Another consideration is that it is possible to purchase “regular” life insurance for your child. Some people choose to purchase whole life policies for their children. And, of course, many parents have riders attached to their own policies. These small insurance amounts are meant to help cover burial costs. Here are some things to consider as you determine whether or not to buy life insurance for your children:

Future Health Problems

Some health problems can prevent an adult from getting the life insurance coverage he or she needs at an affordable rate. The purchase of a whole life policy while your child is long can mean that he or she is already set for life insurance, and doesn’t need to worry about future health problem derailing efforts to receive affordable life insurance.

However, if you don’t have a family history of health issues like diabetes and more, it might not be worth it to insure your child young. Chances are that he or she will be able to obtain the life insurance he or she needs.

College Funding Needs

It used to be that getting life insurance for children was one way to “save” money for college. However, this is not the case so much anymore, since there are 529 plans and Coverdell ESAs to help parents save up for eventual college costs. Besides, the cash value in many of these insurance policies designed as college savings vehicles is usually so insignificant that it doesn’t make that much of a difference. You have to buy a large amount of coverage if you want to be able to effectively cash in the policy.

Instead, it might be a better idea to just find other college savings opportunities, rather than relying on an insurance policy to help pay for your child’s college.

Does Your Child Make Money?

For the most part, life insurance is actually supposed to protect families in the even that a wage earner passes on. In most families, children don’t qualify as wage earners. However, there are situations where the child does earn a living. This might be done through modeling, performing, or by some other means. In that case, life insurance for your child is a must. If your child is bringing in money, he or she should be insured so that your family is protected from a loss of income.

Riders on Your Insurance

Many parents simply find it easiest, and most cost-efficient, to add a rider to their own coverage. These riders, usually with between $1,000 and $5,000 worth of coverage, are designed to pay out if a child dies. This is money that can cover funeral expenses. That way, if your child unexpectedly passes on, you have the money available to cover some of the costs.

Whether or not you decide to insure your child is up to you. However, don’t be swayed by insurance salesmen that tell you that you will get life insurance for your child because you love them. Life insurance isn’t for the person covered, it’s for the people left behind. So, if you love your child, and care for his or her future, you’ll make sure your own coverage is adequate for the future.

(Photo: sophie.z.j)

Kids & Money: Should You Get Life Insurance for Your Child? from personal finance blog Bargaineering.com.

However, a FSA doesn’t roll over; you use the money in the account, or you lose it. Some FSA plans require you to use all the money up by December 31 (if that’s your plan, you better hurry), while others give you until March 15 to use up the money. This “grace period” can make it easier to use your money more effectively, and to get in for appointments. You don’t want to lose your money, so it’s time to make a concerted effort to spend the money in your FSA:

Doctor Visits

Now is the time to schedule doctor visits. This is especially true if you have hit your deductible for the year. Use the money in your FSA to pay for the visit. Visits for yourself and your dependents can be great this time of year — especially if you have a complaint. Don’t wait to have that headache checked, or your teeth cleaned. Dentist visits and eye doctor visits can be paid for with FSA money as well. So, if you’re due for any sort of check up or cleaning, get it scheduled. This can be especially helpful if your health plan doesn’t cover vision or dental.

Have Work Done

If you’ve been waiting to have your child’s wisdom teeth out, or to have that mole removed, now is the time to complete these procedures. Use your FSA money to pay for work that you’ve been wanting to have accomplished. You’ll take care of the problem before it gets any worse (and more expensive), and you’ll be able to use your hard-earned cash to your advantage.

Buy Needed Supplies

It’s a great time to stock up on the things you need. Update your glasses with your FSA money. Purchase more contact solution. Stock up on cough syrup and pain relievers. If you need specific health care items to treat a condition, you can buy these as well. This is a great way to use up the money in your FSA. However, you do need to be aware of recent rule changes to how this is accomplished. If you want to use your FSA money to pay for over the counter drugs, you now need a prescription to do so. Talk to your doctor about a script so that everything is in order.

