Incessant patient-monitor alarms. Hospital food. Middle-of-the-night checks of vital signs. The audible suffering of random roommates.
Yes, being in the hospital is no fun, and not only because you’re receiving treatment for an acute illness or serious injury.
Decades ago, doctors began wondering if select patients presenting in hospital emergency rooms with certain illnesses and injuries couldn’t be sent home to be monitored closely and treated there, rather than being admitted to a hospital ward. This seemed feasible for many chronically ill patients experiencing flare-ups, such as people with complications from diabetes or certain heart conditions.
“Who wouldn’t want to be home rather than in the hospital?” says Dr. Jeff Levin-Scherz, an assistant professor at the Harvard T.H. Chan School of Public Health and a health management consultant at WTW, a financial services company. And the stressful hospital environment isn’t just unpleasant for patients; it can impede their healing.
“Who wouldn’t want to be home rather than in the hospital?”
Jeff Levin-Scherz, health management consultant
Adoption of the concept took off in late 2020, as the overcrowding of hospitals treating COVID-19 patients motivated the federal government to authorize and reimburse hospital-at-home care across the country. These programs, now available through nearly 300 hospitals in 37 states, are demonstrating some ability to provide acute, hospital-level care for patients in their own homes, through a variable mix of provider visits, infusions and other treatments, remote monitoring and portable diagnostics.
Many emergency department physicians are glad to consider home hospital care for appropriate patients. “It gives ER doctors an extra option for patients who they are thinking about admitting,” says Dr. Gregg S. Meyer, president of the Community Division and executive vice president of Value-Based Care for the Mass General Brigham health care system in Boston.
But home hospital care may not be the best option for everyone it’s offered to. Data on health outcomes is limited, and a patient’s personal preferences and home situation should factor into the choice of acute care setting. Insurance coverage for home hospital care may not be the same as for traditional inpatient care.
Here’s what you or someone close to you should know about home hospital care — just in case.
Which illnesses and conditions are suited to acute care at home?
Hospital-at-home programs can treat diseases like pneumonia, chronic obstructive pulmonary disease, diabetes, liver disease and heart failure (a chronic condition), as well as acute conditions like serious urinary tract or skin infections. Each provider institution creates its own list of diseases and conditions for which it may offer acute care at home.
In addition to direct medical care, institutions typically offer a range of services for a hospital-at-home admission. Health care provider Kaiser Permanente’s program for advanced care at home offers services such as medical equipment, oxygen, laboratory testing, medical meals and supplies, mobile diagnostics, pharmacy, blood draws and transportation.
Still, there is reason for caution. For one, the physicians’ task of choosing the right patients to be offered acute care at home — “those not too sick but sick enough” — is complex, wrote the authors of a 2023 paper analyzing the effectiveness of burgeoning hospital-at-home programs, published in Public Policy & Aging Report. “Minimal research informs this issue, and no reliable standards or diagnostics have yet been set.”
Will my insurance pay for home hospital?
If you have private insurance through an employer or state or federal marketplace, contact your insurer and inquire about your coverage for hospital-at-home services provided by specific hospitals in your area. Medicare has led the way with paying for home health care, reimbursing these programs for their services at the same rate as if the patient were in the hospital.
Medicaid coverage for home hospital care varies by state. Contact your state’s Medicaid office to learn more.
How does the quality of care compare?
Because hospital-at-home programs are just beginning to gain traction, research on the quality of care that they provide is limited. But so far, the data is mostly encouraging.
“There are dozens of randomized controlled trials that show that acute care at home is actually superior to traditional care in the hospital on many, many outcome metrics,” says Dr. David Levine, a clinician-investigator at Brigham and Women’s Hospital and an assistant professor at Harvard Medical School.
According to Mount Sinai Health System’s data on its home hospital program, 30-day re-admission rates for the New York City provider’s home hospital patients were less than half of those treated in the hospital: 7.8% versus 16.3% for the two years ending December 2016.
On another key metric, how long a patient remains in acute care, Mount Sinai’s impressive results were in line with those of many other home hospital programs. The average length of stay for acute care was 5.3 days for patients in the hospital versus 3.1 days for the system’s hospital-at-home patients. (Since 2020, the average home hospital stay has increased to 4.4 days, probably for reasons related to the COVID-19 pandemic.)
However, concerns about patient care quality and safety have made many physicians reluctant to send acutely ill patients to home hospital care, according to the Public Policy & Aging Report paper. “To date, a handful of rigorous studies have found positive cost and quality results, but these are based on tiny samples.”
How safe is home hospital care?
How does patient safety compare for home hospital versus inpatient care? Each environment has pros and cons. In a hospital ward, a registered nurse is always seconds away, and a doctor can be at a patient’s bedside in minutes; response times for home hospital care are longer. But hospitals have their own safety problems. In 2015, an estimated 72,000 patients with health-care-acquired infections died while in the hospital, according to the Centers for Disease Control and Prevention.
Overall, home hospital care has “very, very low unexpected mortality and very low rates of complications,” says Dr.Bruce Leff, director of The Center for Transformative Geriatric Research at Johns Hopkins Medicine.
Some patients receiving acute care at home say they feel safer in their own domestic environment than in a hospital. That was the case for Theresa Corcoran, 87, who in April 2023 suffered a cut on her leg that required many stitches. Weeks later, after developing a serious skin infection in the injured leg, Corcoran was evaluated at Brigham and Women’s Hospital in Boston during a 24-hour stay and then admitted to the system’s hospital-at-home program, which provided antibiotic infusions and wound care.
“Getting to the bathroom wasn’t easy for her” while she was in a hospital ward, says Bridget Ellis, a registered nurse. Ellis was one of the nurses who visited Corcoran during her time in hospital at home. Corcoran said that during her treatment she felt more confident moving around her own home in Belmont, Massachusetts.
The home environment also helps patients in acute care maintain their mental health while healing physically, Ellis says. “If someone wakes up in the hospital in the middle of the night, they’re very confused about where they are. Not being around familiar faces and surroundings, people do get very confused and some lash out — it can be difficult to keep them safe.”
A study at Johns Hopkins Medicine found that delirium was observed in 9% of hospital-at-home patients versus 24% of inpatients.
How does it feel to be a hospital-at-home patient?
When the hospital offered Corcoran admission to Mass General Brigham’s hospital-at-home program, “my first thought was, ‘Ooh, go home?’ That sounded good,” she says. “The places of comfort for me are in my own home.” In the hospital, “there were people in beds in the hallway.”
Corcoran says that at home, it was easier to heed her doctors’ advice. “One of the good things about this is that I can find a spot that’s comfortable in my house and keep my leg up.” Corcoran also says that sleeping in her own bed in peace and quiet and having meals on her own terms helped set the stage for healing.
When Corcoran entered hospital-at-home care, “we had a lot of people coming in, and a lot of phone calls, and a lot of doorbells ringing,” to set up the equipment and services that Corcoran would require, says Jane Chiarelli, Corcoran’s daughter. “I think it’s very important that the patient has somebody with them, at least at the beginning.”
Mass General Brigham home hospital patients do have the option of receiving 24-hour care with home health aides.
How do home hospital patients fare after discharge?
In Ellis’ experience, patients typically do better after they are released from hospital-at-home care than when they are discharged from a hospital ward.
“Being in the hospital, sometimes patients are in bed three or four days straight without getting up much,” she says. “Patients get very weak, and they do end up in rehab. At home, they’re not relying on nurses to bring them food, walk them to the bathroom or roll them in bed. They’re up and moving around a lot more, so they keep up their strength.”
I am fat, but I am not obese. I do not pause to catch my breath when climbing stairs. I do not avoid hikes or sports for fear of failure. But — no mistake — I am fat. I am far above my normal weight. I carry 205 pounds on a frame built for someone forty pounds lighter. [PDF: Body mass index and health, from the USDA.]
How does this relate to personal finance? Your health is your most important asset. Not your house. Not your car. Not your job. Not your retirement account. These are secondary. Your health is your most important asset. Even someone as young as I am (37) can face serious financial repercussions from being overweight.
According to the USDA, “overweight or obese people are more likely than those at normal weight to have medical problems such as high blood pressure, high cholesterol, stroke, diabetes, and heart disease.” Furthermore:
According to the Centers for Disease Prevention and Control, in 2003-2004, an estimated 66 percent of U.S. adults were overweight or obese, along with 17 percent of children and adolescents. The total annual cost of obesity was an estimated $117 billion in 2000.
Another USDA publication [PDF: “Health Insurance, Obesity, and Its Economic Costs”], breaks down the individual cost of being fat:
The lifetime medical costs related to diabetes, heart disease, high cholesterol, hypertension, and stroke among the obese are $10,000 higher than among the non-obese. Among the overweight, lifetime medical costs can be reduced by $2,200 to $5,300 following a 10-percent reduction in body weight.
