Ask Colleen King

Life insurance is life insurance, right? Many times yes, but with the right type of life insurance your mortgage will be protected in a way that affords your survivors more options.

Have you gotten a mortgage or refinanced a loan lately? About 20 minutes after the close, you started getting things in the mail offering crucial, vital protection that was absolutely essential to your existence and the existence of your family as well the continuation of liberty and freedom in America. Geez, when you put it that way……..

Often is it offered by an affiliate of the company you did your loan through, but also insurance agencies that do this type of coverage buy information and seek out public records when a new loan or re-fi closes. The idea is that you fill out the card, mail it then get a call to set an appointment. You can do that and meet with the agent, but there are some definite questions you need to know to ask.

Generally what is being offered is called ‘decreasing term’ life insurance. What you are buying is a term policy that is meant expressly to pay off your mortgage, it’s not a fixed, static amount.  So, as your mortgage balance decreases, so does the amount the policy will pay if you pass away. If you are buying with a spouse or partner and you both apply, you are really paying two premiums and getting one policy, with a death benefit that decreases over time. AND, if you sell your house, usually the policy is attached to the house so you end up starting over if you are buying another home.

What about this scenario–one of you is working, the other isn’t. The working spouse dies.  You have other bills, and now a loss of income. What do you do? Well, the decreasing term life policy will pay off your mortgage, but what about other expenses?

By using a regular term life insurance policy, either 20 or 30 years, you control what happens to the money. You can now address other bills and have a financial cushion. Maybe you do want to pay off the house, and you can, but what if you are now going back to work and would like the mortgage interest expense as a deduction? This is one of the things I mean by having control over your situation. If  two people are insured, you have two level premium death benefits (meaning the value doesn’t drop over time). And if you move, the policy goes with you.

Optimally, you look at an amount that will pay off the mortgage, put all kids through a four year college program and take care of a majority of the remaining partner’s living expenses. That can end up being expensive, and you don’t want to buy insurance that breaks you. Once we look at rates, then we go ‘backwards’ and see what death benefit amount is affordable. After all, having something is better than nothing, because it will give your survivors time to grieve and deal with things. And not have to make difficult financial decisions at a terrible time.

Some people if they are younger will opt to add on a ‘return of premium’ rider. If you are alive at the end of the term of the policy, they will return 100% of the premium to you. No interest of course, but at least you get it back. Agents are divided on whether this is a good thing to recommend or not. I suggest it, but don’t push it, because ultimately my clients are calling the shots.

So basically, when you have people depending on you financially, whether you want to call this mortgage protection, life insurance or just good old peace of mind, seriously consider looking at it. Be well!

Tags:   Life Insurance · mortgage protection3 Comments

I was on vacation last week, and even though I was out of cell phone and computer/wireless range, there’s always someone talking about health insurance.

I was in a cab on the island of Aruba, which is beautiful. My boyfriend and I with another couple had gone to a great beach and in the cab on the way back, we were asking the gentleman driving us to tell us a bit about Aruba (other than what we knew about Natalie Holloway!)

He was of Dutch origin and had lived there most of his life. Said it was beautiful and safe, but like anywhere, things were changing. Health care coverage was free (remember, that always means higher taxation!) but they were having a huge influx of Colombians which was a burden on their system. He groused that when one comes, the whole family comes and often times they aren’t working, ergo they aren’t paying taxes or contributing to the system. Just draining it. Sound like familiar complaints?

In California, it’s the Central Americans who are often blamed as a problem. Several years ago when I spent a lot of time in Italy, it was the Tamils, the people from Sri Lanka that were ‘draining’ the economy. Every country has it’s problems, and part of it seems to evolve from people in poorer nations striving to make a better life for themselves and their families in a better place.

