Does Medicare Pay for Nursing Home Care?

Medicare does not pay most costs of nursing home care. But there are alternative ways to pay much of these expenses, which reached a median of $105,850 annually in 2020 for a private room, according to a survey by Genworth, a provider of long-term care insurance.

A third of people who are 65 in 2021 might never need long-term care, according to the U.S. Administration on Aging. But 20% of this age group will need such custodial care for five years or longer. So it makes sense to start planning early, while you can still act to improve your late-life circumstances.

Medicare doesn’t cover most long-term nursing home care

Nonmedical custodial care in a nursing home — like help with eating and bathing — is not covered by Medicare. However, Medicare may pay for short-term skilled care in a nursing home if it’s deemed medically necessary because of an injury or illness.

But Medicare Part A does cover professional medical care provided in a skilled nursing facility (not to be confused with a nursing home), a time-limited benefit available when medically necessary for recovery and rehabilitation after a hospital stay. There are substantial limits to this Medicare coverage, chiefly a 20% copay for days 21 through 100, and no coverage beyond 100 days.

For people who are medically and financially able to age in place, Medicare does fully cover many home health care services, such as occasional skilled nursing. Medicare also covers 80% of some other costs, from physical therapy to durable medical equipment, such as wheelchairs.

Medicare Advantage (an alternative to Original Medicare offered by private insurers) also generally does not cover long-term custodial care, but plans may include supplemental coverage to assist with some home health care costs. If you have Medicare Advantage, check your plan for details on coverage.

Medicaid covers some nursing home costs, for those who qualify

Medicaid covers some costs of long-term custodial nursing home care and home health care for individuals with little savings and income. People who exhaust their financial resources while in a nursing home often eventually qualify for Medicaid.

Because it’s a joint federal and state program, Medicaid benefits vary. Contact your state’s Medicaid office for coverage details.

Even if you financially qualify for Medicaid, there may be copays for some services that you’ll need in long-term care. Especially when it comes to nursing home coverage, it’s important to understand the differences between Medicare and Medicaid.

Long-term care insurance is an option for some

Long-term care insurance can work as a way to pay for nursing home care if you can afford the hefty premiums for years or even decades into retirement. This insurance can cover much of the expense of custodial care in a nursing home, assisted living facility or your home.

Be sure to read the fine print on any long-term care policy you consider — and seek advice from a professional who doesn’t stand to gain from your insurance purchase. After years of paying premiums, some people with long-term care policies have faced large and unanticipated rate increases.

Some can afford to pay out of savings

People who have accumulated significant wealth may be able to pay out of pocket $100,000 or more annually for nursing home care for five years or more. But that’s not most of us.

Planning to pay for nursing home care means confronting complex, unpredictable and potentially enormous costs, not to mention your own mortality. With all these challenges, you owe it to yourself to speak with a professional about how long-term custodial care figures into your overall financial plan. The sooner you get started, the better.

Source: nerdwallet.com

What You Need to Know When Buying Car Insurance for the First Time

Adulting sneaks up on everyone at one point or another. If you just purchased your first car, congratulations and welcome to the club! Now, it’s time to deal with all the tedious aspects of driving your new car, like getting car insurance for the first time. First-time car insurance is as exciting as going to the dentist, but it’s necessary to protect yourself financially. If you feel overwhelmed or confused about how it all works, don’t fret. We break it down for you — especially first-time driver insurance cost.

In this article

How do I get car insurance for the first time?

Getting car insurance for the first time starts with how much you need. Each state has different requirements. Most insurance companies will know how much you need depending on where you live. The requirements are typically labeled as 25/50/10 liability insurance. This means that you’ll need liability insurance just in case you were at fault in an accident. The 25/50/10 stands for:

  • $25,000 in bodily injury coverage to pay for each person’s medical bills/injuries if you’re at fault in a crash.
  • $50,000 in bodily injury coverage per accident. This means your insurance will only pay up to $50,000 in medical bills for others you hurt in an accident. 
  • $10,000 in property damage to cover the costs of repairs and replacement of cars, fences, poles and any property you struck and damaged.

You can legally drive with the state’s liability minimums, but you may want to buy more than that. Think of the state’s requirements as the no-frills version of car insurance. The problem is that liability insurance only takes care of other people, also known as third parties. If your car was damaged or you were hurt, minimum liability insurance won’t cover you — you’d have to pay for them yourself.

In addition, a state’s liability minimums are usually not enough if you cause a more serious crash. Think about it this way, if you rear-end a new Tesla, do you think a state’s $10,000 property minimum coverage is enough to fix the Tesla you hit? If the bill for the repair is more than $10,000, your insurance will only pay up to that limit and you’d have to pay the rest out-of-pocket.

It’s best to shop around for car insurance by getting a few online quotes to find the best price. When you do, aim for liability coverage of 100/300/100. This should cover you in case of an accident with injuries involving newer, more expensive vehicles. Besides shopping around for liability insurance with the higher minimums, consider adding the following optional coverages:

Comprehensive insurance

As mentioned, liability insurance only pays for other people’s damages. Comprehensive will pay for repair or replacement of your car if it’s stolen, vandalized, lost in a fire or damaged by a falling tree limb or bad weather events such as hail and flooding. It also covers you if you strike a deer or animal while driving.

Collision insurance 

Add collision coverage to get reimbursed for repairs if your car is damaged because of the accident you caused. In addition to mandatory liability insurance, drivers typically buy comprehensive and collision coverage together. Comprehensive and collision car insurance join forces as wonder twin powers, also known as full car insurance. You’ll have coverage for the damages you cause to others and yourself.

Gap insurance

You probably know the moment you drove your sweet ride off the new car dealer you lost money. But if your car was totaled in a serious accident soon after you bought it, the trouble begins.

Your car insurance company will cut you a replacement check for your lost car based on its current market value and not what you paid for it, which is probably less than what you owe on the car loan. Meaning, the $40,000 car you’re making payments on that’s destroyed may only be worth $32,000 months later because of depreciation. Your insurance company paid you $32,000 to go get a new car, but once you hand that check over to the finance company, you still owe them another $8,000. Gap insurance pays the difference between what you owe and what your car was worth at the time it was totaled. And the coverage is way cheaper than the shortfall you could get hit with.

Do first-time insurance customers pay more?

Just because it’s your first time buying car insurance doesn’t mean it’s more expensive. Your rate depends on your age, driving record, where you live and a handful of other factors. According to the Insurance Information Institute, younger drivers pay more for car insurance. If you’re between the age of 16 to 25, be prepared to pay a little extra for car insurance.

