Source: goodfinancialcents.com
Coronavirus hasnât entirely ended life as we knew it, but itâs certainly caused changes, some of which are likely to be with us for a very long time.
For some the coronavirus is literally a matter of life and death, and it raises an important question: how does coronavirus affect life insurance?
No one likes to think about the possibility of losing their life, or that of a loved one to this virus, but for over 150,000 families here in the US, it has turned out to be a reality.
Letâs examine the impact it may have on your existing policies, and perhaps more importantly, how it may affect applications for new life insurance coverage.
Thereâs good news if you already have a life insurance policy in place. Generally speaking, the insurance company will pay a death benefit even if you die from the coronavirus. With few exceptions, life insurance policies will pay for any cause of death once the policy is in force. There are very few exceptions to this rule, such as acts of war or terrorism. Pandemics are not a known exception.
If youâre feeling at all uncomfortable about how the coronavirus might impact your existing life insurance policies, contact the company for clarification. Alternatively, review your life insurance policy paying particular attention to the exclusions. If thereâs nothing that looks like death due to a pandemic, you should be good to go.
But once the policy is in place, there are only a few reasons why the insurance company can deny a claim:
None of these are a serious factor when it comes to the coronavirus, unless you tested positive for the virus prior to application, and didnât disclose it. But since the coronavirus can strike suddenly, it shouldnât interfere with your death benefits if it occurs once your policy is already in force.
This is just a guess on my part, but I think people may be giving more thought to buying life insurance now they may have at any time in the past. The coronavirus has turned out to be a real threat to both life and health, which makes it natural to consider the worst.
But whatever you do, donât let your fear of the unknown keep you from applying for coverage. Though you may be wishing you bought a policy, or taken additional coverage, before the virus hit, now is still the very best time to apply. And thatâs not a sales pitch!
No matter whatâs going on in the world, the best time to apply for life insurance is always now. Thatâs because youâre younger and likely healthier right now than youâll ever be again. Both conditions are major advantages when it comes to buying life insurance. If you delay applying, youâll pay a higher premium by applying later when youâre a little bit older. But if you develop a serious health condition between now and then, not only will your premium be higher, but you may even be denied for coverage completely.
Donât let fears of the coronavirus get in your way. If you believe you need life insurance, or more of it, apply now.
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That said, the impact of the coronavirus on new applications for life insurance is more significant than it is for existing policies.
The deaths of more than 100,000 people in the US is naturally having an effect on claims being paid by life insurance companies. While thereâs been no significant across-the-board change in how most life insurance companies evaluate new applications, the situation is evolving rapidly. Exactly how that will play out going forward is anyoneâs guess at the moment.
If youâre under 60 and in good or excellent health, and not currently showing signs of the virus, the likelihood of being approved for life insurance is as good as itâs ever been. You can make an application, and not concern yourself with the virus.
That said, it may be more difficult to get life insurance if you have any conditions determined to put you at risk for the coronavirus, as determined by the Centers for Disease Control (CDC).
These include:
Now to be fair, each of the above conditions would require special consideration even apart from the coronavirus. But since theyâre known coronavirus risk factors, the impact of each has become more important in the life insurance application process.
If any of these conditions apply to you, the best strategy is to work with insurance companies that already specialize in those categories.
There are insurance companies that take a more favorable view of people with any of the following conditions:
But even with insurance companies that specialize in providing coverage for people with certain health conditions, some have introduced new restrictions in light of the coronavirus.
For example, if you have a significant health condition and youâre over 65, you may find fewer companies willing to provide coverage.
The insurance company may also check your records for previous coronavirus episodes or exposures. Expect additional testing to determine if youâre currently infected. Most likely, the application process will be delayed until the condition clears, unless it has resulted in long-term complications.
Travel is another factor being closely examined. The CDC maintains an updated list of travel recommendations by country. If youâve recently traveled to a high-risk country, or you plan to do so in the near future, you may be considered at higher risk for the coronavirus. How each insurance company handles this situation will vary. But your application may be delayed until youâve completed a recommended quarantine period.
Since the coronavirus is still very much active in the US and around the world, financial considerations are in a constant state of flux. If youâre concerned at all about the impact of the virus on other insurance types, you should contact your providers for more information.
Other insurance policies that my warrant special consideration are:
Many have been gripped by fear in the face of the coronavirus, which is mostly a fear of the unknown. But the best way to overcome fear is through positive action.
I recommend the following:
Since there is a connection between poor health and the virus, commit to improving your health. Maintain a proper diet, get regular exercise, and follow the CDC coronavirus guidelines on how to protect yourself.
Donât wait for a bout with the virus to take this step. It’s important for a number of reasons and the consequences of not having it can be severe. Compare the best life insurance companies to get started.
If you donât have the virus, and you want to do a policy as quickly as possible, no medical exam life insurance will be a way to get coverage almost immediately.
Low cost means you can buy a larger policy. With the uncertainty caused by the coronavirus, having enough life insurance is almost as important as having a policy at all. Look into cheap term life insurance to learn more about what you can afford.