Health care is only one piece of a ‘better life’ and it costs money. What do we do about it? There are so many ideas, but whatever you think is a great way to change our current system, it won’t happen quickly. The more people that buy health insurance, healthy people rather than just those who are ill, the more money that goes into ameliorating the risk–right now, who buys it? People anticipating needs whether it’s planning a family and all the care costs that come with having babies, people getting older fearing illness, and so on. Younger healthy people also need to get on the band wagon, even though they ‘don’t need it.’ You may not develop asthma or high blood pressure in your 20s, but what about that snowboarding accident or amateur sports injury? Running down the stairs in a hurry and either badly spraining or breaking an ankle. That costs too, and those are the kinds of things that can saddle a young person with a ton of bills that would have been avoided with a decent health plan.

So until the ‘big reform’ (lord help us all!) takes place, covering yourself and your family, if it can be done without costing a fortune, seriously look at doing it. That’s not just a sales ploy on my part, it’s reality. Significant reform will take a few years at best. Meantime, help avoid the potential pitfall of financial ruin by seeking some sort of coverage. A good agent will help you find what fits you best.   Be well!

Tags:   Health insurance · Individual Health InsuranceNo Comments.

When dealing with Individual Health Insurance, depending on your personal health history, it can be dicey to apply because you don’t know whether you’ll be accepted or not and if you are, and are offered coverage at an above standard rate, will it be affordable? Depending on your situation there are some options in California, so we’ll look at a few of them. You can see this poor guy is trying to figure it all out in a song….

If you are coming off a group health plan and have health issues, you are eligible for Federal COBRA for usually up to 18 months as a result of the Health Insurance Portability and Accountability Act (HIPAA). Problem is, if you’ve ever looked at the cost, if you didn’t have a heart condition before, you will now. You get to keep your exact same coverage, not subject to underwriting review, but you are now paying the full cost plus a 2-4% administration fee. NOW you understand the true cost of health insurance. Federal COBRA applies to businesses with more than 20 employees, but California, being the way we are, instituted CalCOBRA for companies with less than 19 employees. Similar rules around this, you can keep it for 18 months but you pay the full cost plus about a 10% administrative cost. And if you work for a 20+ company, you can take advantage of Federal and CalCOBRA for a total of 36 months coverage, if you can afford it.

What do you do when COBRA ends, or if you can’t afford COBRA and are uninsurable? Once you complete the full run of COBRA, the insurance carriers have guaranteed issue health plans you can apply for. But, the cost is often comparable to your COBRA coverage.

Option of last resort are a type of plan called a ‘mini med’ plan. These are not the first line of plans that I as an agent offer but when there is nothing else, it can help keep the wolf from the door. I work with one company that offers 3 different level plans and I usually try to encourage people to look at the highest level, contrary to what I usually advise. The carrier pays a fixed amount per day for hospitalization, a specific amount for office visits, they will help with some physicians and surgical charges and offer several discounts on other types of services such as vision, prescriptions, hearing aids, and so on. The monthly cost on these can often be better than your COBRA offering but not as comprehensive a type of coverage. But, it will help.

Again, not the first type of plan in my arsenal but when properly explained, there is a place for the mini med plan. They tend to be more popular outside of California and can also be found in the group health insurance arena as well when an employer wants to offer something but doesn’t want to break the bank.

Reform of the health care and health care reimbursement has been talked about intensely for well over a year in California. Don’t plan on it happening too soon, we can’t even get a budget passed. You need to be responsible for your own wellbeing so seriously consider looking into at least a high deductible health plan in case something major happens. Because comprehensive reform ain’t happening soon. Be well!

Tags:   Group Health Insurance · guaranteed issue health plans · Individual Health Insurance · mini med plansNo Comments.

The problem with Long Term Care insurance when speaking to prospective clients about it is the cost. That may come before or after the denial of the need for it, because none of us want to admit that we need it. At least I don’t, but I bought it anyway. To avoid ever needing it, because if you can’t eat it or wear it, I don’t want to spend money on it.

