Over the last fifteen years my husband and I have acquired more insurance policies than I can track. We own two homes which means two homeowner policies, plus a wind and fire protection plan for our beach home in North Carolina. There is a large automobile policy that includes all four of our cars. (Yes I realize it seems crazy that two people own four cars between them, but in our defense three of the cars were manufactured before 2000 and none of them carry comprehensive or collision protection.)
We hold two liability policies, which includes one personal policy required for our rental house and another required to protect the small business my husband owns and runs. For awhile we also carried policies for a jet ski and for the camera equipment my husband carried as an amateur photographer.
Shortly after the time of my illness we purchased a life insurance and disability policy for my husband. The disability policy is the nearest and dearest to my heart. Having experienced my own health failures and going on short term disability for five months convinced me that we needed to put a policy in place as soon as possible after I fell ill. Thankfully my husband has remained in good health since purchasing that policy, but I like the peace of mind that it provides.
Just before my son was born I reviewed our insurance policies and decided to purchase an additional life insurance policy for my husband. The original 20 year term policy included $500,000 worth of coverage. At the time we owed very little on our primary home. In fact, we had nine years remaining on a fifteen year mortgage and had no children.
A few years after starting that policy my husband and I used a 15 year cash out refinance to purchase an additional property. The additional property was immediately paid in full, but our primary mortgage ballooned into nearly double the amount it was eight years prior when we initially applied for insurance. Given the increased debt I decided to attain an additional $500,000 worth of coverage with another 20 year term life insurance policy. I like knowing the we would have more than enough money to pay off our properties outright and still have money left over for my son and I if something happened to my husband.
Of course the landscape of our lives is constantly changing. We refinanced our homes in 2012 and plan to pay off one mortgage in eight years and the other in less than nine. Once our mortgages are completely paid off we can revisit our current insurance plans.
I think it’s important to continually review insurance policies to ensure you are getting the best value for your dollar. You can increase your deductibles, remove collision and comprehensive on older vehicles, increase the amount of life insurance you need as your family grows or decrease your coverage as your liabilities decrease.
Don’t forget to review these policies from time to time. Most people sign the paperwork and continue to pay the bill for the next fifteen, twenty or thirty years, but it’s important to review the documentation as your financial landscape changes.
Two weeks ago I wrote about my need to leave COBRA. It has been nearly 18 months since I lost my job and I need to find a new health insurance plan before my COBRA coverage expires. I found a plausible solution that I think will work and I’m hopeful that my wonderful readers will provide comments if it sounds like a bad idea.
So here it goes…
We will switch from a POS plan to a high deductible insurance plan. The maximum deductible per individual is $1,300 and the maximum per family is $2,600. The plan sets out-of-pocket limits at $2,600 and $5,200 respectively.
Preventive services are covered 100% with no coinsurance or co-payments, so my son’s well-child care visits will be covered as well as physicals for my husband and I. The plan also covers routine gynecological visits and cancer screenings like Pap tests.
Everything else requires us to meet our deductible before insurance will kick in. This includes services like visiting the doctor when we’re ill, diagnostic testing, hospitalization and urgent care. We won’t pay coinsurance if we stay in network, but we will owe co-pays for visiting doctors or emergency rooms after our deductible has been met. I believe the co-pays are comparable to what we currently pay.
So here are the numbers that helped us choose the HSA plan.
That’s right by switching plans we will save $760 per month in premiums and $9120 over the course of a year!
According to the IRS we can contribute a maximum of $6,450 to our HSA. Since we’re already paying a ridiculous amount towards health insurance we won’t miss the money and will do our best to set aside each and every penny of the maximum this year.
If you divide $6,450 by 12 months it works out to $537.50 per month. Believe it or not when you add the monthly premium to the HSA contribution you still end up with a $224.50 monthly difference between our current plan and the new high deductible plan with HSA.
In the best scenario we won’t have too many unexpected medical expenses this year, we’ll pay the lower premiums and we’ll bank the rest of the money in our HSA. In the worst case scenario we pay a total of $7800 after meeting our family deductible and out-of-pocket limits. If we continued with our current plan, (which isn’t an option anyway), we would pay $9,120 more in premiums this year. So it appears that even in the worst case scenario we still make out better with the new plan.
