What All Early Retirees Have in Common

January 20, 2021

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Rich & Kristina Messenger

Rich & Kristina Messenger

Senior Vice President



McKinney, TX

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December 2, 2020

Facts About Disability Insurance

Facts About Disability Insurance

How are you protecting your income?

Maybe you already have a life insurance policy worth about 10 times your annual earnings. That should help protect your family in the case of your untimely passing.

But what if you aren’t able to work during your lifetime?

It’s more common than you might think. 1 in 4 20-year-olds will become disabled before they reach 67, and 67% of private-sector workers have no disability insurance.¹ Here are some basic facts about this essential line of protection for you and your family.

Disability insurance has a lot in common with life insurance.
At first blush, it might be hard to distinguish between life insurance and disability insurance. But there are some key differences that are worth exploring.

Disability insurance activates when you can’t work
Life insurance pays out in the case of your passing. Disability insurance can provide a stable income replacement if an injury, accident, illness, or something else renders you unable to work.

There are two types of disability insurance: long-term and short-term Short-term disability insurance can replace your income if you can’t work for a few months. Long-term disability insurance can protect you if a serious health issue takes you out of the field for more than 6 months.

Employers sometimes offer disability insurance (but it might not be enough) It’s not uncommon for employers to provide their workers with some form of disability insurance. As of 2018, 42% of private sector employees had access to short-term disability insurance via their work, while 34% had long-term disability insurance options.²

However, it’s worth noting that this might not be enough to fully protect you and your family. Disabilities can increase your expenses, so you’ll need a strategy that replaces your current income and then some. Make sure your employer-provided plan will give you enough to cover all of your needs in the case of a disability and help your family for the long haul. If it doesn’t do either of those, you may need to turn to private coverage.

The government offers disability benefits (but they might not be enough, either)
Social Security does provide disability coverage to individuals who have worked long enough and paid enough into the system. However, applying for it is a time consuming process. Also, average monthly payments were just over $1,000 as of 2017.⁴ Do your research to see if you’re eligible and if you’ll receive enough before you apply.

Above all, meet with a licensed and qualified financial professional to weigh your options and start developing a plan. They’ll assist you as you evaluate your need for protection, what employer-provided options you might have, and how disability insurance fits into your overall financial strategy.

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¹ “Fact Sheet: Social Security,” Social Security Administration, https://www.ssa.gov/news/press/factsheets/basicfact-alt.pdf

² “Employee access to disability insurance plans,” Bureau of Labor Statistics, U.S. Department of Labor, https://www.bls.gov/opub/ted/2018/employee-access-to-disability-insurance-plans.htm

³ “Disability Benefits,” Social Security Administration, https://www.ssa.gov/benefits/disability/

⁴ “Disability Insurance: Why You Need It and How to Get It,” Barbara Marquand, Nerwallet, Oct. 20, 2017, https://www.nerdwallet.com/blog/insurance/disability-insurance-explained/

September 30, 2020

Life Insurance Next Steps

Life Insurance Next Steps

During the course of Life Insurance Awareness Month, we’ve been focusing on understanding the ins and outs of life insurance.

We’ve discussed why life insurance is necessary, who needs it, what kinds of protection are available and even defined key terms so you can know exactly what you’re looking at!

So what’s next? Application.

Dale Carnegie once said, “Knowledge isn’t power until it is applied.”

There’s an obvious difference between knowing about life insurance and actually being insured. So how do you get started? If you’re looking at getting life insurance for yourself or a loved one, here are 3 helpful steps to consider.

1. Reflect on what’s important. Now this may seem like an obvious thing to do, but it’s absolutely critical that you think about the areas of your life that you really care about and nail those down. Ask yourself, “If something happened to my ability to earn income, who would be affected and who do I specifically want to be cared for?” Your answer(s) to this question will help determine what needs to be protected.

2. Determine your budget. After you’re done with the first step, it’s time to put your money where your mouth is. How much would you be willing to set aside to ensure those things are protected? Run a thought experiment in your mind: “Would I be willing to set aside $50 per month? $100? $200? $400?” This process will help you ‘take the temperature’ about what you’re willing to commit.