Being fat costs money. It costs time. (Overweight people have shorter lifespans.) And it costs mental capital, too. I have experienced these costs in my own life.
Four years ago, I destroyed the ACL in my right knee while playing city-league soccer. I was out of shape and overweight, and my body betrayed me. I spent six months hobbling around, unaware of the injury’s extent. Ultimately, after several doctor’s visits, I had an MRI, surgery, and physical therapy. Even with insurance, this was expensive, especially considering I hadn’t yet wised-up financially. (Cost: roughly $2,000, and a loss of mobility in my right knee.)
Like many who are overweight, I suffer from sleep apnea. Last summer, I spent two nights in a sleep lab. I was given a prescription for a C-PAP machine. (Cost: $734.54, and that damned mask strapped to my face every night for the past year.)
When overweight, I suffer from mild depression. It afflicts my self-esteem and saps my will. (Cost: more mental than financial, thus far.)
Whenever I get heavy, I always join a gym. I pay for a year in advance, go for a couple weeks, and then gradually lose interest. Soon the guilt of having paid hundreds of dollars for a service I am not using becomes overwhelming, which makes matters worse. (Cost: Nothing out-of-pocket — paid by employer. I used to pay $300-$500/year.)
As I get bigger, I’m forced to buy new clothes. My wardrobe increases as I do. I tell myself that I’ll have lots of clothes when I lose the weight, but so far I’m only buying new. (Cost: about $200/year.)
Ultimately I spend more on food to subsidize my fat than I do when I eat healthfully. I’ve never examined the actual costs, but I’m sure all the candy and chips and soda are a steady drain on my funds.
In the past four years, I have paid $4500 because I am fat. And that doesn’t include food.
This post is not a pity party. It is a rallying cry for anyone who is out of shape, who has allowed their physical fitness to lapse. I know many adults who are at a healthy weight but who do not exercise. Just half an hour of exercise every day promotes better fitness. Regular physical activity reduces the risk of cancer and improves self-esteem. Just do it!
If you would like to pursue a course of fitness, here are some helpful tools.
Joe’s Goals, a free online goal tracker.
FitDay, a free web-based diet and weight loss journal. I’ve used this on-and-off for several years. I recommend it.
The book that helped me defeat the fat in 1997 is Realities of Nutrition. It’s fantastic. It doesn’t try to convince you one diet is better than another. It lays out the facts about nutrition. It describes what carbohydrates are, what fat is, what protein is, and explains how they work in concert to give the body energy.
The 29 healthiest foods on the planet
The world’s healthiest foods
When I stood on the scales on the evening of 07 May 1997, I was horrified. I weighed 200 pounds. I was 28 years old. How had I grown so heavy? I steeled my mind. Over the course of the next six months, I dedicated myself to eating healthy and exercising daily. I lost 42 pounds before falling off the wagon on Halloween night. Despite continued battles with food, for two years I remained fit. But then the weight came back.
I am ready to lose it again.
Extra Weight, Higher Costs
I’ve been working with Lauren Muney, a wellness coach (about which more later). This morning, Muney sent me a New York Times article by Damon Darlin which describes how extra weight leads to higher costs.
Being fat costs money — tens of thousands of dollars over a lifetime. Heavy people do not spend more than normal-size people on food, but their life insurance premiums are two to four times as large. They can expect higher medical expenses, and they tend to make less money and accumulate less wealth in their shortened lifetimes. They can have a harder time being hired, and then a harder time winning plum assignments and promotions.
Darlin’s article does a great job of summarizing the financial impact of being overweight. It’s these financial costs (resulting from health problems) that most worry me about being fat. Many find fat people unattractive, but I’m not one of them: I was raised in a family where fat was the norm, and it does not bother me. But the health risks and the associated costs do bother me.
For example, Darlin cites a study from the University of Wisconsin which demonstrated that by supersizing a fast-food order (at an average cost of 67 cents) leads to $6.64 in future medical costs for an obese man, and $3.46 in future medical costs for an obese woman. Super-sizing does not save money.
Many people do find the overweight unattractive, and consciously or not, they treat them differently. There is a social cost to being fat. (More here.) Studies have repeatedly demonstrated that “weight bias”, discrimination against the obese, is at least as strong as race bias. (The article points to Harvard University’s Implicit Association Test, where you can check your own internal biases.)
Studies have also demonstrated that there’s a direct correlation between obesity and net worth. The heavier the person, the less they earn. My initial reaction is that it’s impossible to determine which is the cause and which is the effect — does obesity lead to low net worth, or does low net worth lead to obesity? — but apparently this is a known problem with the research. Regardless, significant weight loss can lead to an increase in wealth.
A baby boomer whose [Body Mass Index (B.M.I.)] drops from 27.5, the middle of the overweight category, to 21.7, the middle of the normal category, sees an increase in wealth of $4,085.
Since first writing about my weight problem in October, I’ve made tremendous progress. This is largely due to Muney, a reader of this site. She wrote that because I had helped her make progress on her wealth, she’d like to help me make progress on my health. After working with her for a month, the results have been outstanding. I’ve lost weight. But more than that I feel great: my physical and mental well-being are the best they’ve been in years.
I look forward to continued progress, and to removing myself from the risks and costs associated with obesity. Right now, I’m going for a walk!
Located just southeast of Tacoma, Puyallup is a charming city known for its flower fields, farming history, and the iconic Washington State Fair. If you’re considering moving to Puyallup, then you may be wondering whether to rent versus buy a home in the area.
If you’re looking to buy a home in Puyallup, the current median sale price for a home is $523,500 as of July. On the other hand, if you’re considering renting an apartment in Puyallup, the average monthly rent for a two-bedroom apartment is $1,808. Depending on your budget and current mortgage rates, it may be that renting is less expensive than buying a home. However, it still may be the right decision for you to buy a home this year.
At the end of the day, making the decision between buying a house or renting an apartment in Puyallup depends on a variety of factors. In this Redfin guide, we will delve into the advantages and disadvantages of both renting and buying in Puyallup, so you’ll have the knowledge to make an informed choice. Let’s get started.
Advantages of buying a home in Puyallup
The first advantage of buying in this market is to consider it as an investment. If you do, you’ll likely make money. Appreciation is real, and even if the market slows down, appreciation grows. Equity can be used as a step towards a bigger house in the future, it can be used as cash when refinancing for medical costs, college costs, or just as a long-term retirement to subsidize your 401k.
Homeownership has benefits, including potential tax benefits. In many instances, it can be a tax write-off, and may reduce your taxable income. Make sure to speak with a tax professional to understand the benefits you may qualify for.
Growth in the area
Puyallup is growing and expanding. What may feel like living in a smaller community now, may not be in a few years.
Disadvantages of buying a home in Puyallup
Low inventory and rising prices
A key disadvantage of currently buying a home in Puyallup, Washington, is the combination of few homes for sale and rising prices.Sellers aren’t selling, creating very low inventory in the market, and as a result, home prices are not decreasing. Many people are waiting for home prices to drop, but what we’re seeing is that prices are still rising.
Not finding your “dream home”
With a high demand for housing and a limited supply of available properties, buyers often find themselves having to settle for a home that may not meet all of their preferences or requirements. The intense competition in the market can lead to bidding wars, driving up prices and putting added pressure on buyers to make quick decisions.
Additionally, low inventory can make it challenging to find a home within a certain budget range or desired location. As a result, buyers may have to compromise on certain aspects, such as the size of the property, home features, or proximity to schools or other amenities, which can be a significant disadvantage when looking for a long-term investment in a home.
Determining if you are ready to buy a house in Puyallup
Depending on your current goals, there are a few additional factors that you may want to consider before deciding if now is the right time to buy a home.
1. Housing market conditions: One of the main factors to consider when buying a home in Puyallup is the housing market. Currently, the housing market in Puyallup is very competitive meaning that you’re likely to see bidding wars and multiple offers. As a result, it’s important to know how much you can afford in today’s market. To gain a better understanding, utilize a home affordability calculator.
2. Financial stability: Before you begin your homebuying journey, it’s important to have a good credit score and a stable income. Make sure you set aside funds to cover your down payment, closing costs, and other costs related to buying a home. It’s also a good plan to have an emergency fund set aside should you have any unforeseen expenses.
3.Long-term commitment: Buying a home is a significant investment compared to renting an apartment – especially when it comes to making a long-term commitment and financially. Therefore, if you’re not planning on living in Puyallup for more than a few years, it may make more sense to continue renting.
4. Personal goals: Finally, you’ll want to evaluate your priorities and figure out your personal goals before beginning the homebuying process. Do you want a home that’s close to amenities or in a more secluded location? Are you looking for a large kitchen or simply more space?
If you’re unsure whether you’re ready to buy, consider consulting with your real estate agent or financial advisor to fully understand your options.
Is it competitive to buy a home in Puyallup?
