Are some insurance policies a waste of money?

I sell insurance but try to focus on the policies that people actually need and use – auto, home and life insurance.

However, there are some types of policies that may actually be a waste of money. Here are a few examples:

Flight Insurance – does anyone sell this anymore? Air travel is safer than it’s ever been. If you desire to leave money to loved ones you need basic life insurance. Insurance that pays for a specific reason, like dying from a plane crash, are usually not worth the money.

Extended Warranty on consumer products – we have all been asked by a sales clerk if we want the one year, two year or lifetime warranty on that new computer, dvd player or other electronic device. If you are buying a very expensive flat screen television you may consider adding a warranty. But for most of the consumer goods, the warranty is a bad buy because they almost never are needed.

Flood Insurance – unless you live in a specific flood zone this is a coverage you want to avoid. It may give you peace of mind but empty your pocketbook in the meantime. While we have read many stories about flooding I bet if you check those areas are known flood risk areas.

Unemployment Insurance – sounds good. You get money coming in if you are laid off. And in today’s economy that is a genuine concern, especially for certain industries or fields. However, most households would be better served by becoming disciplined savers. You not only keep that unemployment premium in your pocket but better yet in your savings account.

Accidental Death Insurance – Deaths occurring by accident are small compared to people who die from ill health. You need life insurance that pays your beneficiaries for all risks, not just for accidents. I remember consulting one lady who had something like 7 accidental death policies. She believed they would pay a benefit no matter how she died. When informed she had to die in an accident for her beneficiary to receive money she promptly cancelled them. We found coverage for her that paid a death benefit whether she died from an accident, cancer, heart attack or any other reason.

When you need to talk with someone about your life insurance, please contact us today!

The Auto Glass Endorsement

It is mandatory in the State of Arizona that companies must offer a zero-deductible glass endorsement. That means you do not incur any deductible when your windshield is replaced or repaired.

Arizona House Bill 2464 will change that.

Arizona Insurance companies will no longer be required to offer coverage for the repair or replacement of auto glass without a deductible. Insurers will now be able to offer auto insurance policies that carry the glass endorsement WITH a deductible. So if your windshield is cracked and needs replaced you will have to cough up a deductible to do so.

Keep in mind that this only gives insurance companies the “option” of offering the endorsement that makes you pay a deductible for a replacement or repair of your auto glass. They can still offer the no-deductible glass endorsement.

One benefit to consumers is this – they may now have another option from their insurance company to buy a policy with glass coverage that includes a deductible but at a lower monthly premium.

Would you opt to buy the new glass coverage where you have to pay a $50 or $100 deductible if it meant your monthly premiums were a little less? That is likely the new choice you will have to make when this house bill goes into effect.

Glass claims absolutely can affect the bottom line of an insurance carrier. If a client has two glass claims per year those can total $600 – $900 in cost to the carrier. If an insured has two vehicles and is paying roughly $1,800 per year in auto insurance those two glass claims can wipe out nearly 50% of the premium received before the insurance company pays out of pocket for any other types of claims. And they still hope to make a profit.

Oklahoma City Tornado

It is amazing the damage done by the tornado that ripped through Moore, OK. Tens of millions of dollars of damage. The loss of life. That city seems to be right in an alley where tornado’s have historically traveled. Makes me wonder if people who move there have trepidation about the likelihood of this sort of thing happening in the future. The future is here…again.

In the metro Phoenix, Arizona area we don’t face tornado’s, or much in the way of hail damage. Sometimes we have fierce winds and heavy rains. Not often but I have seen them and dealt with some of the claim aftermath.

However, we do have other types of threats from causes such as fire, water loss and burglary.

When is the last time you received your annual homeowner renewal and really looked through it? I don’t necessarily mean all the fine print from cover to cover (though even that is advisable) but rather at least the main points of coverage information and the sections detailing what is covered and what is excluded?

Perhaps you need to let the Oklahoma loss and devastation remind you that it is worth 25 minutes of your life to take a careful look at your insurance. Understanding your coverages and policy limitations only serve to help you through the difficult process of a claim should it happen.

Minimum Auto Limits

The State of Illinois is considering raising their minimum auto insurance limits – the first such change in 24 years. Currently the state allows drivers to carry a minimum $20,000 bodily injury and $15,000 for property damage.