3. Seek guidance. Find a licensed and trained financial professional you trust and who offers life insurance products to give you an accurate quote or illustration based on your situation. They will be able to guide you on finding the right type and the right amount of insurance to fit your needs.

No one likes to think about what would happen in the event of a premature death, disability, or critical illness. But whether we think about it or not, the reality is the same: people we care about will be affected by the loss of an income earner. Remember, life insurance isn’t something we can buy in a store. You have to apply! Owning life insurance is more of a privilege than it is a right. So don’t merely spend time accumulating knowledge. We encourage you to apply that knowledge…and in this case, apply for life insurance!

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September 9, 2020

Life Insurance Myths

Life Insurance Myths

We love facts.

Maybe it’s a byproduct of the modern age, but many of us desire an accurate worldview that’s based on evidence and data. Who wants to live with their head in the clouds, believing myths or superstitions?

Unfortunately, there are those of us who have fallen prey to certain life insurance urban legends. Here are some common myths that many people believe and some cold, hard facts to debunk them!

Myth: Life insurance is less important than my other financial obligations
Here’s how the story goes. You have a spouse you love, a house you’re proud of, a reliable car, and kids you care for. All of that takes money; date nights, mortgages, and tuition aren’t cheap! It can be hard to swallow taking on another financial obligation like life insurance on top of the bills you’re already paying.

But life insurance isn’t simply another burden for you to carry. It’s an essential line of protection that empowers you to provide for your family regardless of what happens. The payout can act as a form of income replacement that can help your loved ones maintain their lifestyle, pay their bills, and pursue their dreams when they need financial help the most. Life insurance isn’t less important than your other financial responsibilities. It’s an essential tool that helps the people in your life meet their financial obligations if something were to happen to you!

Myth: Life insurance is unaffordable
This is an incredibly common myth, especially among Millennials; 44% overestimated the cost of life insurance by five times!(1) 65% of people who don’t have life insurance say they can’t afford it.(2) But life insurance is far more affordable than you might think. A healthy, non-smoking 25 year old could only pay $25 per month for a policy.(3) That’s about what a subscription to three popular streaming services would cost!(4) Do some online shopping and be amazed by how affordable life insurance really is!

Myth: My employer-provided insurance is enough
Just under half the workforce has life insurance from their employer.(5) That’s great! The more life insurance you have available to you the better. But it simply might not be enough to fully protect your family. Professionals typically advise that you purchase about 10 times your annual income in life insurance coverage. Most employer-provided life insurance gives only one to three years of protection.(6) That’s not to say you should refuse a policy through work. But you might need to get some extra protection!

Contact a financial advisor if you still have doubts or concerns. They’re full-time myth busters who will help you navigate the sometimes confusing world of financially protecting your family!

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(1) Nupur Gambhir, “9 common life insurance myths debunked,” Policygenius, March 13, 2020 https://www.policygenius.com/life-insurance/common-life-insurance-myths-debunked/

(2) “Is Life Insurance Tomorrow’s Problem? Findings from the 2020 Insurance Barometer Study,” LIMRA, June 16, 2020 https://www.limra.com/en/newsroom/industry-trends/2020/is-life-insurance-tomorrows-problem-findings-from-the-2020-insurance-barometer-study/

(3) Sterling Price, “Average Cost of Life Insurance (2020): Rates by Age, Term and Policy Size,” ValuePenguin, Aug. 10, 2020, valuepenguin.com/average-cost-life-insurance

(4) Joe Supan, “Americans already subscribe to three streaming services on average. Is there room for more?,” Allconnect, Jun 20, 2020, https://www.allconnect.com/blog/average-american-spend-on-streaming#:~:text=One%20poll%20from%20The%20Hollywood,at%20just%20over%20%2414%2Fmo.