Yes, the housing market in Puyallup is very competitive. Multiple offers and bidding wars are common, and buyers are quick to write offers as they’ve spent time navigating the current market. Be ready and start working with an agent as soon as you can.
Advantages of renting a home in Puyallup
No maintenance costs
There’s no hassle if the stove stops working – your landlord has to pay for it. The roof is leaking and needs repairs, your landlord has to fix it, and that’s a large out-of-pocket expense you don’t have to consider.
Renting an apartment or house in Puyallup offers the advantage of flexibility. If you’re uncertain about your long-term plans or prefer the freedom to explore different neighborhoods, renting provides the flexibility to move more easily. Whether it’s for career opportunities, personal preferences, or simply a desire for change, renting allows you to adapt your living situation without the long-term commitment of homeownership.
Potential for lower monthly payments
Renting a home in Puyallup may allow you to have lower monthly payments. With the average rent for apartments in the area being around $1,800, it may be more affordable to rent compared to buying a home. To gain a better understanding of your circumstances and make an informed decision, you can utilize a mortgage calculator. You can get an idea of what your monthly mortgage payment may be, allowing you to better compare between renting vs buying a home.
Disadvantages of renting a home in Puyallup
Risk of rent increases
Besides losing out on appreciation and tax benefits, the main disadvantage to renting is that the rent price is out of your control and doesn’t last forever. Your landlord can raise the rent each year. Ask yourself, do you want to move every year because the landlord is raising rent or would you rather live in a home for 30 years with the same mortgage payment with no fear of it raising? As a homeowner, this stable income may help you save money for future events like trips, retirement, and more.
Lack of updates
Another disadvantage to renting is that your landlord may not keep the home updated with new and modern features. Homeownership gives you control to buy and install new features like a smart refrigerator, gas fireplace, new carpet, and eco-friendly flooring.
Renting vs buying in Puyallup: A real estate agent’s final thoughts
I believe that now is a great time to consider buying a home in Puyallup. With available homes that offer negotiation possibilities, you may not have to compete with multiple offers, making the process less competitive. At the end of the day, whether you rent or buy in Puyallup, the area is a wonderful place to call home. If you’re just starting to think about buying a home, make sure you’ve looked through your finances to understand what you can afford now and in the years to come.
We would like to think of life insurance agents as trusted advisers whose only aim is to get us the right coverage.
But the nature of life insurance -– and the job of life insurance agents -– makes them something close to our natural enemy.
Life Insurance Agent Secrets
One easy way to prevent being taken advantage of is to find an independent agent. “Independent agents save you time and money,” said Chris Huntley, co-founder of JRCInsuranceGroup.com.
“Rather than completing applications and medical exams with 15 of the best life insurance companies to see which one will approve you at the best rating, make one call to a qualified independent agent, who can place you with the most appropriate carrier based on your unique personal and medical history.”
In a lot of ways, what hurts us as consumers of life insurance actually benefits life insurance agents. Here are nine examples of what I’m talking about in a quick Life Insurance 101 article!
1. Their Income Is 100% Commission
Any time you’re buying from a person compensated 100 percent by commission, your radar needs to be up and in perfect working order. Being on commission doesn’t make a person evil. But it may change his or her perspective, as well as the type and degree of products that you will be introduced to.
If the agent is entirely on commission, he or she will then have a vested personal interest in selling you products that will result in you paying the highest premium possible and hence yielding the highest commission. It is also why when you fill out the form for an online life insurance quote engine you will frequently get calls from multiple agents within minutes of hitting submit. Each one is trying to reach you first so that they can get the sale.
2. You May Very Well Be Over-Insured
Whenever an agent evaluates how much life insurance you need to have, he will almost inevitably start with numbers that are larger than anything you’d ever imagine that you would need.
For example, it’s not unlikely that the agent will suggest that you need to have life insurance equal to 30 times your annual income. If you are earning $100,000 per year, he may suggest — without flinching — that you will be adequately insured by a $3 million dollar insurance policy.
After all, you will need to provide income for your family for the next 20 years, college educations for your children, the payoff of your mortgage and a comfortable retirement for your spouse.
He knows that it is unlikely that you will take a life insurance policy that large, but it’s an excellent starting point — for him. After all, if he suggests $3 million but walks out of your house with an application for a $1 million policy, he wins. That’s because he knew going in the door that you probably only wanted a policy for a couple hundred thousand dollars.
And you’d probably be right. After all, if you have other investments and your spouse is also well-employed, you will only need a fraction of the life insurance coverage that the agent will suggest.
Most often, life insurance is only needed to settle final arrangements, medical bills, outstanding debts and maybe a few years of living expenses. Providing for your loved ones to live in luxury for the rest of their lives is an expensive you can’t afford, nor need.
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3. Whole Life Isn’t a Good Investment — Or Even Good Insurance
Life insurance agents like to sell whole life insurance as the best of both worlds–- an investment program with life insurance coverage. In truth, it doesn’t do either particularly well. The insurance benefit will be limited because the premiums are high. And since so much of the premium goes to pay for investment fees and the life insurance coverage, there is relatively little left over for investment within the plan.
4. The Cash Value of Whole Life Won’t Benefit You for Years
Life insurance agents like to hawk the virtues of the cash value build-up in a whole life insurance policy. This is another myth. As a rule, it will take at least five years before you will have a cash value that is equivalent to the amount of money you paid in premiums into the policy. And maybe not even then.
5. “Buy Term and Invest the Difference” Really Is a Better Strategy
There is probably no slogan confronted by life insurance agents that is more irritating to them than this one. And that’s because the slogan is true.
Since term insurance is so much less expensive than whole life, you can buy a lot more of it -– in fact a more reasonable amount for your needs. And the investment performance of mutual funds -– particularly index funds –- dramatically outperforms that of any insurance related investment vehicle.
Even if the combination of term life insurance and investment in a mutual fund is no less expensive than a whole life insurance premium, the money you will accumulate in the mutual fund — and the speed at which you will do it — make it a far superior investment to a whole life insurance policy. And you’ll have a whole lot more life insurance coverage along the way.
6. We Don’t Know About the Value of Long-term Care Insurance
From a consumer standpoint, there are two fundamental problems with long-term care insurance coverage:
It’s very expensive.
It’s not certain that you will ever need it.
Since people are living longer than ever, making a provision for long-term care has become a hot topic. Insurance agents know this, and they’re exploiting the fear.
Emotions aside, most people don’t need long-term care. And even if they do, it’s often for a short period just before death. If there are other assets available, particularly retirement assets or a home with substantial equity, long-term care insurance with my be unnecessary.
And if it isn’t ever needed, you will have spent tens of thousands of dollars over many decades funding an insurance policy that was never necessary. This is an important consideration when there are so many other priorities in your household budget.
Long-term care insurance is relatively new coverage, and it’s not at all certain that it will survive the test of time. Some insurance companies have withdrawn long-term care insurance coverage due to the inability to predict future medical costs or the longevity of their clients.
7. Your Kids Don’t Really Need Life Insurance
Life insurance agents love to sell whole or universal life insurance policies to parents of young children, stressing the advantages of the investment provisions of the policies. Those provisions, they argue, will help parents to provide funds for their children’s college educations. But nowhere is the advice of “by term and invest the difference” more relevant.
You should have only enough insurance coverage on your children to pay for final expenses and uncovered medical costs. In most cases, a $50,000 term life insurance policy will get that job done with money to spare. There is no need to replace lost wages with a ridiculously large policy.
And as we’ve already discussed, insurance related investment vehicles are underperforming investments. You’ll be far better off investing money in a mutual fund for your children.
8. There Is No FDIC Equivalent Back-Stopping Insurance Companies
This is a very relevant question – but seldom asked — since life insurance agents like to position themselves as investment advisers. The investments that they sell are almost always exclusively insurance products. However, there is no equivalent to the Federal Deposit Insurance Corp. that will back up the life insurance company in the event of investment failure.
There are arrangements within each state for companies to collectively backup a failed insurance company, but there is no apparatus in place to deal with a systemic failure such as the financial meltdown that hit the banks and financial companies a few years ago.
While this has obvious implications for the life insurance coverage that you pay for and expect to have, it becomes much more significant when you have a lot of money sitting in insurer-sponsored investments.
More Tips for Dealing With Life Insurance Agents
If you apply for life insurance, keep these four tips in mind from Jeff Root, a life insurance agent and founder of Rootfin.com. And again, they’re not tips your agent will be likely to recommend.
If you’re not satisfied, ask for reconsideration. Life insurance underwriters will always offer the best possible rate class as permitted by their underwriting guidelines; however, if you’re not happy with the life insurance company’s offer, your agent can submit a “reconsideration request” and ask the underwriter for a better offer. Most agents don’t even mention this as an alternative because of the extra work involved in drafting a letter convincing the underwriter why they should qualify for a better health classification.