The reason why first-time insurance may be higher for young adults is tied to the number of deadly accidents. The age group of 16- to 24-year-old drivers are responsible for 66.5% of fatal motor vehicle crashes. A lack of driving experience, more risk-taking, texting and drinking are some of the reasons young adults pose a higher risk of causing a serious crash. Therefore, drivers under 25 are more expensive to insure.

[ See: What’s the Average Cost of Car Insurance in the U.S.? ]

Where to find cheap car insurance for first-time drivers

If the cost of first time insurance could be a dealbreaker on whether you can afford your first car, consider the following tips to find cheap car insurance for first-time drivers.

Choose a more affordable car

Some cars are cheaper to insure than others. For example, a Honda will cost less in car insurance than a Tesla or a sports car. Do your research on insurance costs before you buy a car.

Stay on your parent’s car insurance

You may get a better deal on your car insurance if a parent can add you to their existing auto insurance. They may have loyalty discounts and a long-standing relationship with an insurance carrier and adding your vehicle to their policy could be cheaper than a first time insurance policy.

Shop around for quotes

The best and easiest way to find the best cheap car insurance for first time drivers is to get online quotes from a few car insurance companies. You’d be surprised at how much your car insurance could vary in cost for the same coverage, from one carrier to another.

Most insurance companies make it easy to get a quote. You’ll need an address, details about your car, such as make, model and year, and the type of coverage you’d like. Getting a quote is free and no-obligation. You’ll have an estimate to compare in just a few minutes.

Take advantage of car insurance discounts

Most car insurance companies entice new customers with discounts for a variety of reasons. The best part is, you can take advantage of more than one discount at a time. Some worth considering include:

  • Bundled coverage: Insure your car and your home or apartment with the same insurance company to get a discount on both.
  • Good student: If you’re enrolled in school, you could receive a discount on your car insurance while you study.
  • Military: Enlisted personnel get an automatic discount from most insurance carriers.
  • Telematics: Sign up for an insurance company’s driver tracking program and you could get as much as 25% off your car insurance premiums, based on your driving. You’ll need to download an app that monitors your mileage, speed and other factors to determine how safe of a driver you are and the size of your discount.
  • Defensive driving courses: Most carriers offer a decent discount of 10% or more if you complete an online defensive driving course. The courses can typically be completed over a weekend and can earn you savings over two to three years.

[ For You: Eight Ways to Save on Car Insurance ]

How to buy your first car insurance policy

Ready to buy first-time car insurance? Follow these steps to make sure you get it right.

  1. Get several online quotes: To find the best deal, get quotes from a few carriers and choose the one you like the best.
  2. Round up information: You’ll need your car’s Vehicle Identification Number (VIN) located on your title or on your driver side’s lower dashboard when looking from outside. Besides the VIN, have your vehicle’s mileage, driver’s license, contact information and home address ready. Have your bank information handy to set up automatic payments, as well as a debit or credit card to pay your first premium.
  3. Choose your policy: Enter details about the policy you’re buying, including liability insurance, dollar limits and add ons such as gap, comprehensive and collision coverage.
  4. Pick a deductible amount: The deductible is how much you’ll pay out-of-pocket in case of an accident or claim and before the insurance company steps in to pay the rest. A typical deductible is $500 or $1,000.
  5. Set an effective date: The effective date is the day your insurance starts. It can be as soon as the same day you buy the policy, although you should confirm it with the insurance company.
  6. Choose the length of your premium payment: You can pay your car insurance monthly or every six or twelve months. You could qualify for a small discount for prepaying six or twelve months or by signing up for automatic payments.
  7. Review your information: Make sure the policy, vehicle description and all the information you provided is correct.
  8. Pay for the policy: You can pay for your policy online using your banking information including routing number and bank account number. Or you could pay using a debit or credit card. Once you pay, your policy will be official, effective as of the date you chose. You’ll receive an insurance declaration page by email for your records, or you can download one.
  9. Print out your insurance card and place it in your vehicle: Print out a copy of the insurance declaration and digital insurance card and keep it in your vehicle. You may get a hard copy in the mail, but to be safe, print out a copy. You’ll need it in case of an accident or if you’re pulled over, to show as proof of insurance.

We welcome your feedback on this article. Contact us at inquiries@thesimpledollar.com with comments or questions.

Source: thesimpledollar.com

Everything You Need To Know About Final Expense Insurance

October 19, 2020 &• 6 min read by Anthony Martin Comments 0 Comments

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Final expense insurance is typically a small whole life insurance policy where the proceeds are earmarked specially for funeral and other end of life expenses. Ultimately, the net result will be a tax-free cash payment to a beneficiary(s). Most insurance companies aim to pay claims within a few days since they know the funds are likely to be used for a funeral. Technically, the money can be used for anything. If for example, all the money is not used for funeral costs, the remaining amount is owned by the beneficiary(s) to use as they see fit.

Most life insurance companies make these plans available to seniors from the ages 50 to 85 and offer between $5,000 and $25,000 in coverage. The health requirements to qualify are very lenient too. Even if you have serious health issues, you can still get a policy. Some plans actually guarantee approval no matter what health issues you have. It is important to note that if you buy a plan that has guaranteed approval where there are no health questions, there will be a two to three year waiting period before benefits become active. To get a plan that covers you right away with no waiting period, you must at minimum answer health questions and be approved by the insurance company.

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How much does it cost?

Final expense insurance premiums are typically low since the benefits are on the smaller side. Overall, the average cost of a final expense policy is between $50-$100 per month. Rates will vary depending on your age, gender, health, tobacco usage, coverage amount and the insurance company you purchase your policy from.

For example, a non-smoking 65-year-old woman in generally good health will pay roughly $40-$45 per month for a $10,000 policy. However, a man with the same profile would pay $56-$60 per month.

How do you buy a policy?

There are few different ways to purchase a policy. There are dozens of insurance companies that offer this type of plan, and they all have different application processes.

Ultimately, you must choose which method suits you best. Working with an agent gives you the advantage of having a professional who can answer your questions and make recommendations. However, if you value your privacy and prefer simplicity, then buy a plan online or through the mail. 

No matter how you apply, you can find an affordable life insurance policy for final expenses since there are so many companies to choose from.

Who are the best companies to consider?

The market for final expense insurance is vast. You will find a ton of insurance companies to choose from. Below are some highly rated companies to consider. This information is as of 9/23/20, visit the company websites for current policy information.

1) Mutual of Omaha

Mutual of Omaha is one of the oldest life insurance companies in the USA. They offer two different final expense plans to anyone between the ages of 45 and 85. The first plan is called “Living Promise” and is only sold through agents. You can purchase up to $40,000 in coverage on this plan. It does have underwriting, so your qualification depends on your health. If you are approved, this plan has no waiting period. The second plan they offer is guaranteed issue, so you cannot be denied. With their guaranteed acceptance plan, you can buy up to $25,000 in coverage. Since this plan has no health questions, you will be subject to a two-year waiting period before you are covered. 