In the conversations with people about this frequently and the reasons I hear for not needing it are as follows:

• It’s too expensive
• My kids will take care of me
• I’ll never go to a nursing home!

Okay well, here’s the deal. The expense, just like we don’t want to admit the McDonalds Cheeseburger isn’t 35 cents anymore, you can’t find safe care for $1000/month. Check out the following numbers:

In California, over the past five years, costs increased 19 percent in Los Angeles, 12 percent
in San Francisco, 21 percent in Oakland, 9 percent in San Diego, 9 percent in San Jose, and 28
percent throughout the rest of the state. This compares to a 17 percent increase nationwide.

The study, which found that nationwide the cost of long term care in nursing homes, assisted
living facilities and in the home increased for the fifth consecutive year, also found that one
year in a private nursing home in San Francisco costs $100,101. The comparable cost in
Los Angeles is $76,459, while in Oakland the cost is $92,740, in Sacramento the cost is $92,094
and in Santa Ana the cost is $86,934. The annual cost for a room in a private nursing home runs
$82,560 per year in San Diego and $89,973 in San Jose, while the cost throughout the rest of the
state averages $72,919.

By contrast, the national average for a year in a private nursing home is $76,460 - more than one
and a half times the average annual household income in the U.S. of $48,201. Most long term care
services in this country are rising at a rate faster than inflation, as the cost of providing
this type of care continues to rise.

SO, basically just because you've saved in your retirement fund, you can deplete that very quickly
with long term care needs. Looking into a plan that will cover care at any level, home, assisted
living or nursing home, and has some sort of inflation protection so the daily benefit level will
rise annually is crucial. Your kids will probably have families of their own and may have health
problems of their own by the time you need assistance. With a long term care policy, they can take
care of you if they are able, but supplement that with outside caregivers so they don't run
themselves into the ground. You need to at least look at it.  Be well!

Tags:   Long Term Care Insurance · LTC · LTCi2 Comments

Did you know that it doesn’t really cost $10 to see a doctor? The HMO plans have gotten people into the mind set that it’s only $10 to see a doctor. When you have a Health Savings Account (HSA) you have a much more tuned in idea of cost.

In HMO plans mainly, you have a fixed office visit co-pay that covers pretty much everything. On a PPO plan, the office visit co-pay generally covers the doctor visit alone, then you pay for any additional lab or xrays. That gives you a better idea of what things cost. When you have a health plan that is qualified to be used with an HSA, you pay for everything until you hit the deductible, then you have either full or partial coverage, depending on what your out of pocket maximum is. So what’s so good about that? At least, that’s what this lady is asking herself……

Well, HSA eligible health insurance plans have decidedly lower premiums and overall, the out of pocket maximum is less. So the money you aren’t spending on insurance, you deposit into your HSA. If you have a ‘good’ year medically speaking, then the money in the HSA stays with you. I’ve carried my health insurance this way since 2004 and it’s worked out nicely.

But what you really start to get a grasp of is the cost of care. Some insurance carriers a couple of years ago started posting pricing information on their web site, what they will pay for certain procedures in certain areas. Aetna was the first as I recall. Now that it’s YOUR money, not the insurance company’s most people are more interested in what services are going to cost.

How much time did you spend researching the cost of your last TV or computer purchase before buying? How much time did you spend checking out the cost of an office visit with a couple of doctors in your area? How about the quality of the TV, computer or doctor? I probably have the answer to the doctor question, and that’s okay; this is a new mind set for us, daring to question the almighty medical world. I recently received a nice comment from a lady, Mona Lori, whose web site you need to check out–www.OutofPocket.com. She started this web site in 2007 out of the frustration of having what’s called a Consumer Driven Health Plan, but not knowing how to best use it. Here’s what she said to me in an email:

“ OutOfPocket.com was definitely worth launching.  I have received so many great comments from consumers all over the U.S. about our dysfunctional health care system.  We do not have a critical  mass of consumers using the site yet, but if enough consumers eventually shared/posted actual prices they paid for routine health care services, collectively, consumers will have created a very powerful directory of true prices for health care services.”