I will, of course, point out that the plans are not entirely equal. Our current plan covers some medical items that the new high deductible plan won’t cover and vice versa, but without being able to predict the future we have to move forward with a plan that simply might not be as robust as our current one.
We do have the option of moving forward with a POS or PPO plan that is similar to the one we currently have, but we would continue to face $1500 monthly premiums and after running the numbers I’m not sure that makes much sense. With the new plan if we don’t use the money it can remain in our HSA. With the POS or PPO plan we fork over $1500 each month even if we never go to the doctor.
So what do you think? Is there anything about this plan that doesn’t make sense? Am I failing to think about anything important? If you have any thoughts on the issue please leave a comment below.
I have been paying full price for COBRA ever since I was laid off from my job November before last. While I paid very little as an employee I am currently paying over $1400 a month for myself, husband and 14 month old son. It’s time for us to find ourselves a new insurance plan, but I am uber confused by all of the options available.
I chose to stay on our current plan for as long as possible, but I am crazy about medical care. I have had a number of medical problems and know that above all else that I am willing to pay for quality care. In fact, I will cut back on just about everything else in my life to make certain we can afford good insurance. Over the years my insurance has paid for all sorts of services and procedures that would have been denied by other carriers.
As an employee I paid very little each month in premiums. Now that my husband and I will need to move over to a new plan, (he is self employed), we will pay the bill in it’s entirety.
I am considering moving over to a high-deductible insurance plan with an HSA. I read all of the paperwork associated with this plan and compared it to the standard PPO, but I’m still not certain which option to select.
I’m hoping someone out there can provide some input on my choices. While I will continue to read about the options I need to make a decision in the next month or two.
Here’s what I know. My husband is rarely sick and has not gone to the doctors for anything other than a physical for as long as I can remember. That doesn’t mean something couldn’t pop up for him. My medical problems came on sudden and strong, but in a typical year health insurance is a lot of money down the drain for him. My son just turned 15 months old. He doesn’t have any known health issues either. For the most part my medical problems are a thing of the past. I haven’t seen a doctor or surgeon in quite some time for my symptoms. I do see massage therapists from time to time, but those services were never covered by insurance anyway.
My husband and I are still debating having a second child. Some days I’m excited about the idea and other days I think I could be perfectly content with just one child. It is conceivable that I would pregnant again by the end of the year or shortly thereafter.
Does anyone have any thoughts on high-deductible plans versus standard PPOs? If so, does anyone know if there is a preferable route I should take if I become pregnant?
An update: To view my decision click here.
In my junior year of college my dad loaned me the family car. It was an old school, sky blue Toyota Camry station wagon similar to the one pictured below. I moved off campus that year and started an internship in Annapolis that couldn’t be reached through public transportation.
Everyone made fun of that vehicle, but I loved it. It was big enough to transport my belongings back and forth, (at the time everything I owned other than my bed could fit in the back of it), and it was already old and rusted so I wasn’t worried or bothered by the fact that I never washed or took care of it.
When I graduated my dad let me keep the car for another year and when I moved to DC he told me I needed to attain my own policy to insure it. These days with computers at the ready and the Internet always handy I could search for auto insurance on a million different websites and find comparable rates in a matter of seconds.
Back then my dad called individual agents and asked them about their rates and policies. As strange as it now seems my dad and I drove out to an agent’s house, (he worked out of his home), to meet with him in person. It’s funny, but I have a very vivid memory of my dad and I driving through the city to meet this man. When we arrived he walked outside, looked at my vehicle and talked with my dad and I for an hour about insurance.
He was an older pudgy gentlemen with white hair and a big grin. He became my insurance agent and continued in that capacity for the next twelve years.
Although we’ve been with the same agent for over a decade, I still want to make certain we are getting the best price and policy for our needs. Once a year I log onto various websites to check out auto insurance rates at other companies. There are lots of sites available to help you compare free quotes. A good example is fullcoverageautoinsurances.com.
It’s funny to think about how much the Internet has changed our lives. I can receive free quotes on auto insurance in a matter of seconds at any time of day or night without every speaking with a human being.
These days I doubt any parent will drag their kid around the city to meet face-to-face with an insurance agent, but I must admit that the memory of driving around DC with my father is a good one. It definitely leaves me smiling.