2) AIG

AIG is another very old and stable life insurance company. They only offer one type plan to seniors between 50 and 80, which is a guaranteed acceptance policy. Because it has no health questions, there will be a two-year waiting period before your coverage begins. The premiums are affordable and applying can be done online or through an agent.

3) Aetna

Most people associate Aetna with health insurance, since that is the most common insurance they sell. However, they do offer final expense insurance too. What is most unique about Aetna is they will insure applicants as old as 89. Very few life insurance companies will go beyond 80 or 85. The amount of coverage you can buy from Aetna varies based on your age. It is important to note their plans have underwriting, so you must qualify for their coverage. That is the main downside with Aetna. They have no guaranteed acceptance option. Depending on your health, you may or may not qualify. 

Should you buy final expense coverage?

For some people, a final expense policy makes all the sense in the world, and for others it does not.

A final expense plan is typically suitable for any individual who presently has no means to pay for their funeral costs. For example, you have no savings or real property that can be sold to pay for burial costs. If you are in that situation and don’t want to leave a financial burden to your family, then a final expense policy is fantastic option you should pursue.

At the same time, if you currently have cash, a retirement account, or some other assets that can be quickly liquated to pay for your funeral, you probably do not need a policy. You may prefer one, but you do not necessarily need it. 

If you have the cash, it would probably be better to put it into a funeral trust, so it’s securely locked away for when that day comes.  

At the end of the day, preplanning is an act of love. No matter how you financially prepare for your funeral, your family will appreciate it more than words can express. 

What you do now ensures they aren’t forced to make tough decisions while riding an emotional rollercoaster.


Sign up now.

Source: credit.com

What to Do When You Lose Your Health Insurance

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Losing your job is stressful. Losing your health insurance on top of that is even worse. And whether you have health concerns now or want to safeguard yourself and family for the future, you might be worried about how to cover medical expenses if you’re out of work. Find out what to do when you lose your health insurance because you lost your job.

Ask About COBRA

COBRA is a health insurance continuation option that many employers offer. It allows you to voluntarily extend the health coverage you have under your former employer’s plan. If you qualify for COBRA, you must be given the option to extend your coverage up to 18 or 36 months, depending on what event qualified you for COBRA.

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However, your employer does not have to continue
contributing to cover the premiums of this plan as they did when you were
employed. If they elect to not offer contributions to the premium, COBRA
coverage can be fairly expensive.

Check the Health Care Marketplace

Job loss that causes you to lose employer-sponsored or provided health insurance counts as a qualifying event. That means you’re eligible for a special enrollment period.

Normally, you can only sign up for insurance plans through
the health care marketplaces during open enrollment periods, which typically run
from November to January. Exact dates for enrollment depend on the state.

Special enrollment periods occur for people who have a
qualifying event, such as a change in marriage status, a death in the family or
job loss. You qualify for this special period whether you were fired, laid off
or quit your job.

You must apply within 60 days of losing your insurance coverage. If your employee gives you notice and you know you’ll be losing your insurance, you can apply proactively up to 60 days before that happens.

Purchase Short-Term Coverage

Short-term insurance policies are meant to bridge the gap when you’re between jobs. Not all states allow for short-term insurance—eleven states currently prohibit their sale. But, depending on your state, short-term insurance could cover you for up to 364 days. These aren’t qualified plans under the ACA, which means they don’t offer all the benefits that the ACA requires by law. Typically, these are major medical plans meant to help cover the costs of a catastrophic illness or accident and not routine health care.

Make
sure you understand what benefits are included and how the plan works if you
opt for short-term coverage.

See If You
Qualify for Medicaid

A man holds the hand of a young child while they walk down the street.

If you have lost your job, that probably means your income has been reduced. That could mean that you’re eligible for Medicaid or the Children’s Health Insurance Program (CHIP). The income requirements vary by state, but you can find out more about eligibility from the Department of Health and Human Services.

You
can apply for Medicaid and CHIP at any time, but remember that you can lose
your Medicaid benefits if your income changes. Have a plan in place to budget
for health insurance if you get a job that doesn’t offer benefits or has a
waiting period before benefits start.

Go Without Health Insurance

You can choose to go without health insurance until you find another job or until open enrollment happens again. This can be a risky move because a health emergency or accident could lead to mounting medical expenses that leave you in serious debt.

But if you’re healthy and think there’s a good chance you’ll get a new job with coverage soon, you might decide to take the gamble. If you do, it’s a good idea to set aside some money in savings to help cover the cost of doctor’s visits or other necessary medical care should the need arise. For example, during COVD-19, you might use your stimulus check for this purpose.

You Have Options

Losing your job and your health insurance is scary, but you’re not alone. Credit.com has resources to help you through. Check out our additional resources below—and if you need more help, you can reach out to tipswithtiff@credit.com for help from Credit Tips with Tiff.


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Source: credit.com

Term Life vs. Whole Life Insurance: Which Is Best for You?

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Taking out a life insurance policy is a great
way to protect your family’s financial future. A policy can also be a useful
financial planning tool. But life insurance is a notoriously tricky subject to
tackle.

One of the hardest challenges is deciding
whether term life or whole life insurance is a better fit for you.

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  • I need that peace of mind in my life. What else do you get with ExtraCredit?
  • It’s basically everything my credit needs. I get 28 FICO® scores, rent and utility reporting, cash rewards and even a discount to one of the leaders in credit repair.
  • It’s settled; I’m getting ExtraCredit tonight. Totally unrelated, but any suggestions for my new fear of sharks? I watched that documentary too.
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Not sure what separates term life from whole
life in the first place? You’re not alone. Insurance industry jargon can be
thick, but we’re here to clear up the picture and make sure you have all the
information you need to make the best decision for you and your family.

Life Insurance = Financial
Protection for Your Family

Families have all sorts of expenses: mortgage payments, utility bills, school tuition, credit card payments and car loan payments, to name a few. If something were to happen and your household unexpectedly lost your income or your spouse’s income, your surviving family might have a difficult time meeting those costs. Funeral expenses and other final arrangements could further stress your family’s financial stability.

That’s where life insurance comes in. Essentially, a policy acts as a financial safety net for your family by providing a death benefit. Most forms of natural death are covered by life insurance, but many exceptions exist, so be sure to do your research. Death attributable to suicide, motor accidents while intoxicated and high-risk activity are often explicitly not covered by term or whole life policies.

If you die while covered by your life
insurance policy, your family receives a payout, either a lump sum or in
installments. This is money that’s often tax-free and can be used to meet
things like funeral costs, financial obligations and other personal expenses.
You get coverage in exchange for paying a monthly premium, which is often
decided by your age, health status and the amount of coverage you purchase.