So if you have an HSA, or even just a higher deductible PPO plan and you want to know how to get more bang for your buck, check out www.OutOfPocket.com. She is certainly gathering info still, but this will be a dynamic process, so bookmark her site!   Be well!

Tags:   Health insurance · Health Savings Account · HSANo Comments.

Annuities are a tool that allow money to grow on a tax deferred basis. Not tax free, tax deferred. Tax deferred growth is the benefit of retirement plans, whether you are looking at an employer plan such as a 401k or 403b, or an IRA you start yourself. The idea is that you let this money grow, and when you are ready for retirement, either you won’t be working or you won’t be working as much, so your income drops, ergo your tax liability drops. Here is a link to a really nice simple chart (just the kind I like) that will show you the type of growth you stand to gain.

Annuities and tax deferral

Fixed annuities, whether a regular fixed or a fixed indexed annuity, allow your money to grow on a tax deferred basis, but does NOT have to be set up as an IRA. A lot of advisers used to tell people not to used an annuity as a personal retirement vehicle for IRAs because of fees that were often associated with them, and frankly because there was more money to be made for them if you went into a stock based account.

Well, since the stock market has become so volatile, a lot of people are looking to some kind of a fixed annuity because with these, unlike the stock market or the majority of variable annuities, your principle is guaranteed. Once you hit a certain age in life, you don’t want to risk losing what you have saved and try to rebuild it again.

When planning for retirement most experts will tell you to take advantage of all the ‘pre-tax’ options available. Once you max those out, but you still have excess money you would like to put away, you can either look at a Roth IRA or an annuity. The advantage of a Roth is that you are putting away after tax money so when you pull money out of it, your gains are tax free. The potential disadvantages are the annual limits on what you can deposit and if your income is above a certain amount you aren’t eligible to have a Roth. That still leaves you with annuities as an option. No limits on how much you can put in, your financial status doesn’t come into play so it’s one of those things to consider. Especially if you have some windfall bonus, inheritance or some other good fortune come you way.

So there is a combination of ways to do this, you just need to assess the best prospects! Be Well!

Tags:   AnnuitiesNo Comments.

I always feel bad for people who find health insurance confusing–the things that really make it hard to understand, most people don’t even encounter. Most initial questions revolve around ‘what’s a deductible?’ Right after ‘what’s the difference between an HMO and a PPO (see my other post about that).

When evaluating a health insurance plan, either individual health insurance or a group health insurance plans, the one thing most people look at is ‘what’s my co-pay?’ It’s a good thing to know that, but more importantly (to me) are the following three items:

• The Deductible
• Co-insurance
• Out of Pocket maximum

The deductible generally is what you pay before your coverage kicks in. Some benefits will be available prior to meeting the deductible, like the office visit co-pay. Deductibles are generally involved with PPO plans but in order to drive costs down HMO plans, particularly individual HMO health plans, are starting to have deductibles. I try to get my clients to look at the higher deductible health plans in order to save money on their monthly premium, but it all boils down to what people are comfortable with.

Co-insurance refers to what the insurance company pays versus what you pay once the deductible is met. you hear about 80/20, 70/30, 60/40 even 50/50 plans. The insurance companies pay the larger number.

The out of pocket maximum is really important because if something big happens to you, this is the number that keeps you from going broke. When a major health issue hits once you’ve met your deductible, and the 70/30 co-insurance kicks in, once your ‘30% s’ hit the out of pocket maximum that is generally it for the rest of the calendar year. You may still have office visit co-pays and prescription co-pays, but other costs are pretty much taken care of until January 1 the next year. On a lot of PPO plans these can be $7500 or more, which isn’t chump change, but when you put that up against a surgery costing $100,000 or more, then it becomes a bargain.