Did you know that your credit score is a factor in setting the premium on your life insurance policy? If so, you have one more reason to maintain a healthy credit score. One of the best ways to do it is by regularly monitoring your credit and credit score. There are plenty of services available to help you monitor your credit.
This action step rates a special discussion. When times get tough, and money is in short supply, people often cancel or reduce their insurance coverage. That includes life insurance. But that can be a major mistake in the middle of a pandemic. The coronavirus means that maintaining your current life insurance policies must be a high priority.
The virus and the uncertainty itâs generating in the economy and the job market are making finances less stable than theyâve been in years. Youâll need to be intentional about maintaining financial buffers.
If you donât already have one place, start building one today. If you already have one up and running, make a plan to increase it regularly.
You should also do what you can to maximize the interest youâre earning on your emergency fund. You should park your fund in a high-interest savings account, some of which are paying interest thatâs more than 20 times the national bank average.
In another direction, be purposeful about paying down your debt. Lower debt levels translate into lower monthly payments, and that improves your cash flow.
If you donât have the funds to pay down your debts, there are ways you can make them more manageable.
For example, if you have high-interest credit card debt, there are balance transfer credit cards that provide a 0% introductory APR for up to 21 months. By eliminating the interest for that length of time, youâll be able to dedicate more of each payment toward principal reduction.
Still another strategy for lowering your debts is to do a debt consolidation using a low interest personal loan. Personal loans are unsecured loans that have a fixed interest rate and monthly payment, as well as a specific loan term. You can consolidate several loans and credit cards into a single personal loan for up to $40,000, with interest rates starting as low as 5.99%.
Weâve covered a lot of ground in this article. But thatâs because the coronavirus comes close to being an all-encompassing crisis. Itâs been said the coronavirus is both a health crisis and an economic crisis at the same time. It requires strategies on multiple fronts, including protecting your health, your finances, and your familyâs finances when youâre no longer around to provide for them.
Thatâs where life insurance comes into the picture. The basic process hasnât changed much from the coronavirus, at least not up to this point. But thatâs why itâs so important to apply for coverage now, before major changes are put into effect.
The post How Does Coronavirus Affect Life Insurance? appeared first on Good Financial Cents®.
Source: goodfinancialcents.com
Whether you’re giving your sweetheart a gorgeous diamond ring for Valentine’s Day or you’re the one who gets to wear the bling, don’t forget about protecting it with insurance. I know looping in your insurance agent may not seem romantic, but it can prevent a lot of heartaches if that expensive piece of jewelry gets damaged, lost, or stolen.
Today, you’ll learn how to keep your Valentine’s Day gift or any valuables safe.
Anytime you’re thinking about making a big purchase, such as expensive jewelry, watches, or electronics, make sure you have a plan to insure it. Think about how devastated you’d be if you bought diamond earrings for your sweetie, and they got stolen or lost. I’m sweating just thinking about it!
Anytime you’re thinking about making a big purchase, make sure you have a plan to insure it.
Before you buy something valuable, communicate with your existing home or renters insurance representative or company. Find out if you need additional coverage—it’s likely that you do! In just a moment, I’ll give you some recommendations if you don’t already have a home or renters policy.
Let your insurer know what you’re planning to buy and how much it costs. If you’re still negotiating on price or you’re buying a second-hand item with an unknown value, start with your best estimate.
If the value of your Valentine’s Day jewelry is over a certain amount, your insurer will ask you to submit an appraisal. It must come from a gemologist who uses a variety of tools and their expertise to identify and value gems. It includes photos of your item and an estimated value.
Your insurer needs an appraisal to know precisely what they’re insuring. The document also protects you in case you need to make a claim.
The retailer who sells you a new piece of jewelry should provide you with an appraisal. However, an insurer may want an independent appraisal to verify the value. If you purchase heirloom or estate jewelry, it may not come with an appraisal.
You can find an appraiser by getting recommendations or doing some research online. The cost varies depending on how intricate the item is and how long the work may take.
For instance, an antique ring with many stones and old-fashioned gem cuts will take longer to analyze than a brand-new diamond solitaire. For a relatively simple piece, the appraisal may cost in the range of $150 to $250. But I’ve had heirloom pieces that cost nearly $500 to appraise.
While your great-grandmother’s wedding ring or a necklace from your valentine might be priceless to you, insurers will only pay you its appraised or actual value.
It could take a gemologist several weeks to complete your appraisal, and they need to have the item in their possession the entire time. So, don’t wait until the last minute to find out what’s required to get a Valentine’s Day gift insured.
Also, note that you can’t insure the sentimental value of any item. While your great-grandmother’s wedding ring or a necklace from your valentine might be priceless to you, insurers will only pay you its appraised or actual value.
If you assume you have coverage for a lavish Valentine’s Day gift simply because you have homeowners insurance, that could be a big mistake. The amount of insurance on your home is different than the amount of coverage for your personal belongings.
Most standard home and renters policies include coverage for personal items like jewelry. However, specific categories of belongings come with coverage limits or caps. Jewelry, watches, and furs typically have a low insurance cap, such as $1,000 or $2,000. If you’re a big spender, that could be a fraction of the cost of your gift.
