Insurance Archives - KNS Financial

Why You Need Life Insurance Before Investing

When people begin to invest money, they’re usually hungry for early results. They may approach investing with the conviction of a recent convert, saving and investing as much money as they can, even to the point of neglecting other needs, such as putting life insurance before investing. This is understandable, and quite natural, particularly if you are either young or relatively new to investing.

In spite of your enthusiasm, it is important to make sure that you have a few basics covered before you begin investing. One of those basics is life insurance.

You’re Not Ready To Invest Unless You’ve Covered The Contingencies

Investment advisers and financial planners commonly recommend that before you begin investing you should have a well-stocked emergency fund. That can include anywhere from 3 to 6 months of living expenses. The purpose of the fund is to make sure that you are protected from any income disruptions or large expenses that might force you to tap your investment portfolio ahead of schedule.

The fund enables you to carry on with the business of life, while keeping your investment portfolio protected from early withdrawals.

In essence, what an emergency fund does is cover a contingency – a temporary loss of income, or the unexpected arrival of a big expense or two. A life insurance policy functions similarly as a contingency plan. It creates a basic survival plan for your family or any other dependents that you have in the event of your death. This is a fundamental need, which means you should have adequate life insurance before investing.

Future Wealth Won’t Take Care Of Your Family If You Die Before You Get Rich

There is sometimes a thought that you don’t need life insurance, since your investment portfolio will eventually grow to the point where you will be effectively self-insured. This notion is especially popular among the young, since the prospect of their own death seems so remote.

The problem with this thinking is that it may be many years before you reach the point of being anything close to being self-insured through your investment portfolio. Let’s say that right now you have $10,000 to invest, but you fully expect it to grow to over $100,000 within the next 10 years. Maybe at that point you will be something close to self-insured, but what happens if something happens to you between now and then? What happens if you die when you only have $20,000 in investments?

Future wealth will not protect your family if something were to happen to you today. That’s the whole purpose of life insurance – as a contingency to take care of your family’s financial needs before you have the money that a large portfolio will provide.

The Cost-Benefit Of Life Insurance Is Much Higher Than An Equivalent Investment

One of the biggest advantages of life insurance is that you can quite literally buy six figures in coverage for just a few hundred dollars per year. This is especially true if you are in your 20s or early 30s. You may be able to buy $250,000 in life insurance for just a few hundred dollars per year.

If you are just starting out as an investor, it will take you many years – even decades – to accumulate that much money.

There may sometimes be the thought to keep your expenses as low as possible in order to maximize the amount of money that you have available to invest. If a large life insurance policy is only going to cost you $500 or $1,000 per year, it won’t be taking much away from your investment efforts.

And the benefit that you will have as a result of paying the relatively small premium will be enormous for your family.

Life Insurance Before Investing – Just In Case Your Investment Plans Don’t Quite Turn Out

It’s natural to be optimistic when it comes to investing. In fact, optimism is virtually essential to a new investor. But it is a sad fact that investment plans don’t always turn out the way we want them to, despite our best efforts.

Stock markets crash, individual investments blowup, and sometimes we need to tap investment portfolios early for unexpected reasons. The point is, investing is never a guarantee.

And just in case it doesn’t turn out as well as you hope, your life insurance policy can back you up with a plan to cover your family in the event of your death.

Life Insurance Should Be Seen As A Form Of Investment Diversification

You’re probably well acquainted with the idea of investment diversification. But not all diversification efforts are neatly contained within an individual portfolio. Some of the best forms of diversification you can have will be outside your portfolio. This can include an emergency fund, fixed income investments (like bank assets), and real estate.

But insurance can also be a form of diversification. As discussed above, it is a fail-safe against your death, at least until the time arrives that you have enough money saved and invested that you no longer need to maintain the policy.

If you can think of life insurance as a financial instrument that complements your investment portfolio, having it will seem more logical. And not having it can seem like an exercise in being penny wise, and pound foolish.

If you are an investor, especially a new one, do you have a credible life insurance policy – just in case? If not, then you need to make sure you pick up some life insurance before investing another cent!

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Researching Health Insurance Policies

By guest

[The following post sharing tips on researching health insurance options is brought to you by Genworth.]

When looking for health insurance, always shop around. Insurance plans can vary greatly from company to company. One might offer a lower deductible, while another offers better coverage. Shopping around can help you to understand your options. Your individual needs will determine which plan works best for you.

