Life Insurance is for the living!

Here’s a riddle for you:

• The older you get, the more you need it.
• The more you need it, the more likely you may not be able to get it.
• The older you get it, the more expensive it is.

You guessed it, LIFE INSURANCE!

Life insurance does not have to a tough or morbid conversation. In fact, it should be one that you’re proud and eager to have. Now is the time to talk about life insurance. Every day that goes by is another that you’re missing out on value. Unlike auto insurance, the younger you buy it the cheaper it is.

Life insurance does not have to be expensive or confusing either. Level term insurance is a simple, straight-forward product, and very affordable for most individuals. For example, a 30 year old non-smoking male can qualify for $250,000 of coverage for around $25/month. For women, it’s even less.

“But I have life insurance with my employer, I’m good, right?” Not necessarily. How much coverage do you have? Individuals that only have insurance through their employer are more likely to be underinsured than those that have a stand alone policy through and agency. You can read more about that here.

The other major problem with relying on your employer for your only source of life insurance is what happens at the end of your employment. The older you are when you start a policy the more expensive it gets. So, if you are with your employer when you turn 25 and leave when you’re 30, the stand alone policy is going to be more now than what it would have been 5 years ago. “But what about all the money I saved by not paying those premiums over those years?”

Say you’re your sick and have to leave your employer due to illness. Let’s say it’s something major like cancer. Or something even not so daunting. Say it’s just too stressful and you physically can’t handle the job, so you leave. Later to find out you need blood pressure medicine. Depending on the severity of the disease you may not even qualify for life insurance at all. So when you were young, healthy and cheap to insure, just 5 years ago, now it doesn’t matter at all.
Don’t take my word for it. See what top consumer advocates and financial advisors say about life insurance.
Clark Howard
Suze Orman

New State... New Car Insurance

Why don't you head on over to Ryan Hanley dot com and check out my guest post on what to do with your car insurance when you move out of state.

Saving on insurance is no accident...

Do a google search for 'how to save on car insurance', seriously, I'll wait...

By now you're a shopping pro.  You've learned to call around, raise your deductible, keep your credit good, maintain continous coverage, and ask for discounts.  How about we just back up about 6 steps?

DRIVE SAFELY

According to the U.S. Department of Energy, in 2010 the average trip length in a car was just over 10 miles.  That should take you about 15 minutes to drive.  Let's say you're running late.  Driving that 10 miles fast enough to generate the 1.21 jigawatts necessarey to go back to the future isn't going to put you where you need to be on time anyway.

I'm convinced that if you keep 2-3 car lengths of space between you and the person in front of you, you will never be involved in an accident.  At any speed, 80 mph or 15, if there's 30 feet between you and the next person, you'll automatically adjust your speed to maintain that cushion of safety.

Stuck in the Middle with You

 I saw an ad for a large direct insurer claiming that you can save money by buying direct because you avoid “the middleman.” This is one of the biggest myths in insurance, and business in general.
A vast majority of what will determine if you can save money with one insurer vs. another, is if your characteristics match up with the ideal driver of a particular company. If one company insures 1,000 30 year old drivers, and none of them have any accidents, then by nature if you’re 30 that company is going to offer you a better rate than another company, because they have an anomaly.

In regards to the middle man, companies that you buy insurance through directly employ the middle man. The people that answer the phone when you call Safe Auto, Geico, Progressive, and E-surance aren’t working for free.

Generally speaking, the companies in the previous paragraph spend far more money on advertising and payroll, than do the companies that sell insurance with a middleman.

In an independent agency model, the agents are responsible for most of the acquisition and marketing costs. So all the money that direct companies spend on marketing is matched by all the money that agents are spending on marketing. This renders the direct vs. agent pricing model a useless argument.

You should buy insurance from a company and an agent that is easy to do business with and can give you advice when you need it. There are thousands of insurance companies out there that you’ve never heard of. They exist because they all have some part of the insurance market dominated. If one company had the lowest rates for all class of drivers, direct or agent model, there would only be one company.

Age Ain't Nothing But A Number

Most younger drivers ask me if turning 25 makes a big difference if their car insurance rates. The quick answer is yes, but not as much as you may think. Just like driving a red car has nothing to do with your rate anymore, this is one of those things that used to make a big difference, but doesn’t really matter that much anymore.