That means if someone hits your vehicle and you become injured the insurance will only pay out up to $20,000. Your vehicle damages will only be covered up to $15,000. Those limits may work for some claims but certainly not all, leaving some victims in a financial bind simply because someone else chose to cover low limits.

The new limits will raise the BI to between $25,000 – $50,000, depending if one person injured or two or more. The increase in premium is expected to be around $75 for the typical consumer.

Perhaps you are wondering then what Arizona’s minimum auto insurance coverage limits are? Bodily injury is $15,000 per person up to $30,000 and property damage is $10,000. Those are woefully low and an embarrassment to our state. Low limits like these put innocent people at personal and financial risk.

I hope at some point soon this issue will be taken up by someone in the Arizona legislature and the responsible thing done.

Insurance and the professional athlete

Many kids grow up dreaming of playing professional baseball, basketball and football (sorry hockey). The odds are so small however. Even the best athletes can run into injuries or even greater competition and never make it.

Peyton Manning is one of the lucky ones. He recently signed a contract with the Denver Broncos for $20,000,000 per season for 2013 and 2014. And in reality it probably is a bargain for Denver as their team will likely continue to compete for a Super Bowl as long as Manning is behind center.

As part of his contract Manning and the Broncos also agreed to add insurance to his contract that would wipe his salary off the books if he reinjures his neck. Ironically, the insurance policy does not cover the parties if he is injured for any other reason, just the neck.

In 2012, Manning threw for over 4,600 yards for 37 touchdowns and 11 interceptions.

I was unable to determine how much this insurance policy cost but it is merely the cost of doing business in professional sports.

Who Pays for our Summer Droughts?

Remember the hot, dry summer of 2012? Due to a lack of rain farmers were hit hard by a shortage of good crops. Did this affect the pockets books of those who own farms? You would think but in reality many farmers actually profited more than if they had ample rain and a good crop season, at least if you believe a recent online article on the subject.

According to one online article, crop insurance not only saved farmers from last years drought but provided them with terrific profits as a reward. One type of crop insurance covers lower harvests or lower prices.

Farmers got a poor harvest and corn and soybeans were in short supply. Prices soared, which benefited farmers. The insurance paid farmers for their lost yield, but paid them at a higher, post dought market price.

Who pays when crop insurance claims are filed? Tax payers, of course, to the tune of about $16 billion in 2012.

I don’t know all the ends and outs of farming or crop insurance. Matter of fact, I know very little. The article I read seemed very believable and seemed to want to steer the reader against farm subsidies, like crop insurance.

Do I think we should discontinue farm subsidies? Probably not. If you speak with a farmer you will come to understand the varied struggles, from the weather and insurance to repairing and maintaining equipment. It’s no small feat running a successful farm. It’s a life that is not always easy but one that most farmers love and would never leave. Still, it does not diminsh the many challenges small farm families face.

If we pressure the small family farmer too much we end up forcing them to sell to large farming corporations. Just what we need – corporations in charge of more farm land. Considering all the money our government hands out to various wasteful programs and foreign nations ensuring our small farmer families can continue providing food for us seems worth it.

We all love to eat, afterall.

More Fallout from Superstorm Sandy

Businesses like restaurants, hotels and retail already hit hard by superstorm Sandy are finding life a bit harder as certain claims are being denied. One claim in particular has generated lawsuits. Customers with “business interruption” coverage filed claims that resulted from the storm interfering with their normal business operations.

However, some insurers are denying claims because it was the flood that knocked out the power which caused the interruption. Flood is not covered under most insurance policies. The businesses are claiming it was not the flood that interrupted coverage but resulting explosions.

Two hundred forty two companies requested mediation, the process involved when clients and insurance companies cannot resolve claims disputes, according to the American Arbitration Association. Most of the cases involve business interruption issues and claim denials. The average claim is approximately $92,000.

It pays to read your insurance policy in advance. While I understand those policies are thick and not the easiest on the eye, there are certain sections worth spending time on and this your actual coverage pages and pages that discuss items not covered.

Health Insurance News for Rural Arizona

Arizona State Senator, Gail Griffin – R-Hereford, sponsored a bill that will will prohibit health insurance carriers from declining payments for medical services provided through telemedicine. Put another way, if a medical treatment/condition is covered under a patient’s plan the insurance carrier will be required to pay whether it was provided physically in a doctor’s office or through a televised link-up.