When looking around for health insurance try finding a site that lets you compare all of the companies in your area side-by-side. You can then see how each company ranks against the others in each aspect and choose the one that best fits what it is that you need.

If your spouse is on your insurance and they have access to insurance with their employer, you will probably be imposed a surcharge. You might save money by having them get their own insurance – make sure you compare them.

Take advantage of a little-known fact about health insurance: you may be able to get a “free look,” or test-drive, of an insurance plan. When shopping around, be sure to ask if the provider allows this test period, and make sure that you understand any restrictions or requirements for requesting a refund if you are dissatisfied.

Take advantage of preventative care benefits to save money and of course, your health. Most preventative screenings and procedures are covered by health insurance at no charge to the enrollee including vaccinations so stay up to date on everything your policy provides. By doing this now you can save a lot later.

When considering your health insurance options, take a look at a hospital only policy. Such policies do not cover regular doctors visits, but will take care of you in the event of an emergency that lands you in the hospital. The benefit is a lower cost premium, but the trade off is no day to day medical coverage.

When considering health insurance policies, look carefully at which hospitals are utilized in your policy. Many people think about their doctors when choosing a policy, but few consider the hospitals. Making sure that the hospital closest to you is covered, or the hospital at which your doctor practices, can make medical emergencies easier to tend to in the future.

When it comes to health insurance, you really need to research your own state. Insurance can differ state to state, so you want to make sure you understand what is available in your own area.

Long-term care health insurance can help cover the cost of assisted-living facilities for the elderly. It can be expensive or impossible to get if you wait until you need coverage. The time to buy is when you are in your fifties, and it’s best to look for a policy that provides protection against future cost hikes.

One key question to ask when purchasing long term care insurance is the amount of the daily benefit and how the rate will be adjusted over time. Is it a fixed dollar amount or is it adjusted for inflation? How long are the benefits payable? These are key questions which could become critical to your well being at some point.

As was stated in the beginning of the article, it is important that you are educated about health insurance, whether you already have it or are looking to get it. By using the tips given here, you are on the way to getting the best health insurance possible.

Creating a Side Business to Pay for Obamacare

By Kevin M

Tens of millions of people are currently going without health insurance coverage. The reasons are pretty simple: either they can’t afford the high cost of premiums, or they have been declined coverage due to pre-existing conditions.

The Affordable Care Act, more commonly known as Obamacare, looks ready to fix the pre-existing condition problem. Under the plan, not only will insurance companies not be able to turn you away for pre-existing conditions, but they will be unable charge you a higher premium either.

So far, so good.

[Find out how to save money on prescriptions.]

What Obamacare Won’t Fix

There is a lot in the President’s plan that I really like, starting with the elimination of pre-existing conditions as a factor in health insurance coverage. That needed to happen a long, long time ago. And you can’t argue with a concerted attempt to get everybody covered.

What is not as certain however is how much all this is going to cost. The current consensus is that young, healthy people will be paying more than they were under the old system, while older and less healthy customers will pay less. If I had to bet money on this plan, I‘d have no trouble betting that premiums are going still higher.

It’s hard to imagine how 100% coverage on preventative care, mandating coverage, and providing health insurance for 50 million people who currently don’t have it, is going to lower premiums. Add to that the fact that health insurance premiums have been going up for years, and there is no solid evidence that this cycle will change.

So just by making an educated guess, I think it’s pretty safe to say that higher premiums are something that Obamacare will not fix.

And that creates one not-so-small small problem…

You Will Now Be Required To Have Health Insurance

Under the new law, you will be required to have health insurance, otherwise you will have to pay a penalty. For 2014, the penalty is so low you pay it and get on with your life. The higher of $95 or 1% of your gross income is still a heck of a lot cheaper than even an inexpensive health insurance plan.

But as the years pass, those penalties become increasingly stiff. You’ll be paying a substantial penalty, but not having any health insurance coverage to show for it. Effectively, that will force you to have health insurance whether you want it or not.

If doing without health insurance has been your strategy for dealing with unaffordable premiums, it looks like that option is about to go out the window. And that raises the question How will we be able to afford that which we can no longer avoid?

Creating A Side Business To Pay For Health Insurance

I’ve heard horror story projections about Obamacare – we all have – but my feeling for a long time has been that the present health care system is already broken, and we should embrace this change. It does have a lot of positives, but we have to deal with the reality of figuring out how we are going to be able to afford it.