Bottom Line

Your FSA can be a great financial tool that helps you better manage your health care costs (just don’t mix it up with the HSA). However, the money doesn’t stick around forever. Whatever you don’t use by the deadline designated by your employer’s plan disappears. So, double check the deadline for using the money in your FSA, and make a plan to use it all up so you receive the maximum benefit of your tax deduction, and your health care dollars.

(Photo: jasleen_kaur)

Way to Spend Your FSA from personal finance blog Bargaineering.com.

It’s not that they’re lying but if a lie of omission is still a lie then you may be able to make a case that some fabrication is going on. Hidden within these omissions is everything from largely non-significant all the way to something that could cost you big dollars if you’re ignorant to the specifics of the policy.

Anti-Concurrency

The hurricane that ripped up the east coast in 2011 put a spotlight on the anti-concurrent policies contained in homeowners’ insurance policies. Those who live in coastal regions often have hurricane insurance and everybody knows that with a hurricane always comes water. The “storm surge” is that big wall of water that is forced inland due to the massive force of the hurricane but did you know that hurricane insurance may not cover flood damage? In order to claim the losses from a flood, you need flood insurance even though it was caused by the hurricane.

How do you defend against being a victim of the anti-concurrency clause in your insurance? Of course you do your best to read the policy but after that, you call the company or your insurance agent and ask them to explain it to you. Lay out some scenarios and ask them if you’re completely covered. You might even record the call and put it somewhere where a flood wouldn’t ruin it.

You’re Going to be Confused

Insurance companies know how to play the game. All they have to do is make your policy impossible to understand by using big words with small print jam packed on a small piece of paper and the chances of your reading it and understanding it are slim to none.

Lawmakers caught on to this and that’s why more than half of the states have laws that require insurance companies to write their policies in plain English so people who are insurance industry insiders can understand it.

Still, it won’t be easy. That’s when you once again call your agent and tell them to get comfortable because this is going to take a while. They earned commission off of your sale so make them work for it.

Your Credit Score Matters

In the post 2008 economy more people have credit problems than those who don’t but that doesn’t stop the insurance companies from penalizing you for your credit problems. If you can’t pay other people you owe, why would you pay them? Often, when you need to purchase insurance, you can’t afford to wait until your credit improves but you can ask the agent if the company is using your credit to determine your eligibility and premium.

They’re Paid More to be Difficult

In a 2007 study, one insurance company was found to give bonuses and pizza parties to employees who met low payment goals. Translation? The less that you get for your claim, the better their paycheck looks. It’s important to think about incentives. Although not all adjusters or companies are bad people, they care more about their paycheck than your claim so you have to go in to negotiations armed with all of the knowledge that you can. Know the fair replacement value of the items you lost and don’t give in to a low ball offer.

Don’t Call Unless You Have To

Do you have a CLUE? The Comprehensive Loss Underwriting Exchange or CLUE is the insurance version of your credit report. If you call and tell them that a deer ran through your bedroom window and you wanted to know your deductible, even if you don’t file a claim, that goes in to the CLUE. Enough negative entries and you’ll have a tough time getting insurance at a good rate in the future.

It’s not fair to vilify the insurance industry but just like all companies, their goal is to make money and they can only do that if they limit their losses. Your goal is the opposite so don’t count on them to be fair or reasonable. They may easy to work with but always do your own fact finding.

(Photo: alancleaver)

5 Things Insurance Companies Aren’t Telling You from personal finance blog Bargaineering.com.

Well, as it turns out, it’s very easy for you to not use all of your medical benefits. I don’t mean flexible spending accounts, which are the most obvious benefit that could be squandered either by not participating or letting a balance expire. I mean the regular routine checkups you are eligible for but don’t take advantage of.

Regular Checkups

If you have medical insurance, you should check to see what is covered as part of your annual routine preventive maintenance. You will typically get at least one annual checkup with your physician, optometrist (with vision coverage), and dentist (with dental coverage). You may have to pay a co-pay with each of the visits but the checkup and cleaning itself will be covered entirely. Also, depending on your age, the services covered will vary.

It’s important to take advantage of these essentially free checkups because preventive care is so much cheaper than prescriptive care. Wouldn’t you rather have your teeth cleaned once a year than have cavities filled? Ever since I went to cleanings twice a year (and flossing regularly!), the cleaning visit itself has been less painful, faster, and I haven’t had any dental issues.