(5) Marvin H. Feldman, “4 Things You Probably Don’t Know About Your Life Insurance at Work,” Life Happens, Sept. 22, 2017 https://lifehappens.org/blog/4-things-you-probably-dont-know-about-your-life-insurance-at-work/#:~:text=Press-,4%20Things%20You%20Probably%20Don’t%20Know,Your%20Life%20Insurance%20at%20Work&text=For%20the%20first%20time%20ever,to%20a%20new%20LIMRA%20study.

September 2, 2020

Life Insurance Crash Course

Life Insurance Crash Course

Does life insurance intimidate or confuse you? You’re not alone.

A recent study found that 65% believed life insurance was too expensive for them, and another 52% didn’t know how much or what kind they needed. 42% of respondents didn’t have life insurance because they didn’t like thinking about passing away!(1)

But life insurance doesn’t have to be mentally or emotionally overwhelming.

That’s why we’ve created this beginner’s guide to life insurance. We’ll give you a simple explanation of life insurance, define the purpose of life insurance, and see who needs it most!

What is life insurance?
Life insurance is typically a contract between you and an insurer where the insurer promises to pay an agreed upon amount to your beneficiary(s) when you pass away. The contract itself is called a policy, making you the policy holder. The money your beneficiary receives (depending on the type of policy you have) is called a death benefit. The monthly or yearly payment you give to the insurer in exchange for the insurance is called a premium. In short, you pay an insurer a little bit each month in exchange for a payout to your loved ones in the case of your passing (or because of other circumstances stipulated in the policy).

What is it for?
Life insurance can’t replace your presence for your family and loved ones. But it can replace your income. There might be people who depend on your income to make ends meet or to achieve their dreams, like a spouse or college-aged child. Life insurance can offer them the financial resources to maintain their lifestyles. It also provides them some time to grieve and plan their future.

Who needs it?
As a rule of thumb, it is recommended that people with dependents have some form of life insurance. Typically that means people with families that rely on their income to pay bills or with aging parents that need financial support. But there are some surprising ways that loved ones in your life might depend on you. Keep an eye out for a blog post with more details on who needs life insurance later this month!

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Life insurance, at its core, can be straightforward and simple. It’s one of the most important layers of financial protection you can provide for your family to help replace your income and give your loved ones some peace of mind. Next week we’ll take a closer look at the different types of life insurance and how much coverage is enough for you!

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July 13, 2020

The Gambler’s Fallacy

The Gambler’s Fallacy

Humans are amazing.

We’ve sent people to the moon, we’ve constructed gravity-defying skyscrapers, and developed incredible medicines and machinery to make our lives better.

But there is something we’re generally not great at—understanding probability.

It’s a mental blind spot that many of us seem to have. Sure, we can learn math formulas that help us make predictions in the abstract, but most of us will fall prey to a common misjudgment called the Gambler’s Fallacy. Here’s how it works!

Consider a coin toss
You and some friends are incredibly bored one day and start tossing a coin to pass the time. Somehow you flip 5 heads in a row, so maybe you can make a little cash off this run! You wager $10 that the next coin toss will be tails. Afterall, isn’t there a huge chance that the next toss won’t be heads?

Wrong!

You flip the coin, slap it on your wrist, and see heads for the 6th time. Congratulations, you’ve fallen prey to the Gambler’s Fallacy. You assumed that because an event frequently happened in the past, it was less likely to occur going forward.

But the past doesn’t always predict the future
We love noticing patterns and seeing trends. They are mental shortcuts to understanding the world, and they help us predict future events so we can come up with a game plan. It seems intuitive that 5 coin flips for heads somehow means that getting tails is right around the corner! We expect a 50/50 overall outcome, so the coin must have exhausted its ability to land with heads up for a bit, right?

But that’s not how pure randomness works. Each coin flip is its own separate event. The past few tosses have nothing to do with how the next one will turn out. It’s always 50/50, no matter what has happened in the past!