My suggestion is to create a dedicated income stream to pay for your health insurance. With premiums expected to be anywhere from $250-$300 for young individuals, and well over $1,000 for families, it is very possible that health insurance will be the single most expensive line-item in many household budgets. That will require some extraordinary measures to deal with.

[Should you let your employer know about your side business?]

Since you’ll need your regular income just to pay living expenses, the best strategy may be to develop a side business that will be used primarily to pay for health insurance. Here are my suggestions for just such a business. Each should be able to provide you with at least a few hundred dollars per month, and maybe a lot more. One of them may be the best solution to mandatory health insurance.

This is just a list to get you started – you probably have skills and interests that would make your own choice of a side business obvious. Now is an excellent time to dust off any ideas you have, and put them in the practice.

Freelancing On The Web. If you are comfortable with computers and the Internet you may be able to sell your services to websites and blogs. The possibilities here are nearly endless – content writing, social media management, editing, technical assistance, business development – you name it. Figure out what it is that you can do better than most people, put together a concise resume (or build your own website), then begin contacting site owners directly to hawk your service.

Tutoring. Where I live, people who tutor high school students are getting at least $30 an hour. Pick a subject that you are strong in, and offer your services as a tutor. Make up a simple brochure and provide a small supply to each of the schools in your area. You can also advertise your services on Craigslist, or place flyers in grocery stores, churches, Laundromats, or even the bulletin board at work.

Selling A Product. Is there a product that you feel very strongly about? Your enthusiasm and conviction may be your best tools to sell the product. Many companies offer affiliate programs that you can work through. You sell the company’s product, and collect a percentage commission upon each sale. You can automate the whole process by creating a website, and selling the product online.

Applying A Specific Skill You Have. Inventory all of your skills, there may be one or two that you can convert into a business. For example, if you have bookkeeping skills, offer your services out to small businesses. If you have fitness skills, you may be able to teach in a gym. This can include Zumba, yoga, aerobics, or even personal training. Think about the skills that you have, and the businesses were those skills might be useful.

[Find out how to discover the right business for you.]

Starting a side business is often a matter of matching your skills with a corresponding market niche. Spend some time working on that – surf the web looking for ideas and markets, join networking groups, and talk with your friends. As a rule, a side business will provide far more compensation than a part-time job will. And that may enable you to afford health insurance coverage that you otherwise can’t.

What are your own plans to deal with healthcare reform and higher, mandatory premiums?

How To Deal With Financial Emergencies Before They Happen

By Khaleef Crumbley

Having a financial contingency plan is always important, even more so, now that the economy is more unstable than ever, it is a necessity for every household! Keeping your finances organized when you fall upon hard times is one of the keys to surviving and thriving in these situations.

Here are 6 things that you can do now in order to prepare for financial hardship.

How To Set Up A Financial Contingency Plan

Rather than waiting until you fall on hard times, it makes sense to plan for the worst now, while you are in the best position to prepare yourself. Start with these basic points…

Set Up An Emergency Fund

I have talked a number of times on this site about the importance of an emergency fund. Having money set aside will be extremely important if you lose your job, or face some other financial difficulty. My goal (once our debt is paid off) is to to have between 9 months and a year of our living expenses saved for a “rainy day”..

Many people have gone deep into debt (I’m one of them) because they did not have significant savings to carry them through hard times. The purpose of an emergency fund is to remove the stress, fear, and even the need to borrow, when financial hardship comes.

Every good financial contingency plan should involve a large emergency fund!

Pay Off All Debt

One of the biggest factors in how well you handle a financial emergency is the amount of debt that you have. It is much easier to adjust your living expenses than it is to rearrange your debt payments. So when you are in a position where you need to free up a large amount of committed money, you won’t have over $500 in student loan repayments (that used to be me) to worry about!

Being at the mercy of credit card companies, banks, and other loan servicing agencies, will only add to your stress and may impair your ability to make good decisions during an emergency.

Know Your Options Ahead of Time

Whether it’s an old profession, becoming a part of the contingent workforce, or part-time job, you should ensure that you have a way to earn money that’s not connected to your current full-time job. You may not want to take on that side job, or put more time into your hobby just yet, but knowing what realistic options you’ll have if you are no longer able to work at your current job will be crucial if/when it happens.