Remember to take advantage of these services!

Money Leaks: Not Using Your Medical Benefits from personal finance blog Bargaineering.com.

The process of buying insurance can take more time, but you can get a good start on the process by comparing insurance rates. Here is how you can get a cost comparison in 55 seconds:

1. Decide what coverage you want: The first thing you need to do is figure out what insurance coverage you want. How much car insurance will you need? Do you need comprehensive? Or is collision and liability enough? What coverage amounts do you want? With life insurance, you can get a quick thumbnail of how much coverage you need by multiplying your annual salary by 10. Before making your final decision, you’ll want to sit down and better work out your needs, but, for now, establish a ballpark figure for the types of coverage you want, and the coverage amounts you are likely to need. (16 seconds)
2. Gather the information you need: Quickly get the information you will need to get an insurance quote. This usually includes ZIP code, Social Security number, name, and driver’s license number. You might also need to be prepared to answer questions about your accident history, how much you drive, and your general health. (10 seconds)
3. Use an online aggregator to get general quotes: Using the information you have, head over to an insurance quote aggregrator. You can enter the information into the form, and then receive your quotes. Make sure that the web site you use will actually provide you with a list of possible quotes, rather than sending your information off to a bunch agents. This will give you an overview of what you can expect to pay, and help you identify the best deals. (29 seconds)

After you have this information, you will have a pretty good idea of what to expect. If you have more time, you can refine your needs, and you can also contact local insurance agents for help. In some cases, you might be able to get a better customized quote from a local insurance agent or broker. An insurance broker can actually help you find a variety of quotes from different companies. You can mention your online quotes, and see if you can get a similar deal offline.

Before you choose an insurance policy, make sure you shop around. Additionally, it can help to ask about discounts and special programs. Find out whether you can pay less if you purchase more than one policy with a company, or if there are discounts for healthy living, good driving, or student specials for good grades. With a little planning, you can end up with an affordable insurance policy that protects you adequately.

(Photo: alancleaver_2000)

Finance in 55: Compare Insurance Policy Rates from personal finance blog Bargaineering.com.

Homeowner’s insurance

The natural disasters that have occurred over the past few years have shown the importance of having good homeowner’s insurance. You never know when a hurricane, earthquake, tornado, or flood will ravage your area and damage or destroy your home. This leads me to make sure that I have a homeowner’s insurance policy with enough coverage to be able to rebuild. I also make sure to use reputable companies with a history of paying up when the time comes. In my opinion, it is worth paying a couple extra dollars a month to protect my biggest financial investment.

Health Insurance

The number one thing that drives most people to bankruptcy is not having health insurance. Medical bills are astronomical and are too much for the average person to pay alone. That is why it makes sense to pay for a health insurance plan no matter what budget you are living on. Even high deductible policies protect you more than no policy at all.

Automobile Insurance

There are way too many uninsured drivers on the road today. Even though it is against the law not to have at least liability insurance when driving in Texas, I know there are a ton of drivers on the road around me without it. I think that an automobile insurance policy should at least cover the damage you cause to others and whatever amount you need in order to ensure your own ability to get around.

Fun

I personally think that everyone should budget for some fun in their lives, but feel free to be cheap about it. There are so many affordable options out there for entertainment. Would you enjoy board gaming with friends or bird watching in the mornings? You may also want to look into hiking or hosting movie marathons in your home. I believe there is a fun yet cheap option for entertainment for absolutely anyone willing to try something new. I personally love hosting monthly potlucks and we can keep the cost below $25. My husband enjoys computer games and spends $10-$50 for 20-100 hours of fun.

What do you spend on and where do you cheap out? Do you agree with my examples above?

When To Be Frugal from personal finance blog Bargaineering.com.

There are, however, plenty of insurance policies out there that I am comfortable suggesting that you skip. Here are just three of them:

Extended Warranties

You might not think that extended warranties are insurance policies but they are – they protect your products. Are they worth it? They usually are not worth it because you are almost always protected by another means, especially if you pay with a credit card. Many credit cards double the manufacturer’s warranty for up to one year, it’s a feature you’re already paying for.