Don’t
know how much to buy? A good rule of thumb is to multiply your yearly income by
10-15, and that’s the number you should target. Companies may have different
minimum and maximum amounts of coverage, but you can generally find a
customized policy that meets your coverage needs.

In addition to the base death benefit, you can enhance your coverage through optional riders. These are additions or modifications that can be made to your policy—whether term or whole life—often for a fee. Riders can do things like:

  • Add coverage for disability or deaths not commonly
    covered in base policies, like those due to public transportation accidents.
  • Waive future premiums if you cannot earn an income.
  • Accelerate your death benefit to pay for medical bills
    your family incurs while you’re still alive.

Other
riders may offer access to membership perks. For a fee, you might be able to
get discounts on goods and services, such as financial planning or health and
wellness clubs.

One
final note before we get into the differences between term and life: We’re just
covering individual insurance here. Group insurance is another avenue for
getting life insurance, wherein one policy covers a group of people. But that’s
a complex story for a different day.

Term Life Policies Are Flexible

The “term” in “term life” refers to
the period of time during which your life insurance policy is active. Often,
term life policies are available for 10, 20, 25 or 30 years. If you die during
the term covered, your family will be paid a death benefit and not be charged any future
premiums, as your policy is no longer active. So, if you were to die in year 10
of a 30-year policy, your family would not be on the hook for paying for the
other 20 years.

Typically, your insurance cannot be canceled
as long as you pay your premium. Of course, if you don’t make payments, your coverage will lapse, which typically
will end your policy. If you want to exit a policy you can cancel during an
introductory period. Generally speaking, nonpayment of premiums will not affect your credit score, as
your insurance provider is not a creditor. Given that, making payments on your
life policy won’t raise your credit score either.

The major downside of term life is that your
coverage ceases once the term expires. Ultimately, once your term expires, you need to reassess
your options for renewing, buying new coverage or upgrading. If you were to die
a month after your term expires, and you haven’t taken out a new policy, your
family won’t be covered. That’s why some people opt for another term policy to
cover changing needs. Others may choose to convert their term life into a
permanent life policy or go without coverage because the same financial
obligations—e.g., mortgage payments and college costs—no longer exist. This
might be the case in your retirement.

The Pros and Cons of Term Life

Even though term life insurance lasts for a
predetermined length of time, there are still advantages to taking out such a
policy:

  • Comparably lower cost: Term life is usually the more affordable type of life insurance, making it the easiest way to get budget-friendly protection for your family. A woman who’s 34 years old can buy $1 million in coverage through a 10-year term life policy for less than $50 a month, according to U.S. News and World Report. A man who’s 42 can purchase $1 million in coverage through a 30-year term for just over $126 a month.
  • Good choice for mid-term financial planning: Lots of families take out a term life policy to coincide with major financial responsibilities or until their children are financially independent. For example, if you have 20 years left on your mortgage, a term policy of the same length could provide extra financial protection for your family.
  • Upgrade if you want to: If you take out a term life policy, you’ll likely also get the option to convert to a permanent form of life insurance once the term ends if your needs change. Just remember to weigh your options, as your rates will increase the older you get. Buying another term life policy at 50 years old may not represent the same value as a whole life policy at 30.

There are some drawbacks to term life:

  • Coverage is temporary: The biggest downside to
    term life insurance is that policies are active for only so long. That means
    your family won’t be covered if something unexpected happens after your insurance
    expires.
  • Rising premiums: Premiums for term life
    policies are often fixed, meaning they stay constant over the duration of the
    policy. However, some
    policies may be structured in a way that seems less costly upfront but feature
    steadily increasing premiums as your term progresses.

Young Families Often Opt for Term Life

The rate you pay for term life insurance is
largely determined by your age and health. Factors outside your control may influence the rates you
see, like demand for life insurance. During a pandemic, you might be paying
more if you take a policy out amid an outbreak.

Most consumers seeking term life fall into
younger and healthier demographics, making term life rates among the most
affordable. This is because
such populations present less risk than a 70-year-old with multiple chronic
conditions. In the end, your rate depends on individual factors. So if
you’re looking for affordable protection for your family, term life might be
the best choice for you.

Term life is also a great option if you want a
policy that:

  • Grants you some flexibility for
    future planning, as you’re
    not locked into a lifetime policy.
  • Can replace your or your spouse’s
    income on a temporary basis.
  • Will cover your children until
    they are financially stable on their own.
  • Is active for the same length as
    certain financial responsibilities—e.g., a car loan or remaining years on a
    mortgage.

Whole Life Insurance Offers
Lifetime Coverage

Like with term life policies, whole life
policies award a death benefit when you pass. This benefit is decided by the
amount of coverage you purchase, but you can also add riders that accelerate
your benefit or expand coverage for covered types of death.

The biggest difference between term life and
whole life insurance is that the latter is a type of permanent life insurance.
Your policy has no expiration date. That means you and your family benefit from
a lifetime of protection without having to worry about an unexpected event
occurring after your term has ended.

The Pros and Cons of Whole Life

As if a lifetime of coverage wasn’t enough of
advantage, whole life insurance can also be a highly useful financial planning
tool:

  • Cash value: When you make a premium payment on
    your whole life policy, a portion of that goes toward an account that builds
    cash up over time. Your
    family gets this amount in addition to the death benefit when their claim is
    approved, or you can access it while living. You pay taxes only when the money
    is withdrawn, allowing for tax-deferred growth of cash value. You can
    often access it at any time, invest it, or take a loan out against it. However, be aware that anything
    you take out and don’t repay will eventually be subtracted from what your
    family receives in the end.
  • Dividend payments: Many life insurance
    companies offer whole life policyholders the opportunity to accrue dividends
    through a whole life policy. This works much like how stocks make dividend
    payments to shareholders from corporate profits. The amount you see through a dividend payment is
    determined by company earnings and your provider’s target payout ratio—which is
    the percentage of earnings paid to policyholders. Some life insurance
    companies will make an annual dividend payment to whole life policyholders that
    adds to their cash value.

Some potential downsides to consider include:

  • Higher cost: Whole life is more expensive than
    term life, largely because of the lifetime of coverage. This means monthly
    premiums that might not fit every household budget.
  • Interest rates on cash value loans: If you need emergency extra
    money, a cash value loan may be more appealing than a standard bank loan, as
    you don’t have to go through the typical application process. You can also get
    lower interest rates on cash value loans than you would with private loans or
    credit cards. Plus, you don’t have to pay the balance back, as you’re basically
    borrowing from your own stash. But if you don’t pay the loan back, it will be
    money lost to your family.

Whole Life Is Great for Estate Planning

Who stands to benefit most from a whole life
policy?