The cost of the Gambler’s Fallacy The Gambler’s Fallacy might not seem like a big deal. But if you’re not careful, your assumptions about the future could lead to big mistakes in the present. The Gambler’s Fallacy is sometimes called the Monte Carlo Fallacy because of an incident at the Monte Carlo Casino in 1913. A ball fell on the black several times on a roulette table. Gamblers noticed the string of black and decided to start betting on red. Surely the streak couldn’t last much longer! But the run of black continued for 26 rounds. Millions of dollars were lost because people fell into the classic trap of the Gambler’s Fallacy.

It’s easy to trust your gut. Sometimes certain decisions just feel right! But traps like the Gambler’s Fallacy can crop up when we’re trying to plan our futures. How many people make wild emotional calls when they see the market going up or down? How many people assume they’ll never need financial protection because everything is fine right now? It’s always worth seeking professional guidance when you’re making an important call. They can help cut through the confusion and help you avoid pitfalls and mental blindspots!

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December 11, 2019

Party of Two?

Party of Two?

Life insurance is the most personal type of insurance you can have in today’s world.

But there seems to be a lot of confusion about it. Every consumer has different priorities and feelings. Add to that the fact that life insurance can be used for a variety of financial goals and needs, and you have a recipe for befuddlement.

When it comes to life insurance, most agree that if you have children, you should probably have it. There is no question. But what if you don’t have children? Do you need to purchase life insurance? Here’s why it may still be important, even if you don’t have kids now (or don’t plan to):

Many households need a dual income to survive.
Since women began entering the workforce en masse in 1960, household incomes have been on the rise. Many households have now adopted a lifestyle that depends on a dual income to maintain itself. If you’re in this situation, there might be some consequences of your life insurance decisions.

If something happened to you or your spouse, would the survivor still earn enough money to maintain their lifestyle? If the answer is no, consider how a life insurance policy might help.

Mortgage debt is big debt.
Mortgage debt in the United States is big – bigger than credit card or student loan debt. Still, mortgage debt is “healthy” debt assuming the growing equity in a home makes it worthwhile.

But mortgage debt can become a problem if a household’s income takes a hit. Life insurance can protect families from this risk by helping to pay off a mortgage, should something happen to you or your spouse. Either a term life policy or a special mortgage life policy can be used to pay off a mortgage.

Mortgage life insurance can be a nice layer of protection for couples that don’t have children but do have a mortgage.

Life insurance can be used as a savings tool.
Many life insurance policies offer a cash value. This means that certain policies can be cashed in whether or not a death has occurred. In this way, a life insurance policy can act as a savings tool.

Couples without children can pay into their policy in the form of the premiums, and then cash it out for a retirement dream: a new home, a hobby business, or an extended vacation. Using life insurance as a savings tool can offer tax benefits, a guaranteed savings method for the “savings challenged”, and a creative way to finance a dream. In short, it’s a savvy use of life insurance for couples who don’t have kids.

Funeral expenses can wipe out an emergency fund.
A life insurance policy can help cover funeral expenses for you or your spouse. This is one of the most common uses of life insurance. The average funeral today can cost between $7,000 and $10,000. That’s enough to wipe out an emergency fund, or seriously deplete it.

Having a life insurance policy in place can help cover expenses if you or your spouse were to pass away unexpectedly, so you can leave your fund for the day-to-day difficulties intact.

Whether you have children or not, a sudden illness or loss of a breadwinner can have lasting consequences for the loved ones you leave behind. Taking advantage of a well-tailored life insurance policy to shield them from an unnecessary financial burden if something were to happen is one of the best gifts you can give.

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October 23, 2019

Top Reasons Why People Buy Term Life Insurance

Top Reasons Why People Buy Term Life Insurance

These days, most families are two-income households.

That describes 61.9% of U.S. families as of 2017. If that describes your family (and the odds are good), do you have a strategy in place to cover your financial obligations with just one income if you or your spouse were to unexpectedly pass away?