Ask for tentative offers. Consumers can get “tentative offers” from life insurance companies before applying for life insurance. Independent life insurance agents send your risk anonymously to various underwriting desks. Underwriters typically reply within 48 hours with a health classification in what we call a “tentative offer”. You can attach this tentative offer to the life insurance application, and the company you apply with must give you this rate unless you withheld any information from them. This is a must for people with health issues applying for life insurance.
Shopping won’t necessarily get you a better rate. Going from website to website won’t result in finding better rates. However, each company looks at your health differently. It’s your agent’s job to fit your unique health situation into the underwriting guidelines of each company and then see who provides the best rates.
Most applicants won’t get the preferred best rate. Less than 5 percent of people who apply for life insurance can qualify for “preferred best.” Yet it’s the No. 1 health classification quoted on websites.
Disability insurance is the most underrated type of insurance, and one that I routinely would see clients skip. Who ever thinks they will become disabled?
Hard truth – According to some statistics from the Council for Disability Awareness, 1 in 4 workers who are 20 years old will be disabled before they retire. That’s a shocking number for most people to consider. If you can’t perform your job, you can’t earn money, and that’s where a disability insurance plan can save the day.
The best disability insurance companies make it easy to get a quote online. Below you can quickly get a quote from top rated disability insurance companies we recommend, or keep reading to learn more about disability insurance and its uses.
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Quotes From Top Rated Disability Insurance Companies We Recommend
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Quotes from the top disability carriers to ensure you find the best rates
Helps thousands of consumers apply for disability insurance each year
Rated Excellent on TrustPilot
Benefit terms range from 3 months to age 67
Choose your waiting period
Multiple riders add flexibility to your policy
Benefit periods from as little as 2 years or all the way to retirement age
Family care benefit provides coverage for up to a year if policyholder has to take off work to care for a child, spouse, or parent
10% discount to business owners and an additional 10% to preferred occupational classes.
Offers the option of Full Coverage for Mental/Nervous disabilities or a 10% discount for a 2 year limitation.
Rated A (Excellent) by A.M. Best for financial strength
What is Disability Insurance?
The idea behind disability insurance is simple.
It operates similar to a traditional life insurance plan, but instead of paying out upon your death, it pays out if you become disabled.
Coverage for these plans can vary in the size. Just like with other kinds of insurance plans, every disability policy is different.
If you already know what you want and just want to browse different rates from several carriers, click here.
Some plans are going to replace 45 %of your income, while others are going to give more replacement at 65%.
The more replacement coverage you want, the more you’re going to pay for your plan.
The Differences with Workman’s Compensation
When an employee suffers an injury on the job, oftentimes their employer will compensate them through worker’s compensation.
It is important to understand the difference between disability insurance and worker’s compensation – because the two are not the same thing.
The key difference between workers’ compensation and disability insurance is that workers’ compensation (or workers’ comp) pays for injuries that are work-related. Employers will obtain workers’ comp insurance in order to pay for incidents that occur on the job.
If workers sustain injuries on the job, it is oftentimes up to the employer to pay for the person’s medical bills, as well as for the individual’s lost wages if the employee must take time off work because of the injury.
An employee who collects payment via workers’ comp will typically, however, not have a long-term disability, but rather a temporary injury from which he or she will soon return.
On the other hand, disability insurance pays for a percentage of a person’s earnings if the insured is not able to work due to an injury or illness – regardless of whether that injury or accident happened at work or elsewhere.
In addition, if the disability insurance policy is an individual policy (versus an employer-sponsored group plan), the insured will be covered under the policy regardless of who he or she is employed through.
According to the Council for Disability Awareness, less than 5 percent of disabling accidents and illnesses are work related.
This means that the other 95 percent are not – and that these other 95 percent are also not covered by workers’ compensation insurance.
What About Social Security Disability Benefits?
It can be extremely difficult to qualify for Social Security’s disability benefits. For example, Social Security will only pay benefits if a person is considered to be totally disabled. This means that the individual cannot do work that they did previously, nor can they do other jobs either.
In addition, the person’s disability must have lasted, or be expected to last, for at least one year or result in death.
An individual must also have collected enough work credits in order to qualify for Social Security disability benefits.
You can take a look at the 2019 Social Security Administration limits and rates for OASDI and social security here.
The number of credits will be dependent on the age that the individual is when he or she becomes disabled.
With that in mind, the importance of disability insurance becomes even more clear.
This type of insurance can provide you with the additional funds that you need to help pay living expenses – without the need to dip into savings, retirement assets, or worse yet – use credit – for the purpose of paying day to day bills until you are back on the job.
If Social Security deems that a person’s situation qualifies, there is still a five month waiting period before benefits are paid.
This, too, can create a financial hardship for many people in terms of paying living expenses – especially if there are added medical costs due to the illness or injury that has been suffered.
So, we know Social Security won’t give the money you need and workman’s comp probably won’t cover it, so now what?
This is why you should explore a private disability insurance policy.
Types of Disability Insurance
The two main types of coverage are long-term disability and short-term disability.
You can probably guess from the name, but short-term policies are designed to cover employees for a much shorter time, anything shorter than two years.
Long-term disability, on the other hand, is built for anything past two years. A long-term disability insurance policy could continue to pay out for the rest of your life if it’s needed but typically runs from 5-10 years.
Some of the common causes for short-term disability insurance include:
having a baby
a severe illness
a major injury.
Long-term disability could include a lot of things, but some common causes are:
or serious injuries
Long-Term Disability vs. Short-Term Disability
Aside from the obvious, there are a few key differences between long-term disability and short-term disability.
One of those is the waiting period for a payout.
With short-term, policyholders can start receiving weekly checks as quickly as a 1 to 7 days after you file a claim for the policy.
With a long-term disability insurance policy, on the other hand, it can be anywhere from 90 days to 180 days.
If you’re looking at the cost difference between the two plans, short-term policies are going to be significantly more affordable than its long-term counterpart. Long-term plans can give you years more coverage which could translate to thousands and thousands of additional coverage from the insurance company.
Another key difference between the two kinds of plans is how you can get the coverage.
A lot of companies offer their employees short-term disability insurance, but almost no companies have a long-term disability insurance program.
If you want to get the long-term coverage, you’ll have to purchase a plan through a private insurance company. If your company offers any type of short-term disability insurance, you should always enroll in the program.
Group, Individual, Multi-life
Inside of the two main types of disability insurance are several “sub-types” of coverage.
One of those is group coverage.
These are policies which are offered through an employer and are offered to all the employees. Group coverage could be either short-term disability or long-term disability.
Employer-sponsored short-term plans are designed to pay for any disabilities which occur outside of the workplace. Short-term disabilities are much more common than long-term disabilities which could impact you for the rest of your life.
Individual Disability Insurance
If your company doesn’t have any sponsored plans, you can purchase a private policy through an insurance company.
You’ll be required to answer some medical questions and depending on the plan, take a medical exam.
Multi-Life Disability Insurance
When you’re shopping around for a disability insurance policy, you’ll probably come across plans being sold as “multi-life plans.”
The idea of these plans is to get several key people in a business (think of several doctors in a practice) to all apply at the same time with their plan.
The insurance company markets these policies as multi-life so they can offer simpler underwriting processes and pass some of the savings onto the policyholders.
Is Group Disability Enough?
For the employees who are lucky enough to get disability insurance through their employer, you still might be lacking. Just because you have a plan through your job, it might not be enough.
Let’s say you’re not able to go to work because of an accident. You can’t get to your job and pull in your paycheck, are you going to be able to pay for all of your monthly bills without having to make any extreme sacrifices.
To determine if your group disability insurance is enough, you’ll need to do some basic math.
Look at your plan and see how much coverage it provides.
For this example, let’s say it pays 50% of your salary. Now, take a look at your bills and expenses.
If the total of those numbers is more than 50% of your income, then your group disability isn’t enough.
If you’ve crunched the numbers and came to the jarring realization your group plan isn’t enough, the best choice is to purchase an additional individual plan.
Both of the policies can work together, and your individual plan can pick up the slack left behind.
What’s the Difference Between Owner-Occupation and Any-Occupation?
One of the most important things to understand about disability insurance plans are the differences between an owner-occupation plan and an any-occupation plan.
They may sound the same, but they completely change how your plan operates and the coverage it will give you.
First, let’s look at owner-occupation (sometimes called own-occupation protection). Policies with this protection will only pay out if you can no longer to the duties and tasks required to you by your job.
If you’re an electrician, but you can not do the simple tasks required on a day-to-day basis, then an own-occupation plan will pay you the benefits.
Any-occupation policies will only pay the benefits of the plan if you can no longer perform any occupation based on your education and work experience.
As you can tell, any-occupation policies have much stricter rules on the circumstances in which they will pay the policyholder.