  • Young adults and families who can
    net big savings by buying a whole life policy earlier.
  • Older families looking to lock in
    coverage for life.
  • Those who want to use their policy
    as a tool for savings or estate planning.

To that last point, whole life policies are particularly advantageous in overall financial and estate planning compared to term life. Cash value is the biggest and clearest benefit, as it can allow you to build savings to access at any time and with little red tape.

Also,
you can gift a whole life policy to a grandchild, niece or nephew to help
provide for them. This works by you opening the policy and paying premiums for
a set number of years—like until the child turns 18. Upon that time, ownership
of the policy is transferred to them and they can access the cash value that’s
been built up over time.

If you’re looking for another low-touch way to leave a legacy, consider opening a high-yield savings account that doesn’t come with monthly premium payments, or a normal investment account.

What to Do Before You Buy a
Policy

Make sure you take the right steps to finding
the best policy for you. That means:

  • Researching different life insurance companies and their policies, cost and riders. (You can start by reading our review of Bestow.)
  • Balancing your current and long-term needs to best protect your family.
  • Buying the right amount of coverage.

If you’re interested in taking next steps, talk to your financial advisor about your specific financial situation and personal needs.

Infographic explaining the difference between term and whole life insurance policies.


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Source: credit.com

4 Ways Health Insurance Can Save you Money

December 26, 2019 &• 6 min read by Alice Stevens Comments 0 Comments

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Many health insurance shoppers will consider premium costs when purchasing health insurance. The full cost of a health planalso includes your out-of-pocket expenses, like the deductible, copays, and coinsurance.

As important as it is that your health plan is affordableand that the monthly premiums fit into your budget, it’s also important to consider the value health insurance offers. If you’re considering opting out of health insurance next year, evaluate the value of the following health plan offerings before you finalize your decision:

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  • I need that peace of mind in my life. What else do you get with ExtraCredit?
  • It’s basically everything my credit needs. I get 28 FICO® scores, rent and utility reporting, cash rewards and even a discount to one of the leaders in credit repair.
  • It’s settled; I’m getting ExtraCredit tonight. Totally unrelated, but any suggestions for my new fear of sharks? I watched that documentary too.
  • …we live in Oklahoma.

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  • Discounted rates
  • Cost-sharing
  • Preventive care coverage
  • Additional features

While everyone has a different financial situation with varying constraints, health insurance is a worthwhile investment.

1. Discounted Rates 

Health insurance companies negotiate costs directly with hospitals and other medical care providers. These rates are then included with the health plans offered by the company. 

Some plans only have negotiated rates for in-network providers. Others have different negotiated rates for in-network care and out-of-network care. All health plans offer coverage for emergency services when a patient is admitted—whether or not the care was received from an in-network provider.

The amount the hospital or clinic usually charges is higher than the negotiated rate. The differences between the negotiated rate and the standard rate varies depending on how the insurance company has negotiated. 

However, when you receive an Explanation of Benefits (EOB) with the breakdown of costs, you’ll see:

  • What the hospital or clinic usually charges
  • What the negotiated cost actually was
  • What portion of the bill your health insurance company paid
  • The amount left for you to pay

2. Cost-Sharing 

Health insurance plans come with an annual deductible and annual out-of-pocket maximum. The deductible is the amount of money the insured must pay in cost-sharing over the course of the year before the insurance company takes on a greater responsibility for the costs. The out-of-pocket maximum is higher than the deductible. Once it is reached, the insurance company is responsible for the remainder of your covered medical expenses.

Health insurance plans often have separate deductibles for prescriptions and medical care. Health insurance plans that offer out-of-network coverage will have a different deductible and out-of-pocket expenses maximum for out-of-network care and in-network care. 

Health insurance companies determine cost sharing in a few different ways depending on how your plan works. With a traditional plan, you’ll have copays and coinsurance. Coinsurance means that the insured pays a certain percentage of the discounted medical bill.

Copays are a set amount that the insured pay when they receive health care services. There are usually set amounts for prescriptions, primary care visits, specialist visits, and emergency services. Payment may also be required beyond the copay after the bill is processed by the insurance company. The copay contributes to this payment.

High-Deductible Health Plans (HDHPs) with Health Savings Accounts (HSAs) work differently. Instead of having copays and coinsurance, you pay for your medical expenses as you receive medical care. You can use the funds in your HSA to pay these costs.

Funds in your HSA roll over year to year and can be invested. The money you put into your HSA is tax-free. The monthly premiums for HDHPs tend to have lower premiums because a greater cost responsibility is on the policyholder. Some people take advantage of these plans while they are healthy and save funds for medical expenses later in life.

The specifics of cost-sharing differ from plan to plan, so carefully reviewing your plan before signing up will help you understand how the cost-sharing works.

3. Preventive Care Coverage 

Because of the Affordable Care Act, health insurance plans cover preventive care fully. While the future of the Affordable Care Act is uncertain, coverage for preventive care is an important way that health insurance protects your finances.

Doctors can detect some health problems early on and implement treatment plans to prevent the issue from developing further. Regular visits to the doctor go a long way in avoiding expensive bills later, especially for preventable issues.

It’s especially important for people with some diagnoses and conditions to visit a specialist regularly as needed because some health issues can be managed successfully and future complications can also be avoided.

4. Additional Features 

Health insurance companies also offer the following helpful features with their plans:

  • Telemedicine
  • Nurse help lines
  • Care management

These additional features are helpful resources for people. Telemedicine allows plan members to work with a doctor over the phone or through video chat in non-emergency situations. Some companies offer this service to plan members for free, like Oscar. Other companies also offer it as an a la carte supplement to health insurance, like GoHealth.

Others may charge a fee when you use the telemedicine service. The fee for the telemedicine service may vary based on your plan and your insurer and can be cheaper and faster than setting an appointment with your doctor or visiting an urgent care.

Nurse help lines are another common offering among health insurance companies, including Cigna. This hotline gives people quick access to a nurse without needing to leave their home. In non-emergency situations, the nurse can answer questions and give advice on scheduling appointments. 

While these benefits are nice and do not require you to establish care with a doctor, you can always call your doctor’s office with questions to get similar assistance. If the doctor can’t take your call, one of the assistants can take a message and get back to you with a response in a non-emergency situation. Even after hours, there’s usually a doctor on-call. 

Another benefit some health insurers offer is care management. These can be helpful to people who want support with improving their health. Companies like Kaiser Permanente offer this with many of their plans to help members with chronic conditions.

Is the Investment Worth It? 

It’s easy to see how much your health insurance plan saves you on medical care when you review the EOB.

It’s trickier to determine if the cost of monthly premiums is worth the savings. If you have health insurance, you can keep track of how much you are spending on medical care, prescriptions, and premiums. Evaluate you EOBs over the course of the year to understand what the costs would have been without insurance.