Of course there are many other things to look at. Many individual health insurance plans in California, in an effort to come up with affordable plans, don’t cover maternity. Some plans offer generic drug coverage only, there’s all sorts of combinations coming up so you really need to look at what you are considering purchasing. That’s where an independent agent can come in handy.

Independent agents can help you sort through all of what’s available and help you decide which options will fit your situation best. AND, best of all, it doesn’t cost you anything to use an agent. The rates are the rates, and independent agents are paid by the carrier you place your business with. And a good agent will be there after the sale to hep you with any issues that come up. Be well!

Tags:   Group Health Insurance · Individual Health Insurance2 Comments

Medicare Supplements, Medicare HMOs, do you need anything more than original Medicare? Well, if you’ve looked at how it works, you’ll know that there can be some hefty costs especially if you are hospitalized.

Medicare Part A you automatically get at age 65 if you’ve worked a specific length of time in the US. This mainly covers hospitalization. The big expense here is that you have a deductible, and unlike most insurance plans, these are ‘per hospitalization’, not calendar year deductibles. in 2008, the Part A deductible is $1024, and this goes up pretty much every year. So if you are hospitalized in February, and then again a few months later for an unrelated problem, you’re hit with another deductible.

Part B you have to buy and this takes care of things more along the line of doctor visits and outpatient procedures. With Part B, this year the cost is $93/month and you have a $135 deductible, but that’s once a year. Where the expense comes in is that Part B is that it covers 80%, leaving you with 20% which of course can add up.

So, having some type of additional coverage is pretty important, especially for that Part A deductible! in order to have any of these additional types of coverage one does have to have both Parts A and B

First, there are two basic categories of ‘additional’ Medicare coverage, Medicare Supplements and Medicare Advantage plans. Medicare Advantage plans further divide into Medicare HMOs, regional PPOs, Private Fee For Service (PFFS) plans and medical savings account plans. I’ll be skipping the last two because the PFFS plans are fraught with problems and being phased out, and the savings account plans aren’t catching on.

Medicare HMOs function like regular HMOs, from the aspect that you pick a primary care doctor and you then have a network of doctors and hospitals that you get your care from. One advantage of these over the supplements is that during the annual open enrollment period, November 15 to December 31, you can change to another plan if you aren’t happy without going through underwriting–BIG plus especially as yu get older and have health issues. BEST part of these is that they are free in most counties, particularly in Southern California.

Medicare Supplements function more like a PPO, except that the ‘network’ for this are providers that take Medicare–leaves it pretty wide open. The plan designs are identical because they are designed by the federal government. Some carriers offer some limited extras, but mainly you want to look at the price of these. Comparable to these are the Regional PPOs. These are offered on a limited basis, they aren’t everywhere. And there is a network, the specific network for this product for the carrier you are insured by. Again, these may end up going by the wayside since the HMOs and Supplements by far blow away the competition.

So talk to your agent to see what is going to work best for you–Be well!

Tags:   Medicare · Medicare HMO · Medicare supplementsNo Comments.

Life insurance is one of those things that you don’t want to spend money on, right? If you’re like me, if you can’t eat it or wear it, I don’t really want to spend money on it. But do you really need it?

Keep in mind what life insurance is for. Growing up, I thought it was something your parents and grandparents bought in order to have something to leave to the remaining family. WRONG! View life insurance as ‘income replacement’–when you have people financially dependent on you, what happens to them if something dire happens to you? Whether it’s a spouse and children, elderly parents, a disabled sibling, what happens to their existence if they are fully or partially relying on your income?

Who doesn’t need it? Well, that’s debatable because even if you don’t have someone relying on you for some kind of financial support, should you pass away and leave large debts the proceeds from life insurance would be helpful. If you have family or friends that you would be leaving something large to, and the value exceeded the estate tax maximum, people often use term life insurance to pay for the tax liability.