Car insurance companies today use a dynamic rating system that compares all the variables of a risk to determine an appropriate rate. There are thousands of available price points depending on how each of your individual characteristics interacts with each other.

When it comes to age, most insurance companies will gradually lower your rate each year you get older. Because the rate changes are gradual, most drivers don’t see a noticeable difference between 24 and 25.

Another reason I advise younger drivers to not get to excited about age is because from the time you’re 16 to the time you’re 25, many things change about you that may negate any rate difference based on age. Some of those common things are, driving history, getting a new vehicle, wanting more coverage, changing from a family policy to your own, even where you live will make a difference.

Here’s a useful tip. If you pay for your insurance monthly, it’s a good idea to shop around for new insurance 30 days prior to your birthday. Most companies will give you credit for being a year older 30 days in advance. And, since most policies don’t renew on your birthday, shopping around will help you get a lower rate prior to your renwal, as well as set up a policy more inline with your birthday to help you get the most accurate rate with each renewal.

Even though your age will make a slight difference in your rate, the two most important things you can do to help keep your rates low is drive safely and maintain insurance continuously. One speeding ticket or a small lapse in insurance can increase your rate 20-40% percent.
If you’re looking for tips on how to save or would like a quote be sure to contact me.

Health Insurance vs. Car Insurance mandates

I’ve seen a number tweets recently about the difference between mandating health insurance and car insurance. Rhetorical or not, I’ll share a few talking points as to why this is an apples and oranges comparison. I’m not going to go into politics or beliefs. If you choose to leave a comment or ask a question please play nice.



1. Federal vs. State
This is the biggest difference in the two. The federal government is about to mandate that all Americans have health coverage. Currently, the mandate to have car insurance is handed down by state governments. In fact, it may surprise you to find out, most states don’t require car insurance at all. For more on that read my previous post.


2. Choice
When the federal government mandates that all Americans must have health insurance, they are basically saying this. In order for you to be considered a law abiding citizen you must have health coverage. Unlike, the states’ auto insurance mandate; only people who choose to own and operate cars are required to be financially responsible for them.

3. Liability/Negligence
The reason states require car insurance is to protect the public from a dangerous activity. According to the CDC, in 2006, the number one cause of death for people under age 44 is unintentional injury. Motor vehicle accidents are either the leading cause, or second leading cause of unintentional injury in every age category! By mandating car insurance states are protecting their citizens from an inevitable financial catastrophe caused by a chosen activity. If we’re going to allow you to do 70 mph with 2,000 lbs of steal and fiberglass, we want to be sure that in the LIKELY event that you do cause an accident, you’ll be able to pay for the damage you cause to the other person. A vast majority of states do not require you to provide medical coverage for yourself, even though driving is about the most dangerous activity you can participate in. Medical coverage for yourself is not required in most car insurance policies, because if your injuries are caused by you, you don’t sue yourself to recover from them. If they are caused by somebody else then you do sue them. See also negligence.


Even if car insurance wasn’t a requirement a vast majority of Americans would still purchase it. Just as a vast majority of Americans currently have health insurance. Insurance, both car and health, is designed to protect you from a financial catastrophe. If you didn’t have car insurance you would have to pay out of pocket for all the damage caused by you in a car accident. To both repair your own car and the other persons’ as well. Most people have no idea how much it costs to indemnify the other party after an accident because that’s what your insurance company takes care of for you. They also foot the bill for your legal defense after an accident as well.


If you’ve been at fault in a car accident in the past 5 years, call your insurance company and ask them how much they’ve paid out in the claims. I’m sure the numbers will shock you.


If you have questions on what any of your insurance is doing for you, please contact me. Leave a comment or ask a question, but remember no politics!

Car Insurance is NOT Required

I’ve seen a lot of talk on twitter today about the parallels of requiring health insurance and auto insurance. I feel that it’s time to remind, or notify, everybody that car insurance is not mandatory, in most states.

What is mandatory, is that if you’re going to drive, you have to be able to pay for the damage that you potentially might cause if you’re at fault in an accident. This is called maintaining Financial Responsibility (FR). Now, given that auto insurance is regulated on the state level, each state will vary a bit on their requirements for FR.

Generally, buying a car insurance policy is the easiest way to satisfy the FR laws. I deal with insurance in most states. Ohio’s FR laws are fairly transferrable from one state to the next. Here’s an easy to read excerpt from the Ohio FR law:


“To comply with the FR requirements, individuals must maintain insurance or get a bond.”