Type of Disability Insurance
Description of Disability Insurance
Short-term disability insurance
Provides coverage for a limited period of time, usually up to 6 months, and replaces a portion of your income if you are unable to work due to illness or injury.
Long-term disability insurance
Provides coverage for a longer period of time, typically until retirement age, and replaces a portion of your income if you are unable to work due to illness or injury.
Group disability insurance
Provided by an employer as part of a benefits package, group disability insurance offers coverage to all employees and may be offered as short-term or long-term disability insurance.
Individual disability insurance
Purchased by an individual, this type of disability insurance offers customized coverage and can be either short-term or long-term disability insurance.
Own-occupation disability insurance
Offers coverage if you are unable to work in your specific occupation due to illness or injury, even if you are able to work in a different occupation.
Any-occupation disability insurance
Offers coverage only if you are unable to work in any occupation due to illness or injury.
Residual disability insurance
Offers coverage if you are able to work but have a reduction in income due to illness or injury.
How Much Does Disability Insurance Cost?
Now for the part everyone wants to know, how much is a disability insurance plan going to cost you?
Well, there are a lot of different factors which are going to affect how much the premiums are. It’s difficult for me to give an exact number without knowing your exact situation.
For example, the age of the applicant is going to play a major role in the premium rates. If a 25-year old applies for a policy, it’s going to be significantly cheaper than a plan for a 45-year old.
The general rule of thumb for disability insurance is the premiums are going to be anywhere from 1% to 3% of your gross income.
If you are making $100,000, you can budget for $1,000 – $3,000 every year.
As I mentioned, there are dozens of different factors which will completely change how much you pay.
If you’re a smoker, then you’re going to pay much more for your plan.
If you have a riskier job, you’re going to pay more.
The rule of thumb is exactly that.
How Much Disability Insurance Do You Need?
I alluded to the amount of disability insurance earlier in this article, but now let’s take a hard look at how much coverage you should have.
Not having enough disability insurance protection could cause some serious financial strain if something were to happen.
First, let’s look at your living expenses. If you don’t already have a budget, take some time to look at all of your monthly bills (power bill, water bill, mortgage payment, etc.) and your spending (groceries, gas, etc.).
On top of those monthly expenses, add in a few “unexpected” bills as well. You never know when something is going to break or an extra bill is going to pop up.
You want to have some cushion in your budgeting. Otherwise, you end up living paycheck-to-paycheck.
After you have the monthly expenses number, you can do some subtracting.
If you aren’t working, your expenses are going to look very different than they do now. For example, if you aren’t driving to work every day, you probably won’t be spending as much on gas.
You won’t be spending money on work clothes, and you will probably cut out some additional “entertainment expenses” as well.
Now you have a new number, your monthly expenses minus some tweaks.
The next number you want to add to the equation is any income you’ll make from other sources besides your disability insurance plan.
This category can include any money from your investments, money from your spouse or partner’s job (or a second job if they decide to add another job) and any additional disability income you may qualify for.
If you’re the main income earner in your home, then having disability insurance is one of the most important purchases you can make.
For most people, they purchase disability insurance for their family and loved ones. for others, they buy a plan to protect their business.
If you’re one of the foundational workers in your business (ex. an owner, CEO, etc.), then you should consider buying a disability insurance policy for your company.
Key man plans operate a little differently than a traditional disability policy. With these policies, the business pays the premiums for the plan, and if something were to happen to you and you couldn’t perform your job, then the business is going to get the money from the payout.
These policies are a way for the companies to protect themselves against financial struggles if a key person in the business were unable to work because of illness or injury.
The company can use this money to outsource those duties or to hire someone to replace the key person while they are out with the disability.
Disability Insurance for High Income Occupations
There is a certain group of people which disability insurance could have some serious problems.
If you are a high-income earner, the standard disability insurance policy simply may not be enough. Just about every insurance company which sells one of these plans is going to have an income limit.
Regardless of the percentage they replace, they are not going to offer more than that limit.
Typically, these are doctors or lawyers who own their own firms, for example.
Some policyholders may find the insurance company’s limit is below the 60% they offer in income insurance.
If you’re one of these people, there are some things you can do to get the protection you need, regardless of how much money you make every year.
One option is to choose a company who offers higher limits. Each company has different coverage limits on their policy. We can help you shop around until you find one with a high enough limit for your needs.
Another route is to buy two separate plans from different companies. Sure, you’ll pay more in premiums every month, but you’ll have the protection in place if you ever need it.
Where to Get a Disability Insurance Quote
You now know the basics of disability insurance coverage, it’s time to go out and find a policy of your own.
There are more than 40 insurance companies which sell these plans. As I mentioned, they are all different. Some are going to have higher limits, offer a larger percentage, or have cheaper rates.
You need to find a company which suits your needs.
Before you pick a company, compare the rates and plans from several companies. You don’t buy the first house you see, why would you buy the first policy you find?
Sure, you can use your own time to contact those 40+ companies individually, or you can use a tool which will do the dirty work for you.
If you’ve decided you want to get disability insurance or supplement the coverage you already have from work, check out PolicyGenius. They are one of the few companies out there which can gather quotes from dozens of companies for disability insurance, all in one place.
PolicyGenius allows you to tailor your quotes to exactly the kind of policy you’re looking for; the perfect amount of coverage with the proper waiting period.
They know shopping for insurance isn’t easy, but they make it as quick as possible.
FAQs – Best Disability Insurance Quotes
How can I get the best disability insurance quotes?
To get the best disability insurance quotes, it’s important to shop around and compare policies from different insurance companies. You can request quotes online or by speaking with a licensed insurance agent. Be sure to provide accurate information about your occupation, income, and health to receive an accurate quote.
What factors can affect the cost of disability insurance?
The cost of disability insurance can be affected by several factors, including your age, occupation, health status, and the type and amount of coverage you select. Policies with longer benefit periods or more comprehensive coverage may be more expensive.
How much disability insurance coverage do I need?
The amount of disability insurance coverage you need depends on factors such as your income, monthly expenses, and savings. A general guideline is to have enough coverage to replace 60% to 80% of your income, but this may vary depending on your individual circumstances.
Dorothy was right: There is no place like home. Home is where we feel safe and relaxed in the familiarity of our surroundings — the sheets are just right, our favorite chair welcomes us, and we know, half-asleep and at 1 a.m., that we can get to the bathroom in exactly 10 steps.
But it turns out we might not be as safe as we think. According to the Home Safety Council (HSC), home-related injuries cause nearly 20,000 deaths and 21 million medical visits each year. HSC’s State of Home Safety in America report found that unintentional home injuries cost an average of at least $222 billion each year in medical costs between 1997 and 2001, far greater than costs from other home injuries such as violence ($98 billion) or suicidal acts ($96 billion).
Yet most of us, myself included, fail to take these numbers seriously. HSC polled Americans on the injury prevention actions they took in their homes and found that an alarming number failed to appreciate the risk and lacked either the motivation or knowledge to reduce it.
The good news is that most home injuries are avoidable with a few simple modifications, ranging in price from free to $40. Learn how easy and inexpensive it is to protect your family from the five leading causes of injury, as reported by the HSC.
Falls Each year 5.1 million Americans are injured by falls that occur in and around the home. Falls are the leading cause of home injuries and account for one-third of unintentional home injury deaths.
Put a nonslip mat or safety treads on the tub floor and use grab bars when you get out of the shower: $4-$10.
Turn on area lights when using stairs, steps, and landings: $0.
Use handrails on both sides of stairs and steps, and shoo pets away from your path (I know, easier said than done): $0.
Use a proper ladder for climbing instead of a stool or furniture: $0-$30.
Poisonings The second leading cause of home injuries, more than 2 million poisonings are reported to the Poison Control Center each year, yet only 1% of respondents in the HSC survey considered it a top concern.
Lock poisons, cleaners, medications, and other dangerous substances away from a child’s reach: $0.
Keep all cleaners in their original containers, and do not mix them. Even better? Buy non-toxic all-purpose cleaners from brands like Method or Seventh Generation, or make your own: $2-$6 for 32 ounces of self-made or purchased cleaner solution.
Use medications carefully, following the directions. Use child-resistant bottles, but don’t rely on them: $0.
Install carbon monoxide detectors in bedrooms: $20-$30 per detector.*
If someone is unconscious, is having trouble breathing, or is having seizures, call 911, but if someone seems okay and you think they may have ingested poison or you have a question, call the National Poison Control Hotline. Put the number in your phone’s address book or near the home phone (only one-fifth of polled Americans reported doing so) — it’s 1-800-222-1222: $0.
Radon is a cancer-causing, radioactive gas that you can’t see, smell, or taste. The Surgeon General has warned that radon is the second only to smoking as the leading cause of lung cancer in the United States. Test your home at least every two years or when living patterns change: $15 (or free — some state programs offer low-cost or free kits, contact your state radon contact for more information).