Medical procedures, surgeries, and emergency medical treatment are more expensive than preventive care. Some of these events can be planned for in advance, but many cannot. 

Because of the high financial cost of these services, not having health insurance is a risk for your financial stability.


Alice Stevens loves learning languages and traveling. She currently manages content for BestCompany.com, specializing in personal finance, health insurance, Medicare, and life insurance.

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Looking for Auto Insurance? Here Are 6 Things You Need to Know

September 17, 2017 &• 5 min read by Neil Richardson Comments 0 Comments

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Let’s get one thing out there: no one is especially psyched to get car insurance. You get it because it’s a financial safeguard against damage to your car or injury to you or others (and maybe because it also happens to be legally required in some form nearly everywhere in the US). Car insurance is complicated, and drivers often don’t know what to expect from the process.

Let us break down the basics so you’re better able to find the right coverage for you. Here are six things you need to know.

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1. What Car Insurance Is 

As a licensed insurance agent, I find that many people I talk to don’t quite understand what insurance is or why they need it. I get it. After all, insurance is rather abstract—it’s not a physical object you buy at a store. Further, if all goes well for you, you won’t ever have to use the coverage you paid for. So it’s often hard for people to see the value.

In the simplest terms, insurance is a promise from an insurance company to support you financially in the event that something unfortunate occurs and causes you financial loss or other damage. You pay an insurance company money (your premium) for a policy that details your coverage (who/what is protected and to what dollar amount), and the insurance company is responsible for paying if something happens and you incur a loss (damage to your car, a broken leg, etc.). Insurance companies do this by pooling risk among all the people they insure, collecting premiums from everyone and using those funds to pay claims for those who need it.

Of course, there are many other details that go into the whole system, but we’re keeping it simple.

2. What Different Insurance Types Cover

The type and amount of coverage each person needs varies, but these are the coverage basics you should know.

Liability coverage is legally required for drivers in almost every state. It covers the other driver in a crash you cause, and it includes injury and property damage. If you see numbers like 25/50/10 or 30/60/25, that shows the liability coverage limits for (1) bodily injury per person, (2) bodily injury per accident, and (3) property damage—each in thousands of dollars. For example, 25/50/10 means your coverage will extend up to $25,000 per individual injured in an accident, $50,000 for all persons injured in an accident, and $10,000 for property damage.

In no-fault states, you are required to carry coverage (normally personal injury protection or PIP) for your injuries regardless of who caused the accident.

Collision coverage, which covers damage caused in a crash, and comprehensive coverage, which covers damage from other events including weather (fire, flooding, etc.) as well as theft, are often collectively called full coverage.

Other coverages include uninsured motorist coverage, which protects you and your vehicle from damage caused by people who don’t have insurance, and medical payments coverage, which covers select costs for injuries you and your passengers sustain in a collision.

3. How to Get Car Insurance

You can easily go online, call a company or two, or even walk into a local insurance agent’s office to talk to them about getting coverage. But how do you know which company to contact?

Insurance companies spend billions of dollars every year on advertising, so you could probably rattle off a few big car insurance brands you’re familiar with. But it’s important for consumers to know that not all insurance companies are the same—in fact, they all have different ways of pricing policies, and many look for certain types of customers with certain risk profiles to do business with.

This is why it’s more important than ever to compare car insurance quotes from as many companies as possible. Getting multiple opinions and understanding the market will help you find the best rate around.

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4. Why You Pay What You Do

Insurance companies determine what you pay for insurance based on dozens of “rating factors”—all having to do with who you are, where you live, what you drive, and other details of your history, both on and off the road. Everything is about statistics, and insurance companies assign certain levels of risk to each of these factors to gauge the likelihood that you will file a claim.

For example, teens are considered high-risk drivers because they have so little experience behind the wheel and are statistically likelier to be in an accident—and thus file more claims—than older drivers, so they often pay much more for their premiums.

Other risk indicators include some obvious ones (like your driving record) and some less-obvious ones (like your ZIP code). There are also certain factors, like your credit score, which only some states allow to be used in determining your rate (it’s prohibited in California, Hawaii, and Massachusetts).

5. How to Lower Your Risk and Your Rates in the Future

You can’t change certain insurance rating factors, like your age, but you can make a few changes to reduce your risk in other areas. Here are a few tips:

  • Drive safely and maintain a clean driving record.
  • Consider sharing a policy with someone you live with.
  • Bundle your renters or homeowners policy if you can.
  • Pay your premium in full at the start of your policy or sign up for auto-pay.
  • Maintain insurance coverage with no lapse between policies (even for a day).

6. When to Get Insurance 

The obvious time to get car insurance is when you’re getting a car, but it’s critical that you don’t have a lapse in coverage between insurance policy terms. I highly recommend shopping around for car insurance before you begin the car-buying process. Shopping early also allows you to account for your premium in your car-related expense budget.

Other times to switch insurance could be if you get married, move, or have another big event in your life; if your rates increase for no apparent reason; or if you need to add a new teen driver to your policy.

Additionally, it’s important to compare rates every six months to make sure you’re staying up to date on any changes that might occur if you move, get a speeding ticket, or even have a birthday.

Once you’re ready to start your insurance search, you can use Credit.com’s comparison tool to get a car insurance quote and compare rates.

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What is Umbrella Insurance?

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An umbrella insurance policy is defined as an additional level of liability insurance coverage that exceeds the limit of the insured’s house, car or watercraft. Umbrella insurance adds an extra layer of security to people who find themselves at risk of being sued for damages caused to others in an accident or damages done to property. This insurance also provides protection against defamation, damage, invasion of privacy and slander.

Umbrella insurance policies add additional value when the insured is sued and the monetary limit of the policy has been exceeded. The extra protection offered by the insurance is very useful to those who own a lot of assets and are at risk of being sued.

Why Get Umbrella Insurance if I Have Liability Insurance?

Umbrella insurance is not a core form of insurance. This means it requires the main policy to pay initially pay out on a claim before the umbrella liability coverage can become active.

What Sort of Protection Does Umbrella Insurance Offer?

With umbrella liability insurance, you are protected from:

  • Lawsuits as a result of property damage and injury
  • Additional legal defense costs as a result of a lawsuit relating to an injury inflicted upon others and damages done to the property.

Why Do I Need Umbrella Insurance?

Today, the news is filled with tales of multiple lawsuits and record-breaking sums of money being awarded out.

As a home and automobile owner, there are limits to the liability insurance you can purchase. Liability insurance is defined as the part of a homeowner’s home or auto policy that covers expenses like an injured person’s medical bills including therapy and wages lost due to negligence.