Also knowing what expenses you can easily cut and what services you can do without (it may be wise to just cut them now and build up your emergency fund, pay off debt, or save for retirement), can save you from having to make those tough decisions while under stress!

Know Who You Can Depend On

Don’t make assumptions about who will and who won’t help you. Many people who you think you can count on may not be willing or able to help you, while those you’re not even considering could be the ones who offer you the most support during your time of need!

If your relationship allows for it, verify with your loved ones that they would be willing to help out (and find out how) if you fall on hard times.

You may need to consider taking loans from family or living with friends for an extended period of time; it’s best to know ahead of time (if possible), the people upon whom you can rely.

Be Prepared To Sell Your Possessions

I’m not saying that you should start holding garage sales tomorrow, but it is important to have a discussion with your family members and decide what items can go if you fall upon hard times. A good financial contingency plan will take into account how much money can be gained from selling certain items.

It will be much easier to make this plan now, rather than when you are all under the stress of a financial hardship (stress can skew proper judgment)! Decide what things you can part with, and conduct research to see how much you could possibly get for them. Knowing that you can get $7,000 for you 2nd car may be all that you need to survive a financial emergency.

Be Prepared For Natural Disasters

Even though New Jersey has been hit hard by storms in the last few years, I’m not really focusing on hurricane preparedness, or being able to prevent the damage from a natural disaster in this point. What I am referring to is the ability to quickly get back on your feet after the devastation.

The first thing that you should do is create a home inventory. This will allow you to quickly determine what items were damaged (or are completely missing) after the disaster. It will also help you when filing an insurance claim – everyone around you will be filing claims with their insurance company or requesting disaster assistance from the government. Having a home inventory can help to speed up your claims when that happens.

You should also review your various insurance policies to ensure that you are covered against various disasters. Many people just assume that their policy will reimburse them for all of their damages if something happens, only to find out that they weren’t covered at all, when it’s too late!

Reader Questions

Do you have a financial contingency plan? If so, what are some of the things that you have included?
Have you dealt with emergencies in the past? If so, what have you learned from the experience(s)?
Have you ever been hit by the sudden loss of income or dramatic increase in expenses or debt? If so, how did you handle it?
What else would you add to this list?

What To Look For When Choosing A Life Insurance Policy

By guest

[The following is a guest post discussing things to look for when purchasing life insurance.]

If you have children or others who depend on your income for their survival, you should seriously consider a life insurance policy. This allows those close to you to have additional income in the case of your early death.

It is not only important to have a life insurance policy in place, but it is also necessary to have a sufficient amount of coverage. You should have enough insurance to cover at least five years of your current salary, if you are married. If you have children or many debts, you should have a large enough policy to provide up to ten years worth of your current salary.

When deciding what term to take for your insurance, take a look at what will need to be done with that money. For instance, if your children are newborns, a 25 year term policy will make sure that they are cared for if anything happens to you before they are able to financially take care of themselves.

If you’re married, you should purchase a policy that is two-in-one. This is a joint policy, versus two separate policies. The premium for a joint policy is often cheaper than the premium for two separate policies. You would not need to change anything about your coverage. You would still have the same benefits, but would be able to decrease the amount you pay.

Most life insurance policies are long term contracts. This means that once you sign the contract, you have a responsibility to make payments toward your policy. Therefore, when you are obtaining life insurance, make sure you have a firm understanding of your needs, what you are receiving and that you will be able to afford your payments. If there is anything you do not understand, do not contract yourself to the policy. Ask questions first.

Understand the types of life insurance available before making a decision on which to purchase. Most insurance policies focus on Term Life or Whole Life and knowing the difference is key. Bear in mind that with both of these types of policies, they can be tailored to your specific needs and situations. Be sure to conduct extensive research before making a decision.

When you are planning on purchasing a life insurance policy, select an independent broker. Independent brokers can generally offer more selection in terms of policy and cost than a broker who works exclusively for a specific insurance company. Company brokers are limited to the products their company sells, and may also be pushed by the company to recommend a particular product.

Insurance companies often have extra fees for customers who pay every month instead of just once a year. You may be able to save a significant amount of money on your life insurance by paying your premiums annually instead of monthly.

Prior to looking for life insurance on your own, check with your employer to see if there is available coverage through them. In many cases, employers can negotiate a rate for their employees and their family members. This can save you a lot of money and give you a great policy as well.

photo credit: Freedigitalphotos.net