Fires and burns Of all fire- and burn-related injuries, 90% occur in the home. We know we should have a fire extinguisher and smoke detectors in the home (93% of the people polled did have smoke detectors installed), but most of us slack off on other precautions such as fire escape ladders (only 6% reported having one) and a family escape plan (just 26% had one).
Have working smoke alarms: about $3 to replace batteries, $20 per smoke detector.*
Create a family fire escape plan: $0.
Two story home? Keep a fire escape ladder near each upstairs bedroom window: $35+ per ladder.
Don’t leave the stove when cooking, especially when frying food, and consider keeping an easy-to-use fire extinguisher near the range: $0-$12.
Space heaters should be three or more feet away from anything flammable and turned off when you leave the room or go to sleep: $0.
If you smoke, smoke outside and put water in ashtrays before emptying. Lock matches and lighters away from a child’s reach: $0.
Blow out candles before leaving the room or going to sleep, or replace real candles with flameless ones — new battery-operated candles are made with scented wax and create a flickering glow: $0, or $10 for a 6-inch flameless candle.
Set the hot water heater at or below 120 degrees Fahrenheit to prevent burns, and test bathwater temperature before children climb in: $0.
Choking and suffocation The easiest way to prevent most choking-related deaths? Sit, and require children to sit, while eating. Only 39% of adults require children to do so.
If an item can fit through a toilet paper tube, it can cause a young child to choke. Keep small items out of children’s reach: $0.
Don’t put pillows, comforters, or toys in a child’s crib: $0.
Tie or clip the loops in window cords up high where children can’t reach them: $0.
Read the labels on all toys, especially the recommended age: $0.
Cut food into small bites for kids, and both kids and adults should sit down when they eat and chew slowly: $0.
Drowning Most drowning deaths at home are related to swimming pools and spa tubs, but there are easy ways to keep everyone safe this summer.
Sounds obvious, but stay within arm’s reach of children in and around water. This includes bathtubs, toilets, pools, and spas (more than half of the HSC survey respondents failed to do so): $0.
Keep the gate around your pool closed and locked: $0.
Empty large buckets and wading pools after use and store upside-down: $0.
To avoid suction entrapment, don’t use a pool or spa if there are broken or missing drain covers: $0, or $15+ for a drain cover replacement.
Research the safest pool cover for your type of pool: price varies.
*Rather than buying separate carbon monoxide detectors and smoke alarms, install a single unit that does both: $40-$50.
Is your safety to-do list as long as mine? Know any easy fixes that make your home a safer place for your family? I’m embarrassed to say that buying carbon monoxide detectors and testing for radon are two things I have always meant to do, but never got around to doing them. June is Home Safety Month, though, so it’s the perfect time to check it off my list!
This is the third part in a short series about insurance basics. In the first part, I explained how insurance works. In the second, I shared some general tips about how to save on insurance of all types. Today’s article offers info about auto insurance.
You’ve had car insurance since you were old enough to drive, but how much do you really know about it? At its heart, your policy probably contains a few basic types of coverage.
In most states, you at least need to have liability insurance, which covers the cost of any damage you do to other people or things with your car. (But note that liability insurance doesn’t cover injuries to you or other people on your policy; for that, you need PIP insurance, which I’ll cover in a moment.)
Insurance companies like to quote liability coverage as a series of three numbers, like 50/200/25. If that’s Greek to you, here’s a break-down:
The first number is how much, in thousands of dollars, the policy will pay for each person (besides you) injured in an accident ($50,000 in this example).
The second number is the total that the policy covers for each accident ($200,000 here).
And the last number tells how much property damage will be reimbursed ($25,000 in this case).
But there’s more to auto insurance than just liability coverage.
Tip: Many experts recommend that you carry automobile liability insurance coverage equal to your net worth — the total value of everything you own. This can be expensive to do on individual policies. Instead, it may be more cost effective to buy an umbrella policy, which gives you extra liability coverage above what your home and auto policies provide. I don’t know much about umbrella policies, but I’m actually hoping to learn more about them. If you’d like, I can share what I learn.
Collision and Comprehensive Insurance
As you can probably guess, collision insurance covers damage to your car when it hits (or gets hit by) another vehicle or object. But because collisions aren’t the only way for your car to get banged up, comprehensive insurance covers damage from events other than collisions: floods, fire, theft, alien invasion, and so on.
Collision and comprehensive coverage make more sense for newer vehicles, and are generally required if you’re still making payments on your car. They’re less necessary — and may actually be a waste of money! — on older cars. So, if you’re still driving around that 1970 AMC Gremlin, ditch the collision and comprehensive.
Personal Injury Protection (PIP) Insurance
PIP insurance is sometimes called “no-fault” insurance and is required in certain states. It covers medical costs (and possibly lost wages) if you’re injured in an accident. Your policy may also cover passengers and pedestrians.
Uninsured Motorist Insurance
No surprise here: Uninsured motorist insurance covers you and your passengers if you’re in an accident caused by a driver who doesn’t have insurance. It also covers hit-and-run accidents.
How to Save on Car Insurance
Every year, you spend hundreds — maybe even thousands — on car insurance, and chances are, you’re paying too much. The August 2008 issue of Consumer Reports estimated that the average family could save $65 per month by shopping around for car insurance.
Last week, I gave some general tips to save on insurance of all types. Here are some other ways to lower your costs on car insurance:
Ditch towing coverage. Towing — or “emergency roadside service”, as it’s sometimes called — is an easy cost to self-insure. (You likely pay $10 to $30 a year for towing insurance, and one tow costs about $100, which you can save quickly by not paying for towing insurance.) Sometimes your car will break down, but if it’s well maintained, that won’t happen often. Also note that if you’re in an accident, towing is usually covered under collision insurance — but check your policy to be sure.
Plan ahead. Compare auto insurance quotes before you buy your next car. Insurance costs are based on how likely a car is to be stolen, damaged, or to inflict damage, and how badly occupants tend to be hurt in accidents. Repair and replacement costs are also factors. Many insurance companies list cars with lower insurance costs on their websites.
Watch your credit. Most insurance companies now look at parts of your credit report to determine your premiums. This sucks, I know, but parts of your credit history have been found to correlate to what the company has to pay out. They can’t adjust your rates on your current car if you pay on time and in full, but anytime you add a new vehicle, its premiums can be affected by your credit.
Don’t pay monthly. Insurance companies charge a few bucks each month for monthly billing. To avoid that fee, pay every six months or even once a year, if possible. If you have to pay monthly, use your insurance company’s autopay program, which costs less because they don’t have to send you a paper bill.
Though it’ll always cost more to insure a new Corvette than a used Corolla, one of the best ways to keep costs low is to maintain a clean driving record. Insurance companies charge you based on how likely you are to file a claim — and accidents are the biggest source of claims.
Some insurance companies offer discounts for taking safe-driving courses. Others give low-mileage discounts — the less you’re on the road, the less likely you are to be in an accident. Be sure to ask about all the discounts you qualify for!
Note: Much of this material was drawn from the “Death and Taxes” chapter of my book, Your Money: The Missing Manual, which was published earlier this year by O’Reilly Media. You can download a sample chapter here. Image by Incase Designs.
Whether through recent news articles or over the water cooler, you’ve probably heard something about reverse mortgages. But if you (or a loved one) is considering this type of loan, don’t base your opinion on hearsay. For such a major financial decision, it’s worth getting the facts about reverse mortgages. This type of mortgage can actually be a valuable option for people in the right circumstances and who understand the terms of the deal.
Reverse mortgages convert home-equity into cash What is a reverse mortgage? If you own a home and are 62 or older, a reverse mortgage is a way to convert some of your home equity into cash. Rather than make monthly payments to your lender, your lender is making payments to you. The money you borrow through a reverse mortgage is paid back, with interest, when you move out of your home, sell your home, or die.
The older you are and the more valuable your home, the lower the interest rate you can get in a reverse mortgage — meaning you can borrow more money.
Why and how do people use the money borrowed through a reverse mortgage? Cashing out home equity in this way can be helpful if you have a fixed income and need more money to pay for household bills, debt, medical costs, home repairs, or other expenses. The money from a reverse mortgage can be paid out as a lump sum, in regular payments, or as a line of credit.
Unlike with traditional mortgage loans, your credit history does not matter with a reverse mortgage. However, the house must be your primary residence, so vacation homes and investment properties do not qualify.
Effect on taxes and government program eligibility If you’re concerned that the additional money will boost your income tax liability, don’t be. Money obtained through a reverse mortgage loan is not considered taxable income. You also keep the title to the home and can never be forced to move as long as you pay the property taxes and insurance. If you and your spouse take out a reverse mortgage together, the loan isn’t due until both spouses have moved or died.