In your insurance policy, the liability section covers the cost of a legal defense representative if said negligence causes the individual at fault to be called to court. Also, after summing up all the medical fees for the injured and the legal fees of the negligent party, standard liability coverage is not usually enough.

Umbrella insurance provides that extra layer of protection so that taking care of the bills arising from issues like turn out to be less of a hassle.

What is the Cost Implication of Having Umbrella Insurance?

It is possible to procure a personal liability umbrella insurance policy without having to break the bank. It all depends on how much umbrella liability coverage you choose to purchase. It could go for prices as low as $150 for a year to over a million dollars for coverage and increase yearly depending on existing coverage.

To procure additional liability insurance is not expensive especially when compared to the value of the coverage being purchased. Paying $150 – $200 for coverage worth $250,000 could be the best deal you will ever make.

How Much Umbrella Insurance is Enough?

Umbrella insurance isn’t too expensive, but it is an added cost. In order to determine how much coverage you need, and how much you’re willing to pay for it, you need to go over your own financial situation.

Important Questions You Need to Ask about Umbrella Liability and Risk

  • What is the value of my assets?
  • What is the potential loss of future income?
  • What risks could I face?

Possible Beneficiaries of Umbrella Insurance

Beneficiaries of umbrella insurance could be just about anyone. But the group of people who are likely to have umbrella insurance are individuals who have assets they wish to protect. This is because people like them have a higher chance of losing huge chunks of money in a lawsuit.

Getting sued could cause you to lose assets you may have worked hard to get. These include investments and the entirety of your savings.

Can I Purchase Umbrella Liability Without Money or Assets?

If you do end up getting sued, the court will award benefits to the plaintiff should you be held accountable for damages. And if you have no assets, you could be forced to pay for the damages with money you haven’t even earned yet. A student working towards a degree and planning to pay off his or her student loans with his earnings may need to go back to the drawing board if found guilty in a case like this.

How Much Coverage Does Default Umbrella Insurance Have?

When purchasing umbrella insurance, you get the choice to choose the amount of coverage you would like to have. The policy underwriting changes with each insurance company and coverage could vary from a million dollars to tens of millions of dollars. The difference here is simply you and your budget.

Some companies could also double, triple or quadruple the coverage from a million dollars to two, three or four but would not do the same for the cost of the coverage. Because of this, consider getting quotes from multiple companies before making your final decision.

Are There Any Conditions for Owning an Umbrella Policy?

For an umbrella policy to begin paying coverages, there must be a primary liability policy that must have hit the maximum threshold on payments. A lot of umbrella insurance policies need a minimum underlying insurance. Most insurance companies set the underwriting terms for an umbrella policy. The wording will then state the minimum amount of liability needed before one can qualify for an umbrella policy.

Are There Any Limitations on Umbrella Policies?

Yes, there are. And these limitations usually vary from insurance company to company. For some companies, you may be required to ensure all your properties with them before umbrella coverage can be offered to you. Some even go on to add umbrella coverage as an add-on to an existing policy.

Other companies may attempt to offer you an umbrella policy as a separate policy and this is why you should peruse the market before making any decisions. The more assets you own, the greater the need for you to protect yourself. To get this done, you could consider working with a specialized insurer to get the most value for your money.

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5 Things to Consider When Changing Car Insurance

October 22, 2018 &• 5 min read by Josh Smith Comments 0 Comments

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Insurance is defined as a form of protection against loss. But in today’s insurance industry, insurance can be purchased to mitigate against all forms of loss. It is a type of risk management used by people to protect against uncertain loss or the risk of failure. Insurance companies or carriers or underwriters sell premiums to those who wish to purchase premiums. Premiums can be defined as the number of money carriers charge to customers in exchange for the coverage set in the agreement also known as the insurance policy.

And in 2017, the U.S. insurance industry sold premiums reaching a total of $1.2 trillion with the health insurances accounting for a large chunk of that amount. Coming in at second place was P/C (property/casualty) premiums accounting for $558.2 billion in 2017.

Some may argue that the reason for this is due to the hike in prices of premiums over the years, but the truth is for the millions of people who have experienced softer blows because of the payouts from insurance companies, paying a premium is a small price to pay.

There are currently several types of insurance policies. From health insurance to life insurance, automobile insurance and so on.

These days, choosing a new car insurance policy that works for you is usually time-consuming, expensive or even both. And because policies are not usually permanent, you can easily switch insurance providers if you are not happy with your current provider.

And for those who think they can afford to drive around during the period they are in between a comprehensive insurance policy, the bad news is that in all but a few states, an insurance policy is needed alongside a license in order to drive.

But the good news is changing your policy provider should not be so difficult, this article outlines five of the most important things to consider when shopping for a new insurance carrier:

  1. Cost:

Like every other thing on the market, the cost of an insurance policy is not equal. It is almost impossible to get the same coverage from 10 different companies at the same price. Odds are you would get the same coverage you are getting at a fraction of the same price from another company. This is because various companies factor in different things when putting together the price for their insurance policies. Some of these costs could include the cost of running the company, the cost of offering more benefits and other hidden charges.

It is essential to factor in elements other than your out-of-pocket expenses before you decide to make the switch between car insurance companies. You can also try to take control of the factors you can control like improving your driving record or looking at additional types of auto protection plans. All these are considered by the insurance company and could eventually save you money.

  1. Your Choice:

Another important reason why several bare minimum automobile insurance policies are cheap is that they offer limited options regarding maintenance and repairs. Like a health maintenance organization (HMO), car insurance companies can ask you to take your car for approval at one of their approved dealerships for appraisals. Sticking with a top-shelf insurance company could possibly mean higher premiums but it also means better care should you need it.

The better the insurance company, the higher the premiums you would have to pay.

  1. The Benefits:

Odds are, if you cannot list the distinguishable advantages offered to you by your insurance policy, you are not gaining a lot in return. An amazing advantage you could watch out for is the reduction of rates if you go a few months without any accidents and accident forgiveness. Some companies also choose to pay for your rental car if you need to leave your car at the mechanic regardless of how long it might take.

Other companies offer reduced rates for purchases of bulk policies. i.e. The purchase of car insurance with possibly fire insurance and so on. Instead of you letting your insurance company ask what you can do for them, ask what they can do for you.

  1. The Circumstances:

Sometimes things that we do not plan for happen and when such things happen, the first thing to be done is to start searching for a new car insurance policy. For example, most new cars often need complete coverage until they are fully bought, and some local insurance companies do not offer continued coverage if you change cities.

Also, rates could also go up if a new driver is added to the policy. This is, of course, dependent on the driver’s age, gender, and driving history. Understanding your unique situation will allow you to properly assess what is needed and what is a mere frivolity.

