The Insurance Doctor

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  • Tips on Buying Homeowner’s & Auto Insurance

    By Robert Intelisano, The Insurance Doctor

    Following these valuable tips can save you upwards of 20-25% on premiums paid as well as properly protecting the assets you have worked so hard to build.

    FH-Hibu-April2014
    As seen in the April 2014 edition of Forest Hills Life magazine

     

    • Choose a higher deductible. The odds of a 35 year old having a homeowners claim by age 65 are over 1400 to 1. If your mailbox was broken by a delivery truck and the cost to fix it was $600 most people wouldn’t even submit a claim out of fear of either being dropped or a rate increase. So why not have a $1000 deductible in this situation?
    • Check your uninsured/under-insured limits. This coverage is very inexpensive and is one of the only ways to collect money on your own policy. If somebody crashes into your car and has either no insurance or very low limits you can collect the difference from your own policy. I suggest 100/300 coverage, meaning if somebody hits you and you have $50,000 of damages and they have $10,000 of coverage you can collect the $40,000 difference from your own policy. Ask any personal injury attorney about this.
    • Shop around. Examine rates from several companies and make sure to compare plans providing identical coverage. I suggest consulting with an independent broker who can “shop the market” for you and provide spreadsheet comparisons. This is especially important after hurricane sandy as many of the larger well-known companies have either dropped existing clients or stopped writing new business in Zone 1 and 2 areas. This has created opportunities for smaller niche companies to enter the market. Just because you might not have heard of the company doesn’t mean they are not financially strong with a good claims paying history. We are seeing this in abundance now in NY and NJ.
    • Review annually. People tend to be creatures of habit and it’s easier to just pay your renewal when it surfaces each year. Ask your broker to “shop the market” every policy anniversary as rates change every year. In many cases rate increases are based on claims paid the previous year. If company A had a lot of claims that year their rates would noticeably increase and perhaps now company B would have lower rates. This is why it’s critical for brokers to shop around for better rates each renewal year.
    • Assess the need. Determining if you need property and casualty insurance is simple. If you have assets like a retirement account, financial investments and/or a home with equity, then having property and casualty insurance may be a good idea. It helps protect you from being held financially liable for an accident that causes damage to another person or another person’s belongings. It may also help you pay for a person’s injuries or any legal costs you incur as a result of the person being injured on your property due to your negligence. This insurance usually comes into play with auto, homeowners and even renters insurance.
    • Consider umbrella insurance. Also called “excess liability insurance” this can be a wise purchase for high net worth individuals and/or business owners with a value above the primary limits of policies selected. An umbrella policy can cost relatively little compared to the protection it provides.

    For more information and/or competitive quotes feel free to contact me at robcintel@aol.com or 917-359-3985.

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  • College Endowment Funding

    College Endowment Funding

    Next to buying a home, the largest investment many families will make is their child’s college education.  A college education is very expensive.  Even at lower-priced, state-supported colleges, a four year degree can cost in excess of $50,000.

    In a recent survey conducted by the American Council on Education it was found that financing their children’s college education is one of the top five concerns facing American parents today.  In today’s economy, after paying the family’s bills there’s not much left over for a child’s college education.

    This shortfall places parents in the stressful position of having to either plunge into debt by procuring loans or “stealing” from their own retirement which ultimately compounds the problem.  I have seen this phenomenon force parents to work through retirement age while also hurting the chances for their second and third student to obtain a quality education as well.  Over 50% of all college students are forced to drop out, many due to the lack of funds.

    A good alternative strategy is to go after merit-based endowment “free” monies that don’t have to be paid back.  Colleges control over 95% of the money that students receive each year.  They literally have billions of dollars to attract the students they want.  Lehigh University, my alma mater, has over $1 billion in their endowment fund and this figure still places them outside the top 50.

    Years ago colleges looked at financial aid as a charitable operation within their institution.  Financial aid has now evolved into an important recruiting tool for colleges.  Although funding was originally designed to go to those in most need, it actually goes to those who know the most about the process.  The more you know about the deadlines, where funding comes from and who is most likely to be awarded it, the more money you will receive.