You may be asking yourself, “so what’s a bond?” A bond is essentially an insurance product. It’s a promise to pay if something happens. However, you don’t necessarily have to pay for a bond.

Since the state doesn’t require insurance, they just require you to be able to pay for an accident you may cause. If you have $30,000 in the bank, the state will allow you to drive without insurance, because if you cause an accident you’ll be able to foot the bill. Also, if you have $60,000 in real estate equity, you’re good to go too. If you cause an accident you’ll be able to either sell the property or access a line of credit to pay for the accident.

Now, people with $30,000 in the bank or $60,000 in real estate equity know that they want to protect that asset. If they cause an accident they don’t want to be left with nothing. So most people in that situation buy insurance anyway. They do this because they know, that relatively speaking, the small cost of insurance far outweighs the benefits provided by the insurance company. Even, the smallest car insurance policy in Ohio provides $32,500 worth of benefits. And Ohio has some of the smallest coverage requirements in the country. Most states’ insurance policies have a minimum amount of benefits at $75,000.

If you want to talk FR requirements or what exactly your auto insurance does for you, please contact me.

How high is too low?

I had an applicant recently whose story inspired me to do this post. The thought process that you should use to determine your car insurance and homeowners insurance deductibles are very different. Because most people have plenty of experience with choosing car insurance deductibles, they usually apply the same logic to the new experience of choosing a homeowners deductible. The process is different because the rating factors the insurance company uses after a claim is different.

With car insurance, who’s at fault makes a huge difference in what happens to your rate after a claim. In homeowners insurance, it all comes down to how many claims have there been, how often did they happen, and how much did it cost the insurance company to settle them. If you’re at fault in a car accident, it generally does not matter if there was $200 worth of damage or $20,000 worth. Since most car insurance claims are generally small, the difference between a $500 deductible and $1,000 can be a large percentage of the total damage. So the price difference between the two is a strong reason to do one over the other.

But what about homeowners insurance, should the price between two deductibles persuade you to go one way or the other? Yes, but not nearly as much as in auto insurance. Where as in auto insurance you want to avoid at fault accidents, in homeowners insurance you want to avoid claims, period.

For most people $1,000 is as low as you should consider going. If you’re a responsible saver then $2,500 may be the right deductible for you. Consider this claims story from the applicant I referenced earlier:

“I recently had a fire in my bathroom. I mistakenly placed a candle too close to a towel rack and started the bathroom on fire. I was able to contain the damage quickly, and it resulted in $800 damage. I had never filed a claim with my insurance before so I figured why not use it, it’s what I’m paying for. My deductible was $500 so they ended up paying $300. A year later, while on vacation, my house was broken into. Between the theft to my property and the damage to the house, the loss totaled $3,500. Of course I filed the claim and the insurance company paid out $3,000. Six months later, the same thing happened again, this time a $2,500 theft claim. I later learned after talking to a policy officer that this is common with thieves. They rob you, wait a couple months for you to accumulate new stuff and then hit you again.”

This applicant was very happy with the way the insurance company handled the claims and the speed in which they took care of them. So why was she shopping around? Her insurance company was dropping her for having too many losses too quickly. Had she had a $1,000 deductible she wouldn’t be in that situation; the initial bathroom fire claim would have never happened. And let’s face it, when we’re talking about insurance a house for hundreds of thousands of dollars, $800 is small potatoes. Insurance is meant for catastrophic financial loss. Unfortunately, many people do not have much of a savings and $800 can seem like a catastrophic financial event at the time.

What kind of price can you get with 3 claims so quickly? I work with 5 homeowner insurance companies in her state. Most were not willing to accept her at any rate, the best I could do, $2,400/year. Nothing fancy about the house either, $145,000 house with standard coverage.

If you want to talk about deductibles, or any insurance topic, please contact me.  Do you have a claims story that you regret?  Leave a comment.

Until death do you part...

Insurance companies ask a lot of questions while going through an application.  Some of them obvious, some of them not so much.  I saw this question come through twitter and thought I'd take a few paragraphs to hash this one out.

@Jodie_Roberts: Why do car insurance companies need to know your marital status?