Wow. That’s a real conversation-opener, isn’t it? It’s not easy to think about what might happen if one income suddenly disappeared. (It might seem like more fun to have a root canal than to think about that.) But having the right coverage “just in case” is worth considering. It’ll give you some reassurance and let you get back to the fun stuff… like not thinking about having a root canal.

If you’re interested in finding out more about Term insurance and how it may help with your family’s financial obligations, read on…

Some Basics about Term Insurance
Many of life’s financial commitments have a set end date. Mortgages are 15 to 30 years. Kids grow up and (eventually) start providing for themselves. Term life insurance may be a great option since you can choose a coverage length that lines up with the length of your ongoing financial commitments. Ideally, the term of the policy will end around the same time those large financial obligations are paid off. Term policies also may be a good choice because in many cases, they may be the most economical solution for getting the protection a family needs.

As great as term policies can be, here are a couple of things to keep in mind: a term policy won’t help cover financial commitments if you or your spouse simply lose your job. And term policies have a set (level) premium during the length of the initial period. Generally, term policies can be continued after the term expires, but at a much higher rate.

The following are some situations where a Term policy may help.

Pay Final Expenses
Funeral and burial costs can be upwards of $10,000. However, many families might not have that amount handy in available cash. Covering basic final expenses can be a real burden, especially if the death of a spouse comes out of the blue. If one income is suddenly gone, it could mean the surviving spouse would need to use credit or liquidate assets to cover final expenses. As you would probably agree, neither of these are attractive options. A term life insurance policy can cover final expenses, leaving one less worry for your family.

Pay Off Debt
The average household in the U.S. is carrying nearly $140,000 in debt. For households with a large mortgage balance, the debt figures could be much higher. Couple that with a median household income of under $60,000, and it’s clear that many families would be in trouble if one income is lost.

Term life insurance can be closely matched to the length of your mortgage, which helps to ensure that your family won’t lose their home at an already difficult time.

But what about car payments, credit card balances, and other debt? These other debt obligations that your family is currently meeting with either one or two incomes can be put to bed with a well-planned term life policy.

Income Protection
Even if you’ve planned for final expenses and purchased enough life insurance coverage to pay off your household debt, life can present many other costs of just… living. If you pass unexpectedly, the bills will keep rolling in for anyone you leave behind – especially if you have young children. Those day-to-day living costs and unexpected expenses can seem to multiply in ways that defy mathematical concepts. (You know – like that school field trip to the aquarium that no one mentioned until the night before.)

But Wait, There’s More
A well-planned term life insurance policy can provide other benefits as well, including living benefits that can help prevent medical expenses from wreaking havoc on your family’s financial plan if you become critically ill. One note about the living benefits policies, though: If the critical and chronic illness features are used, the face value of the policy is reduced. But which might be more prepared to take a financial hit: the face value of the life insurance policy that just helped you cover your medical expenses… or your child’s college fund?

In some cases, policies with built in living benefits may cost more than a standard term policy, but it may still cost less than permanent insurance policies! And because a term policy is in force only during the years when your family needs the most protection, premiums can be lower than for other types of life insurance.

Term life insurance can provide income protection to help keep your family’s financial situation solid, and help things stay as “normal” as they can be after a loss.

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October 7, 2019

Mortgage Protection: One Less Thing To Worry About

Mortgage Protection: One Less Thing To Worry About

How many things do you worry – er, think – about, each day? 25? 50? 99?

Here’s an opportunity to check at least one of those off your list. Read on…

Think back to when you were involved in the loan process for your home. Chances are good that at some point during those meetings, a smiling salesperson mentioned “mortgage protection”.

With so many other terms flying around during the conversation, like “PMI” and “APRs”, and so much money already committed to the mortgage itself – and the home insurance, and the new furniture you would need – you might have passed on mortgage protection.

You had (and hopefully still have) a steady job and a life insurance policy in place, so why would you need additional protection? What could go wrong?

Before we answer that, let’s clear up some confusion.

Mortgage Protection Insurance is not PMI
These two terms are often used interchangeably, but they are not the same thing.