If you receive regular Social Security or Medicare payments, they won’t be affected by taking out a reverse mortgage. However, your eligibility for Medicaid payments could be affected. Money received from a reverse loan may be considered an asset and could keep you from getting Medicaid.
For example, if you receive $4,000 from a reverse mortgage and spend it all the same calendar month, you can receive Medicaid, according to the National Reverse Mortgage Lenders Association. If you spend some of it and put the rest in your savings account, that’s where you can run into problems. If your total liquid assets exceed $2,000 ($3,000 for couples) the next month, you wouldn’t be able to receive Medicaid.
Are you a spendthrift? One of the disadvantages of a reverse mortgage is that getting money this way won’t correct poor spending habits. If you have trouble managing your money, a reverse mortgage won’t solve your financial problems.
For some folks, getting their hands on a large sum of cash may result in poor spending choices that could leave them without enough money for basic living expenses later on. Who hasn’t heard horror stories of retirees blowing reverse mortgage money in record time on expensive vacations, meals, cars, and other frivolous purchases? Anyone who really has a problem with debt and managing money may need to speak with a credit counselor.
Credit counseling differs from reverse mortgage counseling, which is mandatory for most reverse loans. This free or low-cost counseling can be done in person or by phone. The goal of counseling is to get detailed reverse mortgage information to help you decide if using one of these loans is a wise choice. Counseling can help you review other alternatives to getting a reverse loan. Find a HUD-approved counselor to talk through your options. Seniors who use reverse mortgages can reap a lot of benefits, but these loans aren’t for everyone.
Your home appraisal You may not benefit much from a reverse loan if you don’t have enough home equity. When you apply for a reverse mortgage, your home will be appraised to determine its current market value. The more equity you have in your home, the more money you can potentially receive through a reverse mortgage. After the past year’s market performance, it’s worth noting that no matter what happens with the housing market, the amount owed on a reverse mortgage never exceeds its market value at the time a house is sold.
Just make sure you really want to cash out that home equity. When you own a home free and clear, you can leave it to your heirs without too many restrictions in most cases. But with a reverse mortgage, one of the disadvantages is that if you want your heirs to have the home, they (or your estate) must pay off the loan balance first. They also could choose to sell the home and keep any remaining equity after repaying the lender. If they don’t want the home, they can do nothing and the mortgage lender takes the property.
Reverse mortgage disadvantages: Loan fees Reverse mortgages usually have a lot of upfront costs, so you may want to consider other alternatives to getting more funds if you plan to move from your home in a few years. Some other ways to improve your cash flow are to redo your budget to reduce expenses, get a home equity loan or no-interest loan from a local government agency or nonprofit, or look for grants for homeowners in your area.
One thing to remember is that the US Department of Housing and Urban Development’s Home Equity Conversion Mortgage (HECM) allows you to use the proceeds from to buy another home as your primary residence. So you can use the money from a reverse mortgage to downsize to a less expensive place.
Get the reverse mortgage facts to help you decide As more seniors have struggled to make ends meet in recent years, reverse mortgages have grown in popularity. Some consumer advocates and legislators say reverse home loans are heading for another meltdown like subprime mortgage loans. Others believe that these loans have a lot of value and can help seniors live more comfortably in their golden years.
It’s up to you to make the right decision based on your personal financial situation. And don’t let pushy salespeople pressure you into signing up for a reverse mortgage without understanding all the consequences. Talk to a counselor to discuss reverse mortgage facts and whether one makes sense for your needs.
J.D.’s note: I know absolutely nothing about reverse mortgages. In fact, before doing research for my book, I had vaguely negative feelings about them. But lots of financial experts I trust think they’re a good option — in some cases. Do YOU know anyone who’s taken out a reverse mortgage? Are they glad they did? Or do they wish they hadn’t?
While Minnesota life did not make the Good Financial Cents® top 10 life insurance companies it did get an honorable mention and we have had great success working with this company.
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The History of Minnesota Life Insurance Company
Since 1880, Securian Financial Group has been the holding company and parent of Minnesota Life Insurance Company and Securian Life – as well as their affiliates. This financial powerhouse specializes in working with employers to offer financial, retirement, and insurance plans to their employees.
And, for more than 80 years, Minnesota Life Insurance Company has provided businesses with customized solutions to their employee benefit needs, as well as with expertise in administering large public and private employer plans to small and medium sized municipal employers. This insurer also offers individual insurance options.@media(min-width:0px)#div-gpt-ad-goodfinancialcents_com-medrectangle-3-0-asloadedmax-width:300px!important;max-height:250px!important
This insurance company insures more state plans than any other group insurer. It also counts 20 percent of the Fortune 100 companies as its clients. Also, it is proud to offer industry leading technology, such as the first mobile optimized website for group insurance transactions.
Minnesota Life Insurance Company Review
The unique brand of service that is provided by Minnesota Life Insurance Company has established the company as a valued partner and a premier provider in the group insurance coverage arena. Just some of the quality and exceptional service that Minnesota Life Insurance is known for includes the following:
100 percent of the insurer’s new clients recommend its implementation services;
The company pays out 99 percent of death claims within ten calendar days of receiving proof;
The insurer offers technological solutions to ease its policyholders’ administrative load;
The average tenure of the company’s staff is 12 years.
Its parent company, Securian, is also considered to be strong and stable. Securian has nearly 15 million customers, and more than 5,000 associates and representatives in its headquarters in St. Paul, Minnesota, as well as in sales offices around the country. Also, the company has more than $1 trillion of insurance in force, and in just the year 2014 alone, it paid out more than $4 billion in benefits to its customers.
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The Financial Strength and Ratings of Minnesota Life
The parent company of Minnesota Life Insurance Company, Securian, has been provided with extremely high ratings from the insurer ratings agencies. These include:
A+ (Superior) from A.M. Best. This is the 2nd highest of a possible 16 total ratings.
AA (Very Strong) from Fitch. This is the 3rd highest of a possible 19 total ratings.
Aa3 (Excellent) from Moody’s Investors Service. This is the 4th highest of a possible 21 total ratings.
A+ (Strong) from Standard & Poor’s. This is the 5th highest of a possible 23 total ratings.
Life Insurance Products Offered
Minnesota Life Insurance Company offers both term and cash value life insurance policies. Life insurance policies are individual and group in nature.
For the group plans that are offered, regardless of whether these are offered as basic or as voluntary plans, group life insurance products are considered to be the mainstay of most employee benefits programs – and Minnesota Life Insurance Company provides them all.
Group life insurance products that are offered through Minnesota Life include the following:@media(min-width:0px)#div-gpt-ad-goodfinancialcents_com-banner-1-0-asloadedmax-width:580px!important;max-height:400px!important
Group Term Life Insurance Coverage – Group term life insurance coverage offers life insurance protection for a set period of time. This type of life insurance will pay out a benefit only if the insured passes away during the term that the coverage is in force. With term life insurance, there is no cash value build up.
Group Universal Life Insurance Coverage – A group universal life insurance plan will combine the protection of life insurance coverage along with the option to build up savings with cash value. This cash value account will earn a fixed rate of interest.
Variable Group Universal Life Insurance Coverage – A variable group universal life insurance plan will offer a death benefit, and will provide the option to invest in a variety of different investments, and will also make allocations to a guaranteed account. With a variable group universal life insurance policy, the investment “sub-accounts,” there can be some both potential risks and rates of return so that employees may “customize” their investments to meet their specific financial goals. These investments can fluctuate, and when they are redeemed, they may be worth more or less than the amount that was initially invested by the employee. These plans may be designed to include a guaranteed account that offers a fixed rate of return that is guaranteed never to fall below three percent. The guarantees for the guaranteed account are based only on the financial strength and claims-paying ability of Minnesota Life Insurance Company, which are important. However, this has no bearing on the performance of the individual investment options.
Accidental Death and Dismemberment Insurance – Accidental death and dismemberment, or AD&D, coverage provides a benefit if the insured attains bodily injuries that result in death or dismemberment as a result of an accident.
Business Travel Accident Insurance – Business Travel Accident, or BTA, insurance will provide a lump sum benefit if the insured dies or is injured due to a covered accident while he or she is traveling for business.
Critical Illness insurance – If an insured is diagnosed with a condition that is covered in a critical illness insurance policy, then the lump sum benefit may be used in any way that the insured chooses. These may include making mortgage payments, paying for child care, or paying for any out-of-pocket medical costs.
Accident insurance – The accident insurance that is provided by Minnesota Life Insurance Company will offer a payout to use in any way that the insured wishes that can cover deductibles, out-of-pocket medical expenses, or even everyday living expenses.
Other Coverage Products Offered by Minnesota Life Insurance Company
In addition to term and permanent life insurance coverage, and the accidental death and dismemberment (AD&D) insurance protection, accident insurance, and critical illness insurance to both large employers and to executive groups across the nation, this insurer also partners with Zurich International Life in order to provide group life insurance coverage for global employees.
