance that you have to get coverage.
Additionally, if you apply during the open enrollment, the company can’t increase your premiums, even if you have health complications. If you want to save money, it’s vital that you apply during the six-month window of open enrollment. After the six months is over, then your application will be treated as a normal application, which means that you could get drastically higher premiums.
Any Questions about Medigap Plan J?
Because Plan J is no longer available, I don’t get a lot of questions about the plan, but there are still people with these plans. It’s vital that you get the perfect supplemental coverage. You’ve worked hard to reach this stage of life, don’t let medical bills wreck your retirement dream.
If you have any questions about Medigap Plan J or any of the alternatives, please contact an experienced Medicare supplemental insurance agent or me today.
Medicare is one of the biggest government programs in the United States. It provides health care to millions of senior citizens across the country. It gives them health care coverage that they would be able to afford otherwise.
While Medicare is an excellent program that helps protect seniors from massive hospital bills, but it doesn’t cover everything. In fact, there are a dozen different expense categories that they don’t cover. Those groups could leave you with thousands and thousands of dollars of debts.
Every year, the cost of health care continues to rise. There is nothing that you can do stop the rising costs, but there are some ways that you can protect your finances from being wrecked by those bills. One of the best things that you can do is purchase a Medigap insurance plan. These policies will give you additional health care coverage that will work with your traditional insurance policy.
What is a Medigap Policy?
Medigap policies are sold by private insurance companies across the nation. These plans work as an add-on to your Medicare Parts A & B. They don’t replace the original coverage. You will still have to pay the monthly premiums.
The goal of Medigap plans is to fill in all of the coverage holes left behind. There are ten different Medigap plans that are sold, and they are denoted by a letter of the alphabet, A through N. All of the plans offer different coverage or cover portions of various expenses. Some of them are going to cover 100% of certain categories, while others are going to only pay for 80% of them.
Medigap Plan D
Now that you know the basics of Medicare Supplemental insurance policies, we can look at the specifics of Plan D. Before we get started, it’s important that you understand the Medigap Plan D is not the same thing as Medicare Part D. These plans are very different, but a lot of applicants tend to get the two confused, for obvious reasons.
Medigap Plan D is one of the “middle of the road” supplemental plans. It’s not the smallest, but it’s also not the most comprehensive. There are a few key coverage categories that you should be aware of to ensure that you’re getting the best supplemental plan for you.
Medicare Supplemental Plan D is going to pay for necessary expenses like your Part A hospital coinsurance and costs for an additional 365 days after your original Medicare expires. If you’ve ever spent a night in the hospital or several nights, then you know how expensive it can be to stay. If you’re hospitalized for several days or even several weeks, you’ll find yourself with a massive bill in the mail. Your original Medicare Parts A and B are only going to cover a short stay in a hospital, but depending on the condition, you could be there for a lot longer. That’s where your supplemental plan will come in. It will give you the additional coverage that you need to offset those expensive hospital bills.
Your Medigap Plan D will also pay for Part A hospice care coinsurance or copayment and your Part A deductible. Neither of these is going to be massive expenses, but having coverage for them is going to keep more money in your pockets. More than likely, you won’t be required to pay your Part A deductible. Depending on the services that you need from hospice, you could end up with thousands and thousands of dollars out-of-pocket, but that’s where your Medigap coverage comes in.
Additionally, Plan D pays for your Part B copayments or coinsurance. If you go to the doctor or hospital, you’ll be required to pay copayment fees, but if you have Medigap coverage, then your plan is going to pay for those bills. The more that you go to the doctor, the more that you’re going to pay, and the supplemental coverage can help protect your savings account from being drained by hospital bills.
One of the most notable coverage areas of the Plan D policy is the foreign travel emergency costs. Technically, this plan is going to cover 80% of those foreign emergency costs. While it only pays for 80% of those costs, it’s the most protection that you can get, regardless of which plan that you buy. If you plan on doing a lot of overseas traveling in your retirement, it’s important that you have this additional coverage. If something were to happen to you while you were on vacation, your Medicare is not going to pay for any of that.
Some of the other expenses that you plan will pay for is the first three pints of blood for any medical treatment that you may need. After the first three pints, your Original Medicare should pay for any additional pints. Pints of blood can be expensive depending on how many that you need, but your Medigap coverage coupled with your traditional coverage will cover those bills.
The last portion of expenses that the plan will cover is any skilled nursing facility care coinsurance that you would be responsible for paying for. Depending on the type of skilled nursing facility care that you need, it could end up being a massive bill.
What Medicare Supplemental Plan D Doesn’t Cover
There are also a few key expenses that a Medigap Plan D won’t cover, and those coverage gaps could drain your savings account. One of the most notable expenses is the Medicare Part B excess charges. When you go to a doctor or hospital, and you receive any service, there is a pre-determined amount that Medicare will pay for those services. Legally, the doctor or hospital is allowed to charge up to 15% more than that pre-determined amount, and the amount that is above the amount is called excess charges. Without Medigap coverage, you would be responsible for those bills, and because Plan D doesn’t pay for those charges, you would have to pay for those out-of-pocket.
Deciding which Medigap Plan is Right for you
It’s important that you choose which of the ten plans are going to work best for you. There are several key factors that you should consider to ensure that you’re getting the best plan for you. I know that picking between these plans can be difficult, but there are a few key categories that you should review before you apply for any of them.
The first thing that you should look at is your finances. The primary goal of your Medigap plan is to protect your savings account from the mountain of debt that a hospital could give you. While it’s one of the best ways to give you additional coverage, the supplemental plan shouldn’t break your bank every month. Make sure that you look at your budget and calculate how much money you can spend on your Medigap plan.
The next thing that you should consider is your health. If you’re in bad health and you have several dire health complications, then you should consider purchasing a more comprehensive policy that is going to give you the additional coverage that you need. If you’re in excellent health with no pre-existing conditions, then you can consider risking a smaller plan with a cheaper monthly premium.
Open Enrollment
Enrolling in one of these Medigap policies is very simple. The Medicare supplemental agent can walk you through the whole process, but it’s important that you apply during your Medigap Open Enrollment period. This is a 6-month time frame that beings the month that you turn 65. During this time, the insurance company can’t decline your application, regardless of your health or any pre-existing conditions that you have. If you’re in poor health, this could be the only chance that you have to get supplemental coverage.
Additionally, during your open enrollment, the company can’t charge you more for your plan, even if you have severe health problems. If you wait to purchase one of these plans, it could cost you thousands of dollars more every year. If you want to save money, don’t weight to apply for your coverage.
Any Questions?
Medigap plans are one of the best ways to protect your retirement savings and ensure that you can live out your retirement dreams. The older that you get, the more that you’re going to spend on health care and related medical costs. Don’t’ let those expenses ruin your retirement.
If you have any questions about Medigap coverage, please feel free to contact an experienced Medicare Supplemental insurance agent near you or me today. It’s vital that you get the proper coverage.