If you really love extended warranties because you don’t mind paying for peace of mind, don’t buy it at the store. You can almost always buy it from another provider for far less. The general rule of thumb is that you shouldn’t pay more than 15% of your product’s value when buying extended insurance and you should only get it on things that you use a lot or move a lot (like cameras and laptops).

ID Theft Insurance

Identity theft is a big problem nowadays and fixing a case of identity theft can cost you a lot of time and a lot of money, but the solution isn’t in buying identity theft insurance. Identity theft insurance is sold by financial institutions, like your local bank, and by ID theft insurance specialty companies, like Lifelock. In most cases, they are simply doing things you can do yourself for free. My guide on do it yourself identity theft protection can give you a head start.

Mortgage or Credit Card Life Insurance

Some life insurance companies offer a benefit in which they will pay off your mortgage or a credit card balance in the event you die. These insurances are often more expensive than a comparable term life insurance policy, which pays a set dollar amount in the event of your death. I’ve always believed that when it comes to insurance, don’t try to profit or play games – let life insurance cover any outstanding liabilities and make sure your family isn’t put in financial jeopardy.

Are there any other insurance policies you think people should skip?

(Photo: alancleaver)

Three Insurance Policies to Skip from personal finance blog Bargaineering.com.

One thing that some people, ourselves included, tend to forget to do on a regular basis is get our jewelry appraised to ensure our insurance coverage is sufficient. As gold and silver prices rise, you may discover that your insurance coverage is no longer enough to cover your valuables.

I would recommend getting your jewelry re-appraised every four or five years, unless you’ve seen a big run-up in commodity prices. With precious metals becoming more valuable as of late, now is a good time to re-appraise your jewelry unless you’ve already done so in the last few years. The easiest way to check is to review your appraisal paperwork to see when it was done and how your piece was valued. If you it was appraised last year, then the higher commodity prices were used. If it was done ten years ago, you might want a refresher.

While you’re at it, you should be regularly updating your home inventory too.

(Photo: ljv)

Update Your Jewelry Appraisals & Insurance Coverage from personal finance blog Bargaineering.com.

Maybe they’re an agent and it’s important, to their business, for them to appear successful and influential. A hundred grand on a car to secure a deal worth a few million is a small price to pay. A hundred grand on something to get you to the supermarket is way too much.

The same is true for gold. Gold has traditionally been seen as insurance. If the dollar were to lose all of its value, you could take your bars of gold to another country and trade them for the local currency. If you’ve heard of it referred to as a “store of value,” that’s what that means. Gold holds its value because it remains stable against other currencies, even if your currency is plummeting to zero. When you buy gold, you should think of it as insurance, not as an investment.

The problem is that this type of insurance, unlike auto or homeowners, is finite. As demand increases because people are worried of a default, the price increases. This attracts speculators who see an opportunity. This is true for any commodity, whether it’s corn, oil, or gold. There are people who buy it because they need it and there are people who buy it because they hope it’ll be worth more tomorrow.

We’re in the period where gold’s price has been boosted by speculators, I don’t think I’m going out on a limb when I say that. If you’re buying it because you want an investment, I’d move on. If you’re buying it because you recognize it’s insurance against catastrophe, then $1300+ an ounce is simply the price you have to pay. If there is a catastrophe, you have something with value that you can take with you. If there isn’t, you’re happy because you’ve retained the rest of your wealth.

Is it any different than car insurance? No one wants to be in an accident.

I’m eager to hear your thoughts on this…

(bullionvault)

Gold & Silver Bullion: Insurance, Not Investment from personal finance blog Bargaineering.com.

While jewelry is typically insured by a jewelry rider, almost everything else is covered by your base insurance and you’ll want to update your home inventory to make sure you remember you owned it. While insurance will cover it if you can prove you own it, the home inventory simply makes it easier for you to remember and document if you need to.

Home Inventory

A home inventory is simply a list of all the “valuable” items in your home. It’s really up to you how you decide what is “valuable” and what isn’t, but ultimately you want to cover everything you consider valuable. It’s really a matter of documentation, do you want to spend the time to document your ownership of a $10 item? If so, that’s valuable to you.