Individual annuities are also offered by Minnesota Life Insurance Company. These can help individuals to ensure that they will have an income for the remainder of their lives, by paying out a guaranteed income stream on a regular basis, regardless of how long the person lives. Also, retirement plans are also offered through Minnesota Life Insurance Company.
They have an IncomeToday! Annuity, which is an immediate income annuity (as you can probably guess from the name). With these annuities, you pay one lump sum and then you’ll start receiving paychecks immediately. If you’re getting close to retirement, you might be worried about having enough money, but that’s where these annuities come in.@media(min-width:0px)#div-gpt-ad-goodfinancialcents_com-large-leaderboard-2-0-asloadedmax-width:300px!important;max-height:250px!important
Aside from the immediate paycheck, there are several other annuity options that you can choose. One popular is a fixed indexed deferred annuity. These are annuities that are based on the performance of the markets. That means that these annuities are going to give you guaranteed income, but there is a chance that they could earn you much more.
Another type of annuity that you can choose to supplement your retirement income is variable deferred annuities. When you invest in a variable deferred annuity, there are several options for investing your money. The investment options of the annuity can reflect your risk tolerance and you can change the investments as you get closer to retirement.
Through the parent company of Minnesota Life Insurance Company, Securian, there are many additional insurance and financial products that are offered, too. These include retirement plans, investments, and executive benefits. Because employers are this company’s key market, Securian works with groups in identifying the right plan types for their needs – from profit sharing and 401(k)s to defined benefit and cash balance plans.
The 401(k) plan design options are based primarily on employer goals, as well as the budget and demographics of the particular employer. Investment options can be selected from more than 5,800 unique investment options, and investment allocation portfolios are based on age or risk tolerance. Profit sharing and matching contribution components are also available.
While few employers offer defined benefit plans today, Securian helps companies to differentiate themselves and offer their employees the security of knowing that they’ll have an income for life with a pension income. Regardless of how the investments in the plan perform, the participants in this type of plan will be able to still receive a set amount of retirement income.
Cash balance plans are also available through Securian. These types of plans can help an employer to essentially bridge the gap between a traditional defined benefit plan and a defined contribution plan such as a 401(k). The qualified plan products that are offered by Securian are done so via a group variable annuity contract that is issued by Minnesota Life Insurance Company. While the company (Securian) works with employers of all sizes, it specializes in plans that have assets up to approximately $200 million.
A reverse mortgage may help older Americans who find they need more money in retirement. It’s common for inflation and rising medical costs to be issues. A reverse mortgage allows them to convert some of their home’s equity into cash, which can benefit their financial situation.
Protections established over the past few years by the U.S. Department of Housing and Urban Development (HUD) focus on lowering the risk previously associated with reverse mortgages. What’s more, the federal and state governments have taken aim at deceptive marketing practices that can minimize the complex aspects of reverse mortgage agreements.
That said, it’s wise to proceed with caution. There are still considerable cons to reverse mortgages, and borrowers may be unaware of the finer points. One important fact: It is possible to lose one’s home if you don’t comply with all the loan terms. Take a closer look at this topic here.
Why Do People Choose a Reverse Mortgage?
A reverse mortgage allows qualifying homeowners age 62 and older to convert part of the equity they’ve built up in their primary residence into money they can use to pay off their existing mortgage or for any other expenses that come up in retirement (from health-care costs to home repairs).
The big selling point for reverse mortgages is that the loan usually doesn’t have to be paid back until the last borrower, co-borrower, or eligible non-borrowing spouse dies, moves away, or sells the home. And when it is time to repay the loan, neither the borrower nor any of the borrower’s heirs will be expected to pay back more than the home is worth.
Main Types of Reverse Mortgages
There are three basic types of reverse mortgages. The most common is a home equity conversion mortgage (HECM), which is the only reverse mortgage insured by the U.S. government and is available only through an FHA-approved lender. An HECM can be used for anything, but there are limits on how much a homeowner can borrow.
There are also proprietary reverse mortgages, which are private loans that may have fewer restrictions than HECMs — including how much a homeowner can borrow.
And there are single-purpose reverse mortgages, which are typically offered by nonprofit organizations or state or local government agencies that may limit how the funds can be used. Most of the time, when someone refers to a reverse mortgage, though, they’re talking about an HECM.
Reverse Mortgage Terms to Know
There are safeguards in the reverse mortgage process that protect borrowers, but there are also loan terms borrowers are required to uphold or risk defaulting and potentially triggering a mortgage foreclosure. They include:
Staying Current With Ongoing Costs
Borrowers must stay up to date on property taxes, homeowners insurance, homeowners association fees, and other costs, or they could risk defaulting on the loan. An assessment of a borrower’s ability to pay for those ongoing expenses is part of the reverse mortgage application process, and if it looks as though money might be tight, a lender may require a borrower to set up a reserve fund, called a “set-aside,” for those costs. (In this way, it’s akin to an emergency fund, which is there to cover expenses if needed.)
Maintaining Full-Time Residency
Borrowers (and eligible non-borrowers) must use the home as their primary residence — the home they occupy for most of the year. If they move out of the house or leave the home for more than six months, or receive care at a nursing home or assisted living facility for more than 12 consecutive months, it could result in the lender calling the loan due and payable.
The lender also may choose to accelerate the loan if the borrower sells the home or transfers the title to someone else, or if the borrower dies and the property isn’t the principal residence of a surviving borrower.
Keeping the Home in Good Repair
Because the home is collateral and may have to be sold to repay the loan, lenders may require borrowers to do basic maintenance that will help the property keep its value (e.g., repairing a leaky roof or fixing a problem with the electrical system). If an inspector feels the home is not being properly maintained, the lender could take action.
What Happens If a Reverse Mortgage Borrower Defaults?
If the homeowners default, the first thing that could happen is that future loan payments may be stopped. And if the problem isn’t corrected within the lender’s stated timeline, the loan may become due and payable, which means the money the lender has distributed to the borrower, plus any interest and fees that have accrued, must be repaid. In that case, the borrower typically has four options:
• They can pay the balance in full and keep their home.
• They can sell the home for the lesser of the balance or 95% of the appraised value and use the proceeds to pay off the loan.
• They can sign the property back to the lender.
• They can allow the lender to begin foreclosure.
No matter what the homeowners decide to do, the process could take months to complete. HECM lenders may offer borrowers additional time to fix the problem that put them into default, or the borrowers may qualify for extensions or a repayment plan.
But in the meantime, there could be other implications — if the homeowners are no longer getting money they need to pay their bills or if the lender reports the default to credit monitoring agencies — that could affect the homeowners’ credit scores.
A Few Alternatives to Consider
The advertisements some lenders use to sell their reverse mortgages can be convincing, and some seniors may see these loans as a convenient way to get some extra cash or as a much-needed lifeline.
But, as with any financial decision, there are advantages and disadvantages — and alternatives — to be considered. There are other ways homeowners may be able to get help that could be less complicated and less limiting than a reverse mortgage.
Here are a few options:
• Borrowers may wish to tap into their home’s equity with a traditional home equity loan or home equity line of credit. They’ll have to make monthly payments, and their income and credit history will be considered when they apply, but the terms may be more flexible and the overall cost may be lower than a reverse mortgage. Because the home is used as collateral, there’s still a risk of foreclosure.
• Low interest-rate personal loans might be another option for homeowners who qualify for a competitive interest rate based on their income and credit. Borrowers who don’t have much equity in their home may choose to look into this type of loan, which is unsecured and is paid out in a lump sum. While foreclosure is not a worry with a personal loan, there still may be consequences to the borrower’s credit rating if they don’t uphold the loan terms.
• Borrowers who are struggling to keep up with their bills in retirement may find that refinancing a mortgage with a new, lower-cost mortgage might be an option to help them lower their monthly payments and stay on track with their budget.
Or, if they need extra cash right away and can get a low enough interest rate, they may want to look into a “cash-out refinance,” which would involve taking out a new loan for a larger amount based on the equity they’ve built up during the years they’ve lived in the home.
Unfortunately, no matter which type of loan homeowners might choose, there could be risks.
The government requires a counseling session for reverse mortgage borrowers for a reason: They’re complex, and it can be helpful to have someone cover all the rules and costs involved.
Homeowners also may want to pay a financial advisor and tap their expertise about what type of loan, if any, fits with their needs, goals, and where they are in their retirement.
Though reverse mortgages are available to homeowners starting at age 62, borrowers who expect to have a long retirement may choose to wait until they’re older to tap into their home equity, so they don’t risk running out of money in their later years.
How SoFi Can Help
For many retirees, the equity they have in their home is their biggest asset. Armed with knowledge about the pros and cons of each type of loan and a long-term plan, borrowers can better protect that asset and their financial security.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% – 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It’s online, with access to one-on-one help.
SoFi Mortgages: Simple, smart, and so affordable.
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