My parents plan on taking my 89 year old grandmother on a 5500 mile trip this spring. She wants to make one last trip to visit my uncle who moved far away shortly after graduating from college. For her age I think my grandmother is in great health. She still lives at home alone and is able to walk unassisted.
At my father’s insistence I emailed my insurance agent tonight to find out if staying-at-home with my son would result in a cheaper car insurance rate.
With a little one on the way I decided to review our current insurance policies and am very close to pulling the trigger on a new life insurance policy for my husband. Our current policy was taken out three years ago. It’s a 20 year term for $500,000. At the time we owed very little on our primary home. In fact, we had nine years remaining on a fifteen year mortgage. We also didn’t have any children to consider.
Fast forward and our landscape is quite different. We are expecting a little one in October and now owe nearly double on our primary home. (We used a 15 year cash out refinance to purchase another property.) The additional property is now paid in full, but our primary mortgage is nearly double the amount it was three years ago when we applied for insurance.
Given the increased debt I would like to attain $1 million worth of coverage for at least the next fifteen years. We currently hold mortgages on two distinct properties in two different states. Since the mortgages will be paid off in fourteen years I would like to have enough insurance to pay for those properties outright if something happened to my husband. I would also need to think about his loss of income and child related costs including college.
At the end of fifteen years we may build another house on a piece a land we purchased using the cash-out refi. So I’d like to maintain a policy for at least $500,000 for fifteen to thirty years into the future.
Since we initially purchased insurance three years ago, when my husband was in better shape, our current policy costs just over $300 a year. I thought of canceling that policy in favor of purchasing a new $1 million 30 year term policy, but after thinking through the dates and expenses I’m now considering adding a new policy that would cover only $500,000 more.
In fifteen years the original policy will expire, but by that time our current houses will all be paid off. That means we would only need to consider paying off the new home, (if we build one), and paying for any child related expenses.
After reviewing my husband’s current weight/height ratio and looking over the various categories for coverage it seems that it is cheaper to purchase a new $500,000 30 year term policy while maintaining our current policy, then it is to purchase a new $1 million policy outright. (He weighs more now then he did three years ago and is no longer falling into the premier rate categories.)
So now I just have to rethink things and make sure my new plan makes sense. If our two homes will be paid off in fourteen years I see no reason we’ll need a $1 million policy after that. I think maintaining a $500,000 policy from years 15 through 30 should cover all our bases.
So tell me, in thinking through this am I missing or forgetting or not thinking about something important?
Over the years my husband and I have worked hard to reduce our insurance costs. I believe wholeheartedly in acquiring insurance, particularly disability insurance, but I sure hate shelling out money for each policy.
In order to reduce our overall insurance costs we built up a sizable emergency fund and waited to change our policies until we knew we could afford the larger out of pocket expenses. Once we achieved a solid financial footing we increased the deductibles on each and every policy. The changes started out relatively small. The first change altered our auto policies from $250 to $500, later we made the jump from $500 to $1000.
In my opinion increasing the deductible on homeowner’s policies is a no-brainer. Insurance premiums are bound to rise anytime you make a claim, so it makes the most sense to avoid claims for minor issues. Of course, in order to avoid claims you must have enough money in the bank to cover the cost repairs, which is why all roads lead back to building a solid emergency fund.
Another big savings came from merging our homeowners and auto insurance policies under one low cost provider. This alone saved us a few hundred dollars a year. There are many ways to search for low cost insurance. I simply searched the websites of most big name companies and used comparison sites like those provided by Progressive Insurance.
The other way to save on insurance is by purchasing used cars and holding on to them for the long haul. At this point all three of our vehicles are at least ten years old. When the blue book value of our vehicles falls below $3,000 we typically remove collision coverage from the policy. This usually puts another $100 or so back in our pockets.
Of course, car accidents and speeding tickets are the fastest way to drive up insurance costs, so my husband and I both do our best to practice safe driving. Although we’ve both been caught by speed cameras, neither one of us has ever been ticketed by the police or been the cause of a auto accident. A clean driving record goes a long way in keeping costs down.
Between our clean records, low cost provider, merged policies, older vehicles and high deductibles I bet my husband and I spend at least 50% less on insurance than most of our friends and family.