    Unfortunately, this is where most high school guidance offices falter badly.  They rarely have the knowledge or expertise to become involved with funding issues or the negotiation and appeals process.  Without careful planning and guidance, many families will lose out on tens of thousands of available dollars for their child’s education.  For additional information go to www.yourguidanceoffice.com;

    There are two profound mistakes I have witnessed over the years that are worth noting.  One, is the notion of waiting to submit the FAFSA until after finishing your taxes.   Second, is spending time writing essays for small $500 type scholarship competitions.

    The FAFSA needs to be completed and submitted by January 1st of the students’ senior year.  Many schools will give you $1,000 per year off for just for filing on time.  That’s $4,000 right there.  Keep in mind that endowment money is first come first serve so why not get to the front of the line while their coffers are full?  Waiting until March or April will also put your student in competition with thousands of others making the same filing mistake.  Once your taxes are done simply adjust the FAFSA numbers and re-submit.

    For the higher performing students, seeking small essay writing scholarships can be a costly waste of time.  In fact, there are schools that will decrease scholarship amounts commensurate to what the student received from other sources.  This unwelcome surprise typically occurs after freshman year when it’s time to renew the scholarship.

    Your preparation for college will be time well spent.  With proper planning, you will be able to gain admission to your dream school and receive the necessary funds to attend!

    molumen_phone_iconCall Robert at 917-359-3985        business-contact-32  Contact Robert here

  • The Long Term Care Dilemma

    The Long-Term Care Dilemma

    When I first entered the insurance and financial planning industry over 20 years ago planning was centered around “dying too soon” which is what made life insurance so important.  Now, with advances in medicine people are living much longer and the focus has shifted to “living too long” and preventing running out of money which is the biggest fear of mature Americans today.  Women are living about five more years than men and are more likely to need care and live alone at home when they are older.

    long term care insurance planningI referred back to an article I had written in 2003 when 50% of people turning age 65 could expect to use some form of long-term care during their lives and the average cost of a nursing home in America was about $45,000 per year.  Those numbers are now 70% and $85,000 respectively with over $100,000 in NY.  It doesn’t take a mathematician to figure out that many folks would run out of assets in just a few years.

    Who needs long-term care?  Not everybody is a fit for long-term care insurance.  In general, those with estate values, excluding the home of under $200,000 and over $2,000,000 are not prime LTC candidates.  In the first example they might not be able to afford the cost, especially if they are 70 or older.  This group is more likely to qualify for Medicaid assistance after “spending down” their assets although freedom of choice is lost as the government decides the appropriate care and facility.  The latter group obviously can “self-insure” although it often makes sense to “shift or leverage” some of the risk to an insurance company .

    What exactly is long-term care?  Long-term care is a range of services and supports you may need to meet your personal care needs.  Most long-term care is not medical care, but rather assistance with the basic personal tasks of everyday life called “ADL’s” or activities of daily living.  I use an acronym called ‘BEDTTC” which I invented to be able to teach a course on this to other brokers in the mid-late 1990’s.  The 6 ADL’s are; Bathing, Eating, Dressing, Toileting, Transferring (from bed to couch etc) and Continence.  If you need assistance with 2 of the 6 ADL’s then you will “trigger a claim”.  Cognitive impairments like dementia and alzheimers are also covered.  Keep in mind the average alzheimers patient lives over 14 years.

    A good “total care” policy will cover the four “quadrants of care” which are home care, community care (includes adult day care), assisted living and nursing home care.  These policies should also cover what are called “IADL’s” instrumental activities of daily living.  These include housework, managing money, taking medications, cooking and pet care to name a few.

    Long-term care insurance coverage, whether provided under a stand-alone policy or a rider to a life insurance policy, can protect the assets you have spent a lifetime building.  It can also prevent you from becoming a burden on your kids, keep you in control of decision making and offer “piece of mind”.

    The two biggest mistakes I see are thinking that Medicare, Medicaid or health insurance are going to cover long-term care and waiting too long to address and/or buy the insurance.

    Medicare only pays for long-term care if you require skilled services or rehabilitative care if in a nursing home for a maximum of 100 days.  The average covered nursing home stay is about 3 weeks.  Medicare doesn’t pay for non-skilled assistance with ADL’s which make up the majority of long-term care expenses.  Most health insurance plans cover the same type of limited short-term services as Medicare.  Medicaid does pay for the largest share of long-term care services however your income must be below a certain level and you must meet minimum state eligibility requirements.