One Blue Cross/Blue Shield represented indicated that he believed this legislation would save patients and the insurance carrier money. The cost of transporting a client from a rural area to an urban hospital is costly. If the client can be treated or advised medically through a televised link up it reduces costs.

Implementation of the new bill is being delayed until the latter part of 2014 to allay industry concerns.

And insurance carriers will only be required to pay for seven (burns, trauma, burns, infectious diseases, cardiology, mental health disorders, dermatology, and neurologic diseases, including strokes) treatments through the new televised method. This measure is being designed with 13 rural counties in mind, and the areas that are considered remote in Maricopa and Pima counties, like Gila Bend and Ajo.

Would the real Medicaid study please step forward

Two years ago the National Bureau of Economic Research published a study that concluded people are happier when they are on Medicaid. Those with Medicaid were compared to people not on Medicaid.

Supporters of nationalized health care have used this study to promote an expansion of Medicaid, according to one online article.

The New England Journal of Medicine went after the study to dig deeper.

Their determination, in part, is the original study seemed to focus on whether people seemed “happier” being on Medicaid than the overall effectiveness of the program in the lives of those who use the program. The new study also sought to determine if people were actually healthier. What they found is that people on Medicaid were not any more healthy than those not on Medicaid.

The New England Journal of Medicine study also concluded that Medicaid is pretty good if you have routine health issues. But if you need specialized care that is where the challenge truly begins. The report seemed to indicate that Medicaid resources are spread too thin to adequately help everyone who needs more than routine care. That cannot be good news for the elderly who rely on specialized care more than the rest of the population as a whole.

Long Term Care Insurance Unaffected by Obamacare

One of the mandates behind Obamacare is to treat men and women equally under the health insurance umbrella. However, Long Term Care Insurance is not under the same guidelines so they will continue to charge more for women.

According to Genworth Financial, $2 out of every $3 claim dollars is for women. Women live longer than men and a big reason they require more claim dollars. Insurers will ratchet up rates on women who buy long term care insurance as a result. Women’s premiums are expected to increase 20-40%.

Long Term Care Insurance provides coverage for those unable to care for themselves in a nursing home or need partial care – assisted living. Costs for these services are very high if paying out of pocket. Insurance plans generally coverage a specific dollar amount of coverage for a specific number of years, typically two years or five years.

For example, a LTC policy might provide $200 per day coverage for 2 years.

The rising rates are not expected to impact existing clients or clients who apply together as husband and wife.

Insurers selling group health insurance, beginning 2014, will be able to vary rates based on geography, age, family size and tobacco use but not for gender. So far, Long Term Care plans have avoided this stipulation.

LTC Rates Rising in California

The California Public Employees Retirement System has announced plans to raise long term care insurance rates by 85% in 2015. Not all employees purchase the optional long term care insurance in their benefits package. But those who do will see their premiums nearly double. John Hancock raised rates by 40% and CNA Financial increased rates by 45%.

Long Term Care Insurance helps cover costs associated with nursing home assistance or assisted living. Most everyone knows someone who has been in a nursing home or in an assisted living facility. Costs are rising in both. It makes some wonder if the LTC industry will eventually be an insurance product that is only available to the very wealthy.

At least with life insurance almost everyone can afford a cheap term life insurance policy. That is, until you get into the retirement years when all life insurance is pricey. But long term care will eventually be a product that ceases to exist or becomes known as the rich man’s insurance plan. And you cannot blame the insurance industry. Costs are skyrocketing. They have to do what is needed to remain solvent and hopefully ensure profitability.

The long term care industry has seen staggering increases over recent years as they begin to experience an onslaught of claims. LTC sales took off in the 1980’s. Customers are now in their 70’s and 80’s or beyond and many are needing long term care assistance. Claims are rising. Many carriers sold policies that offered lifetime benefits for as long as the client lives and needs care. Life expectancy has risen and is causing issues with profitablity.

The economy is also causing issues for the insurance industry. Once upon a time, the insurance industry could put money into conservative and fixed investments and earn a sizable return on their hundreds of millions of dollars. Now, as everyone else knows, there are few places to earn a decent, safe return. The lack of investment opportunities is costing the insurance industry profits. And those fewer profits are being passed along to consumers as the need to not lose money on basic insurance products is more important than ever.