This question is necessary for many reasons.  First, marital status makes a difference in the rate you qualify for.  Maried couples receive better rates than single folks.  This is due to a variety of reasons.  Married couples drive less than single folks.  Think about it.  If there's 2 drivers in a house, husband and wife, chances are there's only one trip to the grocery store each week and one car out running errands on the weekends.  Conversely, a house with two roomates tend to make more separate trips.  By virtue of bringing down the number of road miles, the possibility of a claim dips as well.

Secondly, marital status makes a difference because of how claims are paid out.  Liability on a car insurance policy does not pay for injuries to household resident relatives.  So let's take an example.  If the husband is driving and causes an accident in which his wife, as a passenger, is injured, the liability coverage on the policy will not pay for the wife's injuries because she is a household resident relative.  Sinsce liability coverage is designed to protect you from being sued by the not at fault party, it will not cover injuries to your spouse because spouses cannot sue each other.

Now think about this example, but instead of a married couple.  It's an engaged couple that lives together.  If one driver causes and accident and injures the other person.  The passenger can sue the driver because the marital status does not prevent them.  So with this being known, married couples are not going to file a claim for this type of loss because they can't.  Henceforth the rate they are offered is lower than just two people living together, because the possibility of a claim is lower.

There are plenty of other things in insurance that work in a similar matter.  If you questions on any of them please contact me.

Why did my rate increase?

I saw this question come up on twitter today.  It's not an unusual one:

@SaraMorrison: "Why did my car insurance go up when I haven't had any accidents or tickets and my car has only gotten less valuable?"

There's a few reason for this.  First, it's important to remember what insurance is at a very basic level.  The simplest definition I can give is insurance is a transfer or risk.  Ok, so where does it transfer from and who does it transfer to?  In @SaraMorrison's case, she's in California.  When you enter into an insurance contract in California, this is the deal you make with the company.  I'm going to pay company X for insurance, and in exchange for my money, if I cause an accident the company will pay for the damage that I've done to the other party, at a minimum of $35,000.  Not only will they pay the $35k, but if I'm actually sued they'll pay the legal fees to defend me as well.  In most insurance policies the amount of liability coverage you have is far greater that the $35k, putting even more of a burden on the insurance company than this example.

So how can the insurance company afford to potential pay the $35k?  They're looking at drivers that share similar characteristics and with great accuracy, predicting the probable cost of a future claim.  Are you a married female in your 30's with a mini-van in suburbia?  Great, you're going to get a super low rate.  Why? Because most married females in their 30's with a mini-van parked in the 'burbs cause very few accidents.  So that class of drivers pays less then most other.

The trick to finding a low rate for insurance, regardless of the class you're in, is to find the insurance company that has a favorable loss ratio for your class.  This is why companies charge different rates for the same person.  If Company X insures 1000 corvettes and 900 of them have filed a claim, then regardless of everything you have going for yourself, if you drive a Corvette you're going to pay more with Company X.  I think that covers us for class.

On to part B, why does your insurance rate not go down with the value of your car?  You have to remember that the reason insurance is required, and why you should buy it even if it wasn't the law, is because of the liability coverage.  Liability is the coverage that pays for the damage you cause to the other driver.  The cost for the insurance company to provide you with liability is not impacted by the value of your car.  What does impact the cost of your insurance based on car value is the comprehensive and collision coverages. 

This is where it gets tricky.  First, the easy part.  Most accidents do not result in a total loss.  So almost never is the insurance company going to pay a $20,000 collision claim on a $20,000 vehicle.  Because of this, it doesn't matter if i'm driving a $60,000 Escalade or a $15,000 Focus chances are the company is never going to come close to paying for a total loss.  But, if both of these cars are involved in a fender bender, the labor rate is the same.  You're only looking at a minor difference in the cost of parts.

The second part of this equation goes back to our conversation on rating classes.  There is a good possibility that the collision coverage on a vehicle will go up when the vehicle is 2-6 years old vs. if it is brand new.  The reason for this, is the majority of younger drivers that cause most accidents, are not out driving brand new cars.  They simply can't afford to.  So the class of driver that's driving a brand new car, is somebody a bit older and higher up on the socio-economic ladder.  All those new cars are experiencing very few losses because the drivers are much better.  But, once the car depreciates in value and becomes more affordable to a younger, riskier class of driver, the frequency of accidents and cost to settle claims on the car go up.

So which vehicles are the least inexpensive to insure?  It's going to vary by company, but a good way to figure this out is take a poll of high school students.  Ask them which cars they would like drive.  Next, go pick out any car not on their list.

Leave a comment or ask a question.