A home inventory can be very simple to very complex. On the very simple side, simply get a list of all the valuables in your home, take a photo as a kind of “proof of ownership” and condition of each, and any purchasing information you have (receipts, invoices). Some people like to take a photo of each room and then closer photographs of high dollar items like televisions. Digital photos are basically free and you can keep them on your computer, so the more the merrier.

A photo of the room is helpful because it can help you remember what was in a room. If your home is robbed, you’ll probably remember that you had a television on the wall but you may not remember that $200 universal remote until much later. A photo can be helpful.

Updating Home Inventory

Updating the inventory is a cinch, the key is simply remembering to do it after big gift giving events like birthdays and the holidays. When updating the inventory, the same rules apply – photograph and document anything new you’ve acquired since the last time you did a home inventory.

In the event you received a gift and don’t know how much it cost, you can always get a copy of the current price of the item at a retail shop. Insurance companies usually pay replacement cost of its current market value, so the original price won’t matter, but it’s good to know, for yourself, how much it currently costs.

Remember, the key to a home inventory is keeping it up to date. The last thing you want to do is to try to remember what was in a room after a fire or burglary.

(Photo: pascalsijen)

Update Your Home Inventory from personal finance blog Bargaineering.com.

Insurance policies fit into that category and it’s important to take stock and review your insurance policies each year. A lot can change in a year and unless you take some time to review your policies, you may be surprised when it comes time to use them.

Auto Insurance

Auto insurance is probably one of the most insurance policies you have since most people drive their cars every single day. With the passing of another year, it’s time to take another look to see if you want to make any adjustments to your current policy.

Do you still want all the coverages you have on your vehicles? Perhaps you want to increase the deductible or drop comprehensive coverage from an older car? Have you shopped around for insurance in the last few years to see if you’re truly paying the best price for your coverage? Now’s as good a time as any to check around.

Renters/Homeowners Insurance

We’ll get into reviewing and updating your home inventory this afternoon but for now you’ll want to make sure that the policies still make sense. Again, much like auto insurance, you’ll want to check your coverages (do you have all the necessary policy riders like jewelry, flood, and others?) as well as your deductibles. Perhaps you’ll want to raise that deductible and put the savings into your emergency fund as a way of self-insuring?

Life Insurance

If you don’t have life insurance, is this the year you want to get it? It certainly doesn’t hurt to call up an agent to see if a life insurance policy fits in your financial plan. In general, as far as I understand it anyway (I don’t currently have life insurance), life insurance is intended to protect your family in the event of your death. If you have large outstanding liabilities, like a mortgage, it’s important to protect your future cash flow (from working) with an insurance policy in the event your cash flow terminates.

These are just three of the many insurances you’ll want to take a closer look at and the Spring is just as good a time as any!

Review Your Insurance Policies from personal finance blog Bargaineering.com.

It’s always tricky when it comes to family and money and it’s especially tricky if it involves death, family and money. All of the problems I see with this plan have to do with relationships and navigating those issues are going to prove more challenging than navigating the financial aspects of this idea.

The Investment

A 5% annual return over the next 28 years is good compared to the alternatives available right now. You can’t get a 28 year certificate of deposit but the yield on a thirty year Treasury today is around 4.40%. A 5% annual return is 13.6% increase over the safest of safe investments. It’s less than what you’d get in the stock market but it’s far safer.

I don’t know how John calculated the 5% return. I don’t know if he calculated it based on the premiums, whether he accounted for present value, or any of the other stuff that a true apples to apples comparison would consider. Ultimately, I believe the decision isn’t about money and more about the “other stuff” so I think this comparison is good enough.

The last few years have seen a boom in secondary sales of life insurance policies, where investors buy life insurance policies from individuals who are looking to cash out today. If investors can buy life insurance, that is to say they are paying someone for the right to make their premium payments, then certainly John should be able to generate a positive return if he can get a life insurance police for “free.”