For example, if you buy an engagement ring worth $4,000, and your homeowners or renters policy only covers $1,000, you’d come up $3,000 short of replacing it. Plus, the cap applies to an entire claim, not individual items. If you had multiple pieces of jewelry stolen, you’d only receive up to the policy limit.
Jewelry, watches, and furs typically have a low insurance cap, such as $1,000 or $2,000. If you’re a big spender, that could be a fraction of the cost of your gift.
Other types of personal belongings that have insurance caps include silverware, computers, firearms, musical instruments, collectibles, and antiques. Keep reading to learn how to make sure your expensive items are adequately insured.
If your existing homeowners or renters insurance doesn’t have a jewelry limit high enough to cover your posh purchase, one solution is to “schedule it.” You’ll also hear this called a rider, floater, or an endorsement to your policy. Scheduling an item means that you add more detail about it to your existing insurance policy.
One benefit of scheduling an item, such as jewelry, is that you’re covered for all types of losses. For instance, if you accidentally lose a wedding ring swimming in the Caribbean ocean on your honeymoon, you’re covered up to your limit. When your valuables are covered by a standard home or renters policy, without being scheduled, you typically only have coverage for specific events, such as loss from a fire or theft.
One benefit of scheduling an item, such as jewelry, is that you’re covered for all types of losses.
Also, don’t forget that you must pay a deductible when you make a claim. So, if you have a $500 deductible and a jewelry limit of $1,000, the most you’d receive from a claim is $500.
But a scheduled item doesn’t require a deductible. That means you wouldn’t have to pay any amount out-of-pocket to replace a Valentine’s Day gift that gets lost or disappears mysteriously.
Having a rider increases your premium, but it’s usually worth it. The cost might be $5 to $15 per $1,000 of insured value. So, an engagement ring that’s worth $6,000 could mean paying an additional $30 to $90 per year on your homeowners or renters insurance premium.
Another option for insuring a precious gift is to get a stand-alone policy. This policy is separate insurance just for the item, not an add-on to an existing home or renters policy. Most insurers offer a valuable articles policy for specific items like jewelry, watches, furs, collectibles, and antiques.
Whether you own or rent your home, you’ll pay less for an insurance rider than for valuable articles insurance. The only exception would be if you have many expensive items to insure—so, shop and compare both options if you have a collection of valuables.
Most homeowners have insurance, but many renters avoid getting a renters policy because they mistakenly overestimate the cost. It’s surprisingly inexpensive; the average price is $185 per year. So, if you rent, get renters insurance first and then schedule an expensive item.
All the coverages I’ve mentioned protect your valuables at home or when they’re away from your home. Off-premise coverage kicks in when an item is stolen from your car or damaged while you’re traveling.
Additionally, home and renters insurance gives you liability coverage worldwide. It also pays living expenses, such as a hotel and meals, if you can't live in your home while repairs are made after a covered event, such as a natural disaster.
The bottom line is that if you rent and don’t have insurance, you’re putting your finances at risk. Take a few minutes to shop and compare quotes at sites such as Bankrate.com or Policygenius.com. But no matter your situation, you can always opt to insure a Valentine’s Day gift with a stand-alone policy.
Many people are confused about who needs to buy insurance for a gift, the giver or the recipient? Well, it depends on who has the item. If you buy a gift to give, you need to have it insured while it’s in your possession.
If you have a receipt and appraisal, pass them along so the new owner has what they need to get proper insurance.
Once you give a gift away, the lucky recipient owns it and must insure it. If you have a receipt and appraisal, pass them along so the new owner has what they need to get proper insurance.
If you’re married or live together and have the same home or renters insurance policy, you don’t have to take any extra steps. But if you and your valentine have different households, the person who wears and enjoys the gift must make sure that it’s insured.
If you have home or renters insurance, but don't have a list of your personal belongings, it could be challenging to claim a loss. Imagine that your home or apartment got destroyed in a fire. Would you remember every item?
If you don’t have a home inventory, create one and add your Valentine’s Day gift to the list. At the least, have pictures or video of your belongings that you store in the cloud. While losing precious items can be devastating, the more documentation you have, the easier it will be to provide proof that you owned them and make an insurance claim.
If you got a cherished gift for Valentine’s Day or got engaged, congrats! Now make it a priority to protect it.
Source: quickanddirtytips.com
Ask someone if they want to leave a legacy after theyâre gone, and theyâll almost assuredly answer yes. Ask someone if they know how to go about accomplishing such a benevolent task, and they’ll probably say, âI have no idea.â
You might be surprised to learn thereâs a simple solution: your life insurance policy.
The payout from a life insurance policy (called a death benefit) can be a legacy that far outlasts your time on Earth. And itâs not only for people who want to leave a legacy to their spouse and children.
So if you think life insurance isnât for your particular situation, think again. A life insurance policy can change many different peopleâs lives, or even entire communities, after youâre gone.