  1. Your Company:

Because of the internet, finding out pertinent information about a prospective insurance company is very easy. You can figure out everything there is to know about them. What kind of customer service do they offer their clients? Do their representatives listen? Do they treat their customers with respect?

Find out how the claim adjusters and representatives of the company treat those who work with the cars. Knowing these things is essential because a company that treats its employees terribly will possibly skim around the edges when it comes to their customers.

Also, try doing a bit of research into the company’s ethics. It is advisable to do business with a company that believes in the same things you do and do not engage in behavior that you find personally distasteful. Your money will be used to pay for several things to ensure they are all used for things that you support.

It’s an added bonus for you if you know who your insurance agent is, and you have a great relationship with them. Usually, these people are the ones who will go the extra distance for you should you need to file a claim and they can also help with the filing of the claims or give you a recommendation on local companies that could be of help to you.

Finally, you’ll want to check your credit score. Credit.com offers a free credit score updated every 14 days. Usually when getting a new insurance quote, insurance companies will run your credit. A higher credit score usually means a lower monthly premium, although other factors like your driving record and marital impact how much you’ll be paying. Remember to consider these five factors when considering a new insurance company.

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Source: credit.com

Skipping Renters Insurance? Why That’s a Bigger Risk Than You’d Think

October 26, 2017 &• 8 min read by Elyssa Kirkham Comments 0 Comments

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As a finance writer, I am surrounded by people who know a lot about managing money. But even those with the most money know-how can still miss financial must-haves.

For instance, in a recent conversation, a few of my coworkers stated they didn’t have renters insurance. This puts them among the 59% of renters who don’t have renters insurance, according to a poll from the Insurance Information Institute. On the other hand, 95% of homeowners carry homeowners insurance.

Granted, renting comes with fewer property responsibilities than owning. But don’t assume you can skip insurance for your home simply because you’re leasing it. Go without it and you’ll expose yourself to some major risks.

See why opting for a policy is protection you can’t live without, and learn how renters insurance can help smooth over the following five major renting crises.

1. Damaged Belongings

If you’re asking yourself whether you need insurance as a renter, a better question might be, Can you afford not to have it?

If the relatively small cost of a renters insurance premium—typically between $15 and $25 per month—seems too expensive, consider the alternative, suggests John Espenschied, agency principal of Insurance Brokers Group.

“Imagine replacing all your clothes, furniture, electronics, food, personal items, and priceless personal memorabilia,” he says. With renters insurance, the insurer will cover most or part of the value of damaged items. Without this coverage, you’re completely on the hook for all those costs.

Espenschied tells a story of one of his clients, a young woman to whom he recommended rental insurance multiple times. She declined the coverage.

Months later, there was an electrical surge in the building. “It took out everything she owned that was plugged in, including the TV, computer, and several other items,” Espenschied explains. These items were permanently damaged and unusable.

Had she opted for renters insurance, Espenschied could have helped her submit a claim and get the money to replace those belongings. Unfortunately, without the policy there was nothing he could do.

Don’t put yourself in the same position—get a renters insurance policy. On top of that, take steps to document all belongings and valuables so you can prove ownership in a renters insurance claim.

2. The Temporary Loss of a Habitable Home

Some disasters—such as fires, flooding, and electrical issues—can require extensive repairs and render your rental uninhabitable. Your landlord will usually handle these repairs, but if you lose the use of your home, your landlord might only be required to refund a prorated rent for the days you can’t live in your rental.

But if you’re out of a place to live, your daily rent rate might not cover any decent hotels or other temporary housing options.

But there’s good news: “Most renters insurance policies can help you in the event something happens to your apartment or house and you have to live elsewhere while it’s repaired,” says Jennifer Fitzgerald, CEO and cofounder of insurance comparison site PolicyGenius.

Typically, you can find a hotel nearby and your renters insurance will cover the costs of your stay until you can resume habitation of your home.

3. Stolen Belongings

Renters insurance typically includes coverage for theft and burglary too. If your home is broken into or burglarized, you can file a claim with your renters insurance provider to replace any stolen or damaged items.

“It even covers your belongings when they’re not physically in your home,” Fitzgerald says. “So if you take your laptop with you to the local coffee shop or on vacation and it’s stolen, your policy could help cover the costs of getting it repaired or replaced.” Renters insurance will usually be the policy that covers theft of personal items from your car too.

If your home is broken into or your purse is stolen from your car, promptly notifying authorities is an important step—filing a renters insurance loss claim will usually require a police report of the theft.

4. Personal Liability for Legal Damages

The most important protection your renters insurance provides, however, might be personal liability protection.

“If your dog bites someone or a food delivery person slips and falls, you’re covered,” says Stacey A. Giulianti, chief legal officer for Florida Peninsula Insurance. Instead of being held personally responsible for those damages, your insurer will step in and help. “The carrier will even hire and pay for an attorney to defend any resulting lawsuit.”

This can be especially important if you are found responsible for damage to adjacent properties as well, Espenschied says. For example, renters insurance will cover you if your toilet or tub “overflows and leaks into the neighbor’s unit below, causing damage to their personal property and cost to repair the building.” You may also be covered if a kitchen fire in your apartment causes damage to the unit above you.

The damage and loss can easily add up to tens of thousands of dollars. In cases like these, renters insurance can be the difference between smooth recovery and huge financial loss or even bankruptcy.

Make sure you understand your coverage. “Every policy is different, so talk to an agent and read your policy terms,” Giulianti warns.

5. An Eviction for Violating Your Lease Agreement

Many lease agreements include a clause in which the tenant agrees to purchase a renters insurance policy. These common clauses usually clarify that the landlord’s property insurance coverage does not extend to your personal belongings.

If you sign a lease with such a clause, you are agreeing to maintain this insurance coverage throughout your residency there. If you fail to get a policy or allow it to lapse, your landlord is within their rights to serve you with a “comply or quit” notice and possibly begin eviction proceedings.

If you don’t currently have a policy, reconsider getting renters insurance. Alongside a healthy emergency fund, having the right insurance can bring vital financial security to your life. For the cost, renters insurance provides protection and peace of mind.

“Most renters can get a policy for around $20 per month,” Fitzgerald says. “That’s a small price to pay when you think about the fact that if you don’t have renters insurance, you’ll be forced to cover the cost of replacing any and all items damaged.”

Procuring a renters insurance policy is a smart step toward financial security. With the right policy, you can avoid debt in an emergency and protect your possessions and your home. If you’re ready to buy a home, learn more about the ins and outs of home mortgages in Credit.com’s Mortgage Loan Learning Center. And to be financially prepared for anything, it’s also a good idea to build your credit score so you can qualify for loans and other credit when necessary. See where you stand with a free credit score from Credit.com.

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Source: credit.com