The Other Stuff

In my brief emails with John, it’s obvious he’s able to separate the emotional from the financial. That may not be the case for his siblings. While he’ll probably discuss it with them all, when it comes down to the actual financial transaction (when his father passes), things may not be so easily resolved. Death is almost always a very emotional time and things decided, and documented, when the sky is sunny may not be so easily remembered when the clouds roll in. (John foresees this though, saying “Some potential issues that I foresee are disputes by my siblings at the time of payout and the claim that my mother would have on the benefit if she were still living at the time. Everyone seems onboard with the agreement today, although a couple decades may change their opinions.”)

There’s also the less significant issue of pitting your financial interests against your social interests. When an investor buys a policy, hopefully he isn’t sitting around hoping that the policy’s former owner dies. Even if he is, it doesn’t matter. If John sits around hoping he’ll die, that’s not very healthy. That said, it’s clear that John doesn’t feel this way but it could become an issue.

Here’s where you guys come in. John was curious whether you guys thought it was a good idea and whether it was worth causing potential drama between his siblings later on?

Buying Your Father’s Term Life Insurance Policy from personal finance blog Bargaineering.com.

As you’d expect, this business is loosely regulated and I only happened upon it because the SEC was considering classifying life settlements as securities, which would put them under more scrutiny. Right now there is little and inconsistent regulation of life settlements, which makes many people, both in and out of the life insurance business, uneasy.

So what’s bad about life settlements? Since there is little regulation, you’d expect abuse. As Frank Keating, CEO of the American Council of Life Insurers, said in this PBS piece: “This is a system that corrupts life insurance, wrecks the white-hat image and the reality of the industry and encourages people to buy a policy for short- term gain, but for long-term loss. You know, die as quickly as possible. You have a group of investors who can’t wait for you to die. I mean, what a ghoulish business.”

While I can understand that perspective, life insurance is a business. If a consumer can start a policy and make a smart business decision about it, I think you should let them. If they no longer want to pay the premiums, they can get more than the insurance company is offering through a life settlement. The abuse part comes in, and this is the common complaint about annuities, when life settlement companies take advantage of people with a less than fair payout, though that’s hard to quantify, or throw in hidden fees and charges. That’s why regulation of this industry is probably for the best.

What are Life Settlements? from personal finance blog Bargaineering.com.

This means that the days of loading up on band-aids, Tylenol and Advil, and other products you pick up in the drug section of your supermarket are no longer eligible unless your doctor prescribes it. While the rules on what is necessary documentation for reimbursement have yet to be introduced, this might start introducing additional paperwork at the doctor’s office. Advising to take two aspirin and calling it a day might have to come with a prescription.

Also, annual contribution limits to your FSA will be limited to $2,500 a year.

Over-The-Counter Not Eligible for Flexible Spending Accounts in 2011 from personal finance blog Bargaineering.com.

Think about how much information you have to provide if you’re buying any kind of “traditional insurance.” With life insurance, you have to submit yourself to a physical. For auto insurance you have to offer up your car’s history, your credit history and your driving history, which is being tracked by a third party. For homeowners insurance, you have to provide a history of claims on your home (don’t worry, it’s tracked by a third party), your own credit history, and home details.

When you buy travel or trip cancellation insurance, they don’t need anything except your money. When you buy cell phone insurance, they don’t need anything except your money. Extended warranties? Just send in a check.

The reason why these insurance policies don’t care about you, and only about your cash, is because the profit margin on these policies is astronomical. They make so much money off travel insurance and extended warranties that they don’t care how risky you are or how likely you are to use it. They just know that any random Joe off the street is going to generate a profit. The only way they can be assured of that is if their profit margins are high enough.

If you’ve ever looked at the business model of an insurance company, it’s fairly simple. You collect premiums, invest the “float,” and then hope that the gains off the float offset the claims payouts. You expect to pay back all of the premiums in the form of claims in an average year. In a “good” claims year, you pay back less and in a “bad” year you pay back more than the premiums you’ve collected (hopefully less than the gains from your investments). [This is based on reading Berkshire Hathaway annual reports, which are remarkably fun to read]

Insurance companies manage risk by analyzing and scrutinizing who they insure. When they don’t do either, you know they must be making money hand over fist at your expense.

What do you think about my rule of thumb? Makes sense? Totally off base? Please let me know!

Rule of Thumb on Insurances To Avoid from personal finance blog Bargaineering.com.