    Our government wants you to buy long-term care policies so they don’t have to fund it themselves.  They have made it easier to obtain to obtain tax deductions. On the state level, New York State raised their “tax credit” from 10% to 20% a few years back which helps to defray net costs.

    I’m seeing and recommend people address this in their 50’s when folks are younger and in better health.  For many people, switching from disability insurance to long-term care insurance during the pre-retirement stage is a painless transition.  Keep in mind that most disability policies (which protect against loss of income due to disability) start to reduce their benefits from age 55-60 so you are paying the same premiums for decreasing benefits.  An 80 year old can pay as much as four times more that a 55-60 year old.  My family learned this the hard way when we tried to get a policy for my 80 year old grandmother who needed kidney dialysis.  She couldn’t qualify for a policy.  Doctor’s gave her one year and she lived over five years getting dialysis three days/week.  Our family went through all of her assets and some of ours paying over $40,000/year for 8 hours of home care per day.

    The bottom line is that you don’t have to break the bank to buy a long-term care policy as long as it’s addressed early enough when you are in better health and of sound mind.  You will be glad you did!

    molumen_phone_iconCall Robert at 917-359-3985        business-contact-32  Contact Robert here

    Robert C. Intelisano CSA,CLU,LUTCF earned his CSA (certified senior advisor) designation in 2003.

  • Disability Income Insurance 101

    Disability Income Insurance 101

    Imagine that you own a special machine that you keep in your basement.  The device is able to print money.  How would you treat it?  You would keep it well-oiled, perhaps cover it so it doesn’t get dusty.  You would protect it and certainly would INSURE it!

    You call the insurance company to get a quote for your “cash machine” insurance and they say it costs between 2-4% of the amount of money it prints out per year.  That wouldn’t be so bad right?

    Think of yourself as the cash machine and the cost to replace a portion of your annual income is that 2-4% insurance premium.

    The 47 million Americans with no private health insurance was a major catalyst for the approval of the ACA (Obama Care affordable care act).  What about the roughly 100 million working Americans that have no private disability income insurance?

    Just about every working American needs his or her income to survive.  Because wage earners almost always depend on a continuing income stream, protecting their income is a vital step towards financial security.

    Limra (life insurance marketing & research association) says that 71% of Americans say they would find it difficult to meet their current financial obligations if their paycheck were delayed for one week.  Yet very few people have individual disability insurance.

    The purpose of disability income insurance is to replace the income if one is unable to work.  There are two main types of disability policies, group and individual.  Group is usually offered by an employer at a nominal fee.  Individual is usually purchased from an agent somewhat similar to life insurance.  Suffice it to say the chances are anywhere from two to seven times greater (depending on age) of being disabled than dying prematurely.

    What are the odds it can happen to you?  The odds change based on a few factors (age, type of work, smoker etc).  To find out your own odds go to www.whatsmypdq.org to ascertain your own personal disability quotient.

    The two biggest mistakes most brokers make is to sell based on price and to suggest that clients use the annual premiums paid to take a small tax deduction.  The saying “you get what you pay for” is most appropriate when evaluating disability policies.  The “definition” of disability is the most important factor in a policy.  You want what is termed “own occupation” as the definition.  Group policies rarely include that.

    The easiest way to explain this is with an example.  If a surgeon gets his or her right hand mangled in an accident and they have “own occupation” as their disability definition,  they can go on claim and return to work supervising others.  The other definition would be something akin to “they can’t work in any area of their chosen field”.  In that scenario that surgeon would not be on claim and has to take a big pay cut.

    The second mistake is to get greedy and take a small tax deduction on the premiums paid.  If disability policies are paid with pre-tax money than the benefits are 100% taxable.  If premiums are paid with after-tax money then all benefits are tax free.

    One final point is that many disability policies start to reduce their income benefits at age 55 or 60.  This is an age where it’s important to meet with your broker to see if it makes sense to reduce or cancel your disability insurance and re-position those premiums for long term care insurance.

    I’m always interested in reader opinions or suggestions for future topics and can be reached at robcintel@aol.com.

    molumen_phone_iconCall Robert at 917-359-3985        business-contact-32  Contact Robert here