Both Private Mortgage Insurance (PMI) and Mortgage Protection are insurance, but they do different things. PMI is a requirement for certain loans because it protects the lender if your home is lost to foreclosure.

Essentially, with PMI you’re buying insurance for your lender if they determine your loan is more risky than average (for example, if you put less than 20% down on your home and your credit score is low).

Mortgage protection, on the other hand, is insurance for you and your family – not your lender.

There are several types of mortgage protection, but generally you can count on it to protect you in the following ways:

  • Pay your mortgage if you lose your job
  • Pay your mortgage if you become disabled
  • Pay off your mortgage if you die

Say, That Sounds Like Life Insurance.
Not exactly. Mortgage protection actually can cover more situations than a life policy would cover. Life insurance won’t help if you lose your job and it won’t help if you become disabled. Mortgage protection bundles all these protections into one policy – so you don’t need multiple policies to cover all the problems that could make it difficult to pay your mortgage each month. (Hint: A life insurance policy would be a different part of your overall financial plan and often has its own separate goals.)

How Does Mortgage Protection Work?
A mortgage protection policy is usually a “guaranteed issue” policy, meaning that many of the roadblocks to purchasing a life insurance policy, such as health considerations and exams, wouldn’t be there.

If you lose your job or become disabled, your policy will pay your mortgage for a limited amount of time, giving you the opportunity to find work or to make a backup plan. Again, your house is saved, your family still has a roof over their heads, and you’re a hero for thinking ahead. Accidents happen and people lose their jobs every day. Mortgage protection is there to catch you if you fall.

One More Thing…
A mortgage protection policy is a term policy, so you don’t need to keep paying premiums after your house is paid off.

Now that you know a little bit more about mortgage protection policies, have those 99 worries ticked down to 98? Reaching out to me for guidance on your financial worries could help you make that number smaller and smaller… 97… 96… 95…

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August 14, 2019

The Black Hole of Checking (Part 3)

The Black Hole of Checking (Part 3)

Are you feeling the gravity of this checking account situation yet?

All of the money lessons from Parts 1 and 2 dealt heavily with the importance of helping you make sure that all of your money isn’t just sitting in your checking account where it’s neither growing nor working for your future. However, there are a couple of important money-saving details to consider before emptying your checking account.

To avoid becoming too starry-eyed and moving all of your money without considering potentially pricey consequences, ask yourself these 2 questions:

1. Does your personal bank have any kind of fee attached to the minimum amount of money in your checking account? Staying on course to your financial goals can be tough enough, but when you’re hit with a surprise fee from your bank, can that feel like losing vital g-force in the right direction? Americans paid an average of $53 per person in 2015. And these charges can be avoided largely by knowing what your chosen bank requires of you – along with very careful attention to what’s in your account. Use the tips below with your bank’s unique rules to avoid those course-altering fees via your checking account:

  • Have the minimum balance requirement
  • Enroll in direct deposit
  • Open multiple accounts at the same banks
  • Find free checking elsewhere

2. Do you have enough in your checking account to avoid overdraft fees?$15 Billion. That’s how much Americans paid in overdraft fees last year alone. You could probably build your own space station for that kind of money! (A really small one, at least.) Remember the advice in Part 2 to have accounts for differing money occasions like an Emergency Fund or Fun Fund? These separate, deliberate accounts have the potential to help shield against many unexpected and/or large withdrawals from your checking account. Additional ways to protect yourself from overdraft fees are Overdraft Protection through your bank (but watch out for a fee for the service) or having a small cushion in your checking account, just in case.

Moving your money away from the Black Hole of Checking is important. But ignoring the asteroids of unexpected banking fees headed your way could strip away any potential forward momentum you have to make with saving and getting your money to work for you.

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April 22, 2019

A Pocket Guide to Homeowners Insurance

A Pocket Guide to Homeowners Insurance

Homeowners insurance should bring peace of mind.

The right policy is there to help protect you if something happens to your home. Since a home may be the most significant investment many of us make in our lives, the proper homeowners insurance should be a major consideration.

Getