First let me commend you on thinking about the purchase of life insurance. Many people, who have loved ones that would be economically harmed if they were gone, never give life insurance a second thought.
Before I answer your question, let me define the terms, "term life insurance" and "whole life insurance. In doing so, it will shed some light on the answer.
Term life insurance is a type of life insurance that covers you for a certain period of time, hence the name. For that period of time, whether it is one year, ten years, twenty years, or thirty years, the death benefit and the premium stay the same. After this term is ended, you may be able to renew it, but it will be at a lower death benefit or a higher premium. Beyond a certain age, you'll lose the coverage due to the premium increasing beyond your means or you'll reach the age beyond which the insurance company will renew the policy.
Whole life insurance is a type of life insurance that is designed to remain in force for you entire life. The death benefit remains level and the premium never goes up. As long as you pay the scheduled premiums, you have coverage for life.
The advantage of term insurance is that the premiums are significantly less that whole life insurance. The disadvantage of term insurance is that the premiums will be going up and eventually you won't be able to keep the policy. The advantage of whole life insurance is that the premiums and the death benefit stay level and you can keep it for life. The disadvantage is that the premiums are more expensive than term.
So let me get back to the question; which is best term insurance or whole life? The answer is, it depends on what you are trying to accomplish with the life insurance. Term insurance fits great in covering a need that is limited in years, such as the debt on a home, a business debt, or the period of child rearing. Whole life insurance is great for the need you have today, tomorrow, and throughout your life to meet the needs of your loved ones. Some of both may be the perfect answer.
My suggestion is to sit down with an insurance professional and talk to them about what you want to accomplish and how much money you have to secure your loved one's futures. Together, the two of you can come up with a plan that you can comfortably afford that can meet some or all of those needs you have.
In doing so, you will have demonstrated your love and concern for those you hold most dear.
Great question, and I'm sure one that a number of people are asking. There are a number of things you can do to keep your auto insurance premiums in line. By taking these few steps, you will help stabilize your auto insurance premiums, and at the same time, you will be protecting your financial future.
The first thing to understand is that your personal behavior and the behavior of the other drivers in your household have a direct impact on your auto premiums. If you are always letting your auto insurance lapse after a few months, then going and getting it again when your registration is due, you will be mired in high risk insurance for you life and be paying the most for very little coverage.
If you drive recklessly, speed, have at fault accidents, or even worse, get a DUI, you will most likely find yourself in high risk insurance paying a great deal of premium for very little coverage. So, the first step is to keep your auto insurance in force and make sure that every driver in your household understands that their driving behavior directly effects the cost of premiums you pay.
The next step is to examine the coverage and make sure that it is still appropriate. By increasing deductibles, by dropping physical damage coverage (comprehensive and collision) on an old vehicle that has very little value you manage your risk and lower your insurance costs. When a vehicle reaches seven to ten years, you should be examining whether it is still worth keeping comprehensive and collision coverage on the vehicle.
Let me give you an additional suggestion; not all cars cost the same for insurance. While you are shopping for a new vehicle, use your insurance professional to find out the cost of insurance for each vehicle you are interested in.
The last step is to talk to your insurance professional to make sure you are getting all the possible discounts. For teenage drivers, getting at least a "B" average is a big discount.
By taking these three steps, you can significantly improve the amounts you are paying for auto insurance.
I certainly can understand your concerns, having been through the process with my two sons, who fortunately made it through the teen years unscathed. I'm sure all parents get a lump in their throat the first time their child drives the family car out of the driveway for the first time. I know I did.
I have observed that teenagers get their initial impressions about driving from their parents. This only makes sense, they have been driven around by their parents for all their life. The driving characteristics that a parent exhibit will be similar to the teens initial characteristics. It goes without saying that parents should mirror safe and lawful behavior.
The next step is to engage your child in conversation about driving, the dangerous aspects of it, and the responsibility that safe driving entails. Nationwide Insurance has created an online program to assist the parent in this dialogue. It is called Smart Ride and it can be found at www.nationwidesmartride.com. This is a terrific program designed to prepare a child to mentally get ready to get behind the wheel. Not only does it provide a program to engage in this discussion, the parent and the teen get a discount from Nationwide Insurance if they complete the program successfully.
One last suggestion, some teens will listen to another adult before they will listen to their parents. Don't take it personally, it is just the age and most grow out of it. In this case, you might employ what is referred to as a "Dutch Uncle", another adult to discuss the responsibilities of driving. I'd be glad to step in and be that person if you are looking for another "voice" to influence your teen.
From an expense standpoint, there are a few things you can do. In addition to getting a discount for a program like Nationwide's Smart Ride, students can also get discounts for getting at least a "B" average in school. This can be a significant discount and certainly some leverage to get your student working hard in school.
Another financial aspect to impress upon your teen is that their behavior behind the wheel can drastically affect the cost of driving and even their ability to be able to drive. If they have accidents and tickets they can lose their license. Driving is not a right, it is a privilege that can be lost. With my sons we had an agreement concerning the financial aspect of them driving. Our agreement was that I would pay for the insurance for them to drive, but if they had accidents or tickets that increased the cost, they would pay the difference. If they couldn't pay the difference, they would be removed from the policy. This helped to encourage them to exhibit good driving behavior.
I hope this has helped and I wish you the best as you move into this phase of your child's life.
I have some experience in this in that I have started a business and have provided insurance for start-up businesses. My experience is that most businesses fail because they are undercapitalized. In layman's terms that means that they don't have enough money to get through the first few years of having the business struggle.
But, let me turn to an expert in this field to give you a better answer. Let me introduce Jason McCall, MBA, owner of Small Business Consulting Network, Inc in Bridgeport, WV. Jason received his undergraduate degree from Fairmont State College in Business, and his MBA from WV Wesleyan. He has taught business courses at Alderson-Broaddus College and Fairmont State University. His business primarily works to help new businesses get started. Take it away Jason.
Doug you are absolutely correct regarding businesses being undercapitalized. Business owners often start businesses with the idea that they will generate positive cash flow within the first year. This rarely happens for two reasons:
1.The business owner did not consider overhead expenses and determine the sales volume and pricing needed to break-even or achieve desired profit levels. 2.The business has not adopted a marketing plan or the plan has not had sufficient time to generate substantial business relationships.
I always recommend performing a simple break-even analysis to determine sales levels needed to generate cash flow in the first year. The break-even analysis will likely lead to one of two scenarios:
1.My business is not likely to achieve the sales levels needed to break-even or reach desired profit levels. This will likely lead to abandoning the business idea or lead to another one. 2.The desired sales levels will be a challenging goal, and I will need a solid marketing plan.
What I have mentioned are key components of a business plan. Most business owners do not prepare a business plan. Not surprisingly this is one of the most common reasons cited for business failure. Sometimes the best business plan is the one that keeps a person from starting a business that is not likely to succeed. I am an optimist but at the same time a realist. Most businesses fail, but many fail because of failure to consider adequate capitalization and business planning.
Thanks Jason, that is great advice for all the people out there looking to start a business. Good luck if you go forward with you plans. Be ready to work many long and difficult hours in pursuit of your goals.
Good question. As I drove from Bridgeport to Philippi on Rt 76 on Monday through the Rosemont area and found the road flooded over, I was hoping some of those people in that small town had flood insurance. In north central West Virginia, what is normally a small creek can turn into a river that creates a lake with just a couple day's worth of rain.
The short answer is no, there is no coverage for flood under your homeowners insurance and this is standard throughout the industry. That being said, flood insurance is readily available through the National Flood Insurance Program (NFIP) that is managed by the Federal Emergency Management Agency (FEMA) that is a component of the US Department of Homeland Security.
The U.S. Congress established NFIP in 1968 and it was broadened in 1973 and modified in 1994 and 2004. Beginning in 1983, NFIP began a program of working through the insurance industry and participating insurance companies to write and service flood insurance policies in their name. The participating companies sell and service the policies, but the federal government receives the bulk of the premium and suffers any losses.
For those people with homes in a flood zone, flood insurance has to be an important part of their financial plan. Water can devastate a home and result in the loss of what is, often times, a person's most valuable possession. For people that live in a flood zone, the cost of flood insurance is substantial, but not unaffordable. For people in moderate flood zones that own a residential dwelling on property that has not been flooded, there are low cost preferred policy options that are fairly inexpensive.
If this should be a concern for you and you have put off talking to an agent, let me encourage you to talk to your agent today about the cost of flood insurance. It may turn out to be a critical decision if a flood comes your way, and at the very least, it will keep you from panic when the river starts to come up.
Your concern for your home is well founded. For many of us, our most valuable investment is our home. In addition to the financial value, there is an emotional attachment that is equally as important. "Home Sweet Home" is our place of rest and comfort and we want to protect that as well.
A peril like fire can destroy your home in a matter of minutes, leaving you nothing but the charred remains of what was your most valuable investment and your place of rest. So how do you protect yourself?
The first step is to find out what the cost would be to rebuild your home in the event of a total loss. Keep in mind, this is different almost always from what you could sell your home for. The sale price of your home can fluctuate significantly up and down as we have seen in the last five years. The cost of rebuilding your home is a more stable value subject to inflation in the cost of building materials and the cost of the labor to those materials together.
Someone that has been in his or her home for thirty years and bought it for $35,000 might be shocked to know that it might take $150,000 to rebuild it today. It isn't any more shocking than a stamp costing 44 cents or a gallon of gas costing $3. Over a long period of time, inflation has a drastic effect on costs.
As an insurance agent, I have access to a computer program that does a good job of estimating the reconstruction cost of your home based on the square footage and the homes features. I can give you a good idea of what that reconstruction cost would be. Another way to find out the reconstruction cost of your home would be to ask a contractor what he would charge to rebuild your home. Most will tell you it is between $110 and $150 per square foot of living space, plus the cost of a basement and/or attached garage if you have either.
I find that many people are well underinsured compared to the reconstruction value of their home. In some instances, they are insured for less than half of what it would cost to rebuild the home. The question you have to ask yourself is if you had a total loss, which rooms would you want to do without?
Once you know the reconstruction value of your house, my suggestion is to insure the house for that amount. To moderate the cost of this potential premium increase, I'd suggest thinking about increasing the deductible. You would be better off with a little higher deductible than having your home insured for half of what it would cost to rebuild.
If you take these steps, you can feel confident that you'll be able to rebuild your home in the case of a total loss. Next week, I'll talk about how to protect your belongings from a total loss.
Doug Marquette, CPCU, CLU is the owner of Marquette Insurance Agency in Philippi.
During his thirty-year insurance career, he has been a life insurance agent, a
claims adjuster, an underwriter, a sales manager, and now is an agent.
His views
and opinions are not necessarily the views and opinions of the Barbour Democrat.
To send Doug a question, mail it to: Ask Doug, C/O Barbour Democrat, 113 Church
St, Philippi, WV 26416.