A lot of times young people in their 20s with no assets, no house, no dependents will be sold a term policy. Do they need it? The industry is divided; most see life insurance as something you buy after you have something to protect. Others argue you should do it, because being younger, rates are lower and you are insurable. And you’ll probably get married, have kids and accumulate assets at some point, so you’ll need it anyway. Personally, I’ll do it when asked but I don’t actively pursue that market.

How much life insurance do you need? In your younger years, you tend to have more liabilities (like kids) so you need more. Basically, regardless of your situation there are a couple of ways to figure out the ‘how much’ question and you come close to the same amount. Depending on your income level, you can take your annual income and multiply it 5-15 times. OR, you can figure out your expenses on an annual basis, plus how much it would take to pay off the mortgage, $100,000+ per child for college, etc.

Here’s where your trusted agent comes in. A good agent will help you figure out the amount to shoot for then get quotes to see what the ‘ultimate’ amount is going to cost. If it comes back too high, then you adjust until you end up with a cost that is tolerable for your budget.

A little pre-planning can save your heirs a lot of heartache and keep them from having to make certain decisions when they are grieving. Be well!

Tags:   Life Insurance2 Comments

The topic of Long Term Care insurance can be a real tough discussion. We’re talking about something that deals with us aging, being unable to care for ourselves and it can be expensive! That’s uplifting.

I would have been able to put my head in the sand too if it had not been for a few things in my life, both professional and personal. I was an emergency nurse for many years, and even though an emergency department brings visions of car accidents, stabbings, shootings and drug overdoses (at least where I worked) the other thing you would see was families bringing in an elderly relative that they could no longer take care of at home.                    

These poor debilitated people didn’t need acute medical attention, but without getting too graphic, they were bedridden, no bowel or bladder control, couldn’t feed themselves, I’ll stop there. When people get to that point they need what’s called custodial care. Medicare doesn’t cover it, MediCal (California’s version of Medicaid) will, but only after you deplete the person’s assets. It can get ugly and destroy what they worked hard to save for all those years.

You don’t need to be elderly to need custodial or nursing home level of care, and that’s another reason that long term care insurance can be important at any age. Instead of just getting old, younger people have motor vehicle accidents that leave them a mess, the unusual illness at a younger age could leave you needing help, anything can happen at any age. Does that mean you need to get it at age 25 or 30? There’s a lot of debate about that in the industry. Get it at a younger age, your rates are lower, you are still insurable, those could be good reasons. It used to be that you would start looking into it in your late 60s/early 70s, but it gets more expensive and there’s a greater chance that someone can be uninsurable. 50s are good, even late 40s–that’s when I did mine.

Personally, I had tried to talk my mom into doing this for years–she lives in another state and I’m not licensed there, so it’s not like I was looking for a sale. I just knew the cost of care versus the cost of long term care insurance, her overall financial situation and it made sense. She said she’d get to it, blah, blah, but never did. My mom was and still is very active, so I can understand. We lost my dad when he was only 62, it could have been useful during his cancer care, but in 1991 things were different in insurance.

But she called me one morning, in tears, because her husband (she remarried a good guy) had a TIA, or mini stroke. Well that knocked him out of the running and that’s what I told her. THAT got her attention, and within a few months she bought long term care insurance from an agent she had a long standing relationship.

Back to the professional side, when I speak to clients and prospective clients, they tell me they don’t need it, their children will take care of them. Well, back to the old ER scenario. We’d see debilitated people in their 80s and 90s, and their poor kids were in their 60s or 70s. Even before then, the children could have their own health issues that would preclude them from doing the heavy physical care that is often needed.

SO, when you look at $2000-$3000 per year for this coverage, where you are buying a large ‘pool’ of money that can potentially grow over time, compare that to the $60,000-$80,000 per year that in home, assisted living or nursing home care can cost. All things to look at, so if you have an agent you trust, talk to them. If you don’t, and you’re in California, I’d appreciate the opportunity to talk to you. Be well!

Tags:   Long Term Care Insurance · LTC insuranceNo Comments.