The greatest legacy you have is your family. And life insurance can help financially protect the people you love most from the unexpected. If you have people who rely on your income for their day-to-day lives, theyâre the first people you should consider when deciding if life insurance is for you and how much coverage you need.
Your legacy can live on through a death benefit that can help pay off the family home, fund college educations and provide income that helps them continue to meet their financial needs if youâre no longer there.
Your nieces and nephews probably donât need a life insurance policy from you to ensure their day-to-day financial needs are covered. Most likely, they are covered through their parents’ life insurance.
But naming your niece or nephew as a beneficiary of your life insurance policy is a profoundly sweet move that would cement you as the cool aunt or uncle.
Leaving nieces and nephews a nest egg could continue your legacy long after youâre gone. Life insurance proceeds can help you fund that backpacking trip through Europe or contribute to their college tuition as you always intended to do.
There are many uses for life insurance that could help your extended family, which should be considered if you always planned to do so. Just make sure that you have a conversation with your brother or sister to give them a heads up, set expectations and allow them to factor the money into their familyâs overall financial plans.
With the recent election, many social media newsfeeds have been full of photos showing friends and family marching, volunteering, donating and giving back to organizations and movements they are passionate about.
If this resonates with you as well, perhaps your legacy should be giving back to your favorite organizations. Life insurance can offer a way to ensure if youâre no longer around to donate or volunteer, you can still continue giving back and advocating for what you believe in.
One of the simplest ways to give back to a charity via life insurance is to name a trust as the beneficiary of your life insurance policy. Make sure the trust has specific instructions to give a certain amount of your estate to the charity if you were to die.
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Another way to use your life insurance payout in an altruistic fashion is to establish a scholarship at your alma mater. A scholarship is a profound way to have your legacy, and name, live on after you are gone.
Each college has different rules and guidelines for establishing scholarships. You should contact your chosen collegeâs development or advancement office for help with this. Typically, you need $25,000 or more to be able to endow a scholarship at a university. The college or university will usually invest the $25,000 with their current endowment pool and issue a $1,000 scholarship yearly based on the criteria you and the college establish.
Similar to donating a portion of your life insurance benefit to a charity, itâs simplest to name a trust as your beneficiary and ensure the trust has specific instructions for the donation. You can leave instructions in your will to set up a trust or foundation, but you run the risk of your heirs misinterpreting your intent. An estate attorney can help you set up a 501(c)(3) charity, foundation or trust to help establish, fund and award the scholarships.
Love your city? Consider leaving a legacy by creating a small park or playground. Youâll typically need to check with your city council on proposed locations and projects. The council can be an excellent help in determining the cityâs need, recommending parcels of land if you donât already have some to donate, and helping to guide you through how to make a difference.
Communities are almost always in need of a safe place for children to play. But they often lack the funds to build the playground and then maintain it. Through a trust, you can allocate a certain amount of money to create a better environment for your community.
Many of us dream of leaving an impact on our loved ones and communities that will carry on long after weâre gone. Aside from financially protecting your family, directing a life insurance payout for altruistic means is a surefire way to leave a legacy far beyond your years.
If youâre interested in alternative ways of using life insurance to give back long after youâre gone, it’s a good idea to consult an estate attorney who can help you make the best choice for your specific situation.
Image: Juanmonino
The post 5 Ways to Leave a Legacy With Your Life Insurance appeared first on Credit.com.
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While Medicare and Medicaid both help aging adults afford some of their medical expenses, they may not cover the cost of an extended illness or disability. Thatâs where long-term care insurance comes into play. Long-term care insurance helps policyholders pay for their long-term care needs such as nursing home care. Weâll explain what long-term care insurance covers and whether or not such coverage is something you or your loved ones should consider.
Long-Term Care Insurance Explained
Long-term care insurance helps individuals pay for a variety of services. Most of these services do not include medical care. Coverage may include the cost of staying in a nursing home or assisted living facility, adult day care or in-home care. This includes nursing care, physical, occupational or speech therapy and help with day to day activities.
A long-term care insurance policy pays for the cost of care due to a chronic illness, a disability, or injury. It also provides an individual with the assistance they may require as a result of the general effects of aging. Primarily, though, long-term care insurance is designed to help pay for the costs of custodial and personal care, versus strictly medical care.
When You Should Consider Long-Term Care Insurance
During the financial planning process, itâs important to consider long-term care costs. This is important if you are close to retirement age. Unfortunately, if you wait too long to purchase coverage, it may be too late. Many applicants may not qualify if they already have a chronic illness or disability.
According to the U.S. Department of Health and Human Services, an adult turning 65 has a 70% chance of needing some form of long-term care. While only one-third of retirees may never need long-term care coverage, 20% may need it for five years or longer. With a private nursing home room averaging about $7,698 per month, long-term care could end up being a huge financial burden for you and your family.
Most health insurance policies wonât cover long-term care costs. Additionally, if youâre counting on Medicare to assist you with these extra expenses, you may be out of luck. Medicare doesnât cover long-term care or custodial care. Most nursing homes classify under the custodial care category. This classification of care includes the supervision of your daily tasks.
So, if you donât have long-term care insurance, youâre on the hook for these expenses. However, itâs possible to get help through Medicaid for low income families. But keep in mind, you may only receive coverage after you deplete your life savings. Just know that Medicare may cover short-term nursing care or hospice care, but little of the long-term care in between.
What Does Long Term Care Insurance Cover
So what does long term care insurance cover, Well, since the majority of long-term care policies are comprehensive policies, they may cover at-home care, adult day care, assisted living facilities (resident care or alternative care), and nursing home care. At home, long-term care may cover the cost of professional nursing care, occupational therapy, or rehabilitation. This may also include assistance with daily tasks, including bathing or brushing teeth.
Additionally, long-term care coverage can cover short-term hospice care for individuals who are terminally ill. The objective of hospice care is to help with pain management and provide emotional and physical support for all parties involved. Most policies allow beneficiaries to obtain care at a hospice facility, nursing home, or in the comfort of their own home. However, most hospice care is not considered long-term care and may receive coverage through Medicare.
Also, long-term care insurance can help cover the costs of respite care or temporary care. These policy extensions provide time off to those who care for an individual on a regular basis. Usually, respite care provides compensation to caregivers for 14 to 21 days a year. This care can take place at a nursing home, adult daytime care facility, or at home
What Long-Term Care Doesnât Cover
If you have a pre-existing medical condition, you may not be eligible for long-term care during the exclusion period. The exclusion period can last for several months after your initial purchase of the policy. Also, if a family member provides in-home care, your policy may not pay them for their services.
Keep in mind, long-term care coverage wonât cover medical care costs. Many of your medical costs will fall under your coverage plan if youâre eligible for Medicare.
Long-Term Care Insurance Costs
Some of the following factors may affect the cost of your long-term care policy:
If youâre in poor health or youâre currently receiving long-term care, you may not qualify for a plan. However, itâs possible to qualify for a limited amount of coverage with a higher premium rate. Some group policies donât even require underwriting.
According to the American Association for Long-Term Care Insurance (AALTCI), a couple in their mid-50s can purchase a new long-term care policy for around $3,000 a year. The combined benefit of this plan would be roughly $770,000. Keep in mind, some policies limit your payout period. These payout limitations may be two to five years, while other policies may offer a lifetime benefit. This is an important consideration when finding the right policy.
Bottom Line
While itâs highly likely that you may need some form of long-term care, itâs wise to consider how you will pay for this additional cost as you age. While a long-term care policy is a viable option, there are alternatives you can consider.
One viable choice would be to boost your retirement savings to help compensate for long-term care costs. Ultimately, it comes down to what level of risk youâre comfortable with and how well a long-term care policy fits into your bigger financial picture.
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Photo credit: ©iStock.com/KatarzynaBialasiewicz, ©iStock.com/scyther5, ©iStock.com/PeopleImages
The post What Long-Term Care Insurance Covers appeared first on SmartAsset Blog.
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Source: goodfinancialcents.com
Since it doesnât have an immediate benefit â like health or auto insurance â life insurance may be the most underestimated insurance type there is. But if you die, life insurance will likely be the single most important policy type youâve ever purchased.
And thatâs why you have to get it right. Not only do you need a policy, but you need the right amount of coverage. Buying a flat amount of coverage and hoping for the best isnât a strategy. There are specific numbers that go into determining how much life insurance you need. There are even numbers that can reduce the amount you need.
Calculate what that number is, compare it with any life insurance you currently have, and get busy buying a policy to cover the amount you donât have. Iâll not only show you how much that is, but also where you can get the lowest cost life insurance possible.
To make it easier for you to find out how much life insurance you need weâre providing the life insurance calculator below. Just input the information requested, and the calculator will do all the number crunching for you. Youâll know exactly how much coverage youâll need, which will prepare you for the next step in the process â getting quotes from top life insurance companies.
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Now that you have an idea how much life insurance you need, the next step is to get quotes from top life insurance companies for their best life insurance products. And the best way to get the most coverage for the lowest premium is by getting quotes from several companies. Use the quote tool below from our life insurance partner to get those offers:
To answer the question of how much life insurance do I need, youâll first need to break down the factors that will give you the magic number. You can use a rule of thumb, like the popularly quoted buy 10 times your annual income, but thatâs little more than a rough estimate. If you use that as your guide, you may even end up paying for more coverage than you need, or worse â not have enough insurance.
Life insurance may be the most underestimated insurance type there is. But if you die, life insurance will likely be the single most important policy type youâve ever purchased.
Letâs take a look at the various components that will give you the right number for your policy.
If youâre not using budget software to track this number, a good strategy is to review and summarize your expenses for the past 12 months.
When you come up with that number, the next step is to multiply it by the number of years you want your life insurance policy to cover.
For example, letâs say your youngest child is five years old and you want to be able to provide for your family for at least 20 years. If the cost of your basic living expenses is $40,000 per year, youâll need $800,000 over 20 years.
Now if your spouse is also employed, and likely to remain so after your death, you can subtract his or her contribution to your annual expenses.
If your spouse contributes $20,000 per year to your basic living expenses, you can cut the life insurance requirement in half, allowing $400,000 to cover basic living expenses.
But in considering whether or not your spouse will continue to work after your death, youâll need to evaluate if thatâs even possible. For example, if you have young, dependent children, your spouse may need to quit work and take care of them.
Alternatively, if you have a non-working spouse, thereâll be no contribution from his or her income toward basic living expenses.
In either case, your need to cover basic living expenses will go back up to $800,000.
It may be tempting to assume your dependents will be provided for out of the insurance amount you determine for basic living expenses. But because children go through different life stages, there may be additional expenses.
The most obvious is providing for college education. With the average cost of in-state college tuition currently running at $9,410 per year, you may want to gross that up to $20,000 to allow for books, fees, room and board and other costs. You can estimate a four-year cost of $80,000 per child. If you have two children, youâll need to provide $160,000 out of life insurance.
Now it may be possible that one or more of your children may qualify for a scholarship or grant, but that should never be assumed. If anything, college costs will be higher by the time your children are enrolled, and any additional funds you budget for will be quickly used up.
Life insurance is an opportunity to make sure that even if you arenât around to provide for your childrenâs education, they wonât need to take on crippling student loan debts to make it happen.
But apart from college, you may also need to provide extra life insurance coverage for childcare. If your spouse does work, and is expected to continue even after your death, care for your children will be necessary.
If childcare in your area costs $12,000 per year per child, and you currently have a nine-year-old and a 10-year-old, youâll need to cover that cost for a total of five years, assuming childcare is no longer necessary by age 12. That will include three years for your nine-year-old and two years for your 10-year-old. It will require increasing your life insurance policy by $60,000 ($12,000 X five years).
This is the easiest number to calculate since you can just pull the balances from your credit report.
The most obvious debt youâll want paid off is your mortgage. Since itâs probably the biggest single debt you have, getting it paid off upon your death will go a long way toward making your familyâs financial life easier after youâre gone.
You may also consider paying off any car loans you or your spouse have. But youâll only be paying off those loans that exist at the time of your death. Itâs likely your spouse will need a new car loan in a few years. Use your best judgment on this one.
But an even more important loan to pay off is any student loan debt. Though federal student loans will be canceled upon your death, thatâs not always true with private student loans. Unless you know for certain that your loan(s) will be canceled, itâs best to make an additional allowance to pay them off.
Credit cards are a difficult loan type to include in a life insurance policy. The reason is because of the revolving nature of credit card debt. If your death is preceded by an extended period of incapacitation your family may turn to credit cards to deal with uncovered medical expenses, income shortfalls, and even stress-related issues. An estimate may be the best you can do here.
Still another important category is business debts, if you have any. Most business debts require a personal guarantee on your part, and would be an obligation of your estate upon your death. If you have this kind of debt, youâll want to provide for it to be paid off in your policy.
These are the most basic reasons to have life insurance, but in todayâs high cost world, itâs probably one of the smallest components of your policy.
When we think of final expenses, funeral costs quickly come to mind. An average funeral can cost anywhere from $5,000 to $10,000, depending on individual preferences.
But funeral costs are hardly the only costs associated with total final expenses.
Weâve already mentioned uncovered medical costs. If youâre not going to include a provision for these elsewhere in your policy considerations, youâll need to make a general estimate here. At a minimum, you should assume the full amount of the out-of-pocket costs on your health insurance plan.
But thatâs just the starting point. There may be thousands of dollars in uncovered costs, due to special care that may be required if your death is preceded by an extended illness.
A ballpark estimate may be the best you can do.
Whatâs that? Reductions in the amount of life insurance I need? Itâs not as out-in-orbit as you may think â even though any life insurance agent worth his or her salt will do their best to ignore this entirely. But if youâre purchasing your own life insurance, you can and should take these into consideration. Itâs one of the ways you can avoid buying more life insurance than you actually need.
What are some examples of possible reductions?
Letâs say you calculate youâll need a life insurance policy for $1 million. But you currently have $300,000 in financial assets. Since those assets will be available to help provide for your family, you can deduct them from the amount of life insurance youâll need.
Weâve already covered this in calculating your basic living expenses. But if you havenât, you should still factor it into the equation, at least if your spouse is likely to continue working.
If you need a $1 million life insurance policy, but your spouse will contribute $25,000 per year (for 20 years) toward your basic living expenses, youâll be able to cut your life insurance need in half.
But be careful here! Your spouse may need to either reduce his or her work schedule, or even quit entirely. Either outcome is a possibility for reasons you might not be able to imagine right now.
While it may be tempting to deduct the anticipated proceeds from a job-related life insurance policy from your personal policy, I urge extreme caution here.
The basic problem is employment related life insurance is not permanent life insurance. Between now and the time of your death, you could change jobs to one that offers a much smaller policy. You might even move into a new occupation that doesnât provide life insurance at all.
Thereâs also the possibility your coverage may be terminated because of factors leading up to your death. For example, if you contract a terminal illness you may be forced to leave your job months or even years before your death. If so, you may lose your employer policy with your departure.
My advice is to consider a work policy as a bonus. If itâs there at the time of your death, great â your loved ones will have additional financial resources. But if it isnât, youâll be fully prepared with a right-sized private policy.
Letâs bring all these variables together and work an example that incorporates each factor.
Life insurance needs:
Reductions in anticipated life insurance needs:
Based on the above totals, by subtracting $700,000 in life insurance reductions from the gross insurance need of $1,350,000, leaves you with $650,000. At that amount, your family should be adequately provided for upon your death, and the amount you should consider for your life insurance policy.
Once again, if you have life insurance at work, think of it as a bonus only.
Once you know how much life insurance you need, itâs time to purchase a policy. Now is the best time to do that. Life insurance becomes more expensive as you get older, and if you develop a serious health condition, it may even be impossible to get. Thatâs why I have to emphasize that you act now.
Crunch the numbers to find out how much life insurance you need, then get quotes using the quote tool above. The sooner you do, the less expensive your policy will be.
The post How Much Life Insurance Do I Really Need? appeared first on Good Financial Cents®.
Source: goodfinancialcents.com
In response to the ongoing coronavirus emergency, the Internal Revenue Service (IRS) is offering federal tax relief to Americans. It’s part of emergency declarations that were enacted due to the Stafford Act. This response will undoubtedly help citizens and businesses cope with the crisis.
But what you may not know is that changes to the tax deadline affect several aspects of your financial life. In this post, I’ll explain what coronavirus tax relief is and 10 ways it affects your finances.
The central feature of tax relief during the coronavirus pandemic is that the due date for filing and paying your 2019 federal taxes is postposed from April 15, 2020 to July 15, 2020.
You don’t have to be sick or negatively impacted by COVID-19 to qualify for this federal tax postponement. It applies to any person or entity, such as those who are self-employed, an unincorporated business, a corporation, estate, or trust that has 2019 taxes due on April 15. It doesn’t matter if April 15 is the original date for your return on an extension date you previously filed for—your new due date is still July 15.
There’s absolutely nothing that taxpayers need to do to take advantage of this relief.
There’s absolutely nothing that taxpayers need to do to take advantage of this relief. The postponement will happen automatically for any amount you owe or any installment payment you were asked to make on April 15.
Of course, many Americans are expecting a tax refund. When you overpay taxes during the year, the IRS settles up with you during tax season by issuing a refund.
If you’re owed a tax refund, never wait to file your tax return. The sooner you send it in, the faster you’ll receive your money back. Getting a direct deposit is always faster and safer than a paper check. So, be sure to include your banking information with your return, so you receive your refund electronically.
As a result of the postponement of the due date for filing and paying federal income taxes until July 15, 2020, you’ll get a pass on interest and penalties if you pay up by then. However, the extra fees will begin to accrue on July 16, 2020.
Depending on where you live, you may have to pay state income taxes, which have not been postponed. However, it’s possible that the states affected the most by the coronavirus could enact relief measures of their own.
Depending on where you live, you may have to pay state income taxes, which have not been postponed.
Seven states don’t charge income tax, including Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. Additionally, New Hampshire and Tennessee don’t tax earned income, but they do tax your investment income.
If you live in any of the remaining 41 states, plan on filing and paying your state taxes as usual. Check with your state’s tax agency or Department of Revenue to learn more and stay as up to date as possible.
But what if July 15 comes and you need more time? Individuals and businesses can request an automatic extension to delay filing federal taxes. However, this doesn’t give you more time to pay what you owe, only more time to submit your tax form.
To get a federal extension, individuals must submit IRS Form 4868 on IRS.gov, using tax software, or through your tax professional, before the July 15 deadline. Most incorporated businesses must file IRS Form 7004.
If you choose to file an extension request, that would give you until October 15, 2020, to file your 2019 return.
If you choose to file an extension request, that would give you until October 15, 2020, to file your 2019 return. But again, to avoid interest and penalties on any outstanding tax liability, you must pay an amount you estimate is due with your extension request.
If you need a state tax filing extension, check with your state’s tax agency to see what’s possible.
If you’re ahead of the game and already filed your 2019 taxes and scheduled payment to occur on April 15, you have options. If you don’t want your payment to go through, you can reschedule or cancel it until two business days before the payment date.
In other words, April 10 would be the last day to make a tax payment change. However, I wouldn’t wait until the last minute if you plan to reverse or modify it.
To make a change, visit the tax payment portal you initially used and follow the instructions. If you authorized an electronic funds withdrawal from your bank account, contact a U.S. Treasury Financial Agent at 888-353-4537 to request a cancellation. And if you scheduled a tax payment using a credit card, contact the issuer to cancel the card payment.
Most businesses make estimated tax payments each quarter. The 2020 schedule is:
So, the first estimated payment that businesses need to make this year will be due on June 15, 2020.
What about information returns that must be filed by certain types of businesses, or taxes that are due on other dates, such as May 15 or June 15? Unfortunately, individuals and businesses that have filing or payment due dates other than April 15 don’t get any relief at this time.
Again, the assistance only applies to federal income tax returns or payments due on April 15, 2020.
If you or your business owe tax other than income tax, such as sales tax, excise tax, payroll tax, gift tax, or estate tax, you must file and pay them as usual.
You typically have until April 15 to make health savings account (HSA) contributions for the prior year. Under this relief, you can now make HSA contributions for 2019 at any time until July 15, 2020.
To qualify for an HSA, you must be covered by a qualifying high-deductible health plan that you get through work or on your own. In early March, the IRS issued a notice that a high-deductible health plan may cover the cost of COVID-19 testing and treatment before your deductibles are met. Also, just as before the coronavirus, you can pay for medical testing and treatment using funds in your HSA.
Just like with an HSA, you typically have until April 15 to make contributions to a traditional IRA or a Roth IRA. Because the tax filing date is postponed to July 15, you can make IRA contributions for 2019 at any time until July 15, 2020.
However, for most workplace retirement plans, such as a 401(k) or 403(b), the deadline corresponds to the calendar year. So, December 31, 2019, was the last day to make 2019 contributions for accounts offered by an employer.
While this tax relief may not be enough to buoy many people and businesses that have been affected most by the coronavirus pandemic, it’s just one measure. There will be broader fiscal relief enacted to minimize the economic impact of this ongoing health crisis.
Source: quickanddirtytips.com
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, itâs also important to consider the value health insurance offers. If youâre considering opting out of health insurance next year, evaluate the value of the following health plan offerings before you finalize your decision:
While everyone has a different financial situation with varying constraints, health insurance is a worthwhile investment.
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 admittedâwhether 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, youâll see:
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, youâll 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.
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.
Itâs 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.
Health insurance companies also offer the following helpful features with their plans:
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 doctorâs office with questions to get similar assistance. If the doctor canât 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, thereâs 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.
Itâs easy to see how much your health insurance plan saves you on medical care when you review the EOB.
Itâs 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.
The post 4 Ways Health Insurance Can Save you Money appeared first on Credit.com.
Source: credit.com
Having health insurance makes it possible to receive medical care while only paying a fraction of that careâs true cost. Insurance doesnât cover everything, however. Some of the cost of your care is still up to you to pay, and that cost comes in two primary forms: copays and coinsurance.
What Is a Copay?
A copay is a flat amount of money that youâre responsible for paying for a health care service. Copays typically apply for things like a doctorâs appointment, prescription drug or medical test. The amount of your copay is dependent on your specific health insurance plan.
You can typically expect to pay your copay when you check in for your service, be it an annual physical, dental cleaning or blood test. Copays are typically lower amounts ranging from $10 for something like a generic drug prescription to around $65 for a visit to a medical specialist.
Depending on your insurance plan, copays may not take effect until after you reach your deductible. Your deductible is the amount of money you must pay out-of-pocket before your insurance provider starts to pitch in. Deductibles reset at the beginning of every year.
When you are reviewing your plan information and you see the phrase âafter deductibleâ or âdeductible appliesâ in reference to your copays, thatâs an indication that the copay is only in place once you meet your deductible. On the other hand, if you see âdeductible waived,â thatâs a sign that your copay is in place from the beginning. It may go without saying, but the latter situation is vastly preferable to you.
What Is Coinsurance?
Coinsurance is another method of splitting the cost of medical coverage with your insurance plan. A coinsurance is a percentage of the cost of services. You pay the percentage, and your insurance company foots the rest of the bill. So, if you have a $8,000 medical bill and a 20% coinsurance, you would be on the hook for $1,600.
Coinsurance typically only comes into play after you hit your deductible. Further, you may have differing coinsurance percentages for the same services depending on your provider network. If you have a preferred provider organization (PPO) plan, your coinsurance could be a higher percentage for providers outside your network than it is for providers in your network.
Similarly, your coinsurance may not apply to providers outside your network if you have a health maintenance organization (HMO) plan or an exclusive provider organization (EPO) plan. Thatâs because these plans typically donât provide any out-of-network coverage.
Copay vs. Coinsurance
Copay and coinsurance are very similar terms. They both have to do with portions of the cost of your health care thatâs under your responsibility. Because of that, and their similar names, itâs easy to confuse the two. There are a couple of important distinctions to keep in mind, however.
The most notable difference between copays and coinsurance is that copays are always a flat amount and coinsurance is always a percentage of the cost of the service. Another difference is that some copays can be in place before you hit your deductible, depending on the specifics of your plan. With coinsurance, you have to hit your deductible first.
Bottom Line
If youâre choosing between health insurance plans, make sure to examine the provided copays and coinsurance for each option. While they may not be the most important factor to consider, a high copay can be quite a pain, especially over the course of years of appointments and procedures.
Tips for Staying on Top of Medical Expenses
Photo Credit: ©iStock.com/DuxX, ©iStock.com/SARINYAPINNGAM, ©iStock.com/Aja Koska
The post A Guide to Coinsurance and Copays appeared first on SmartAsset Blog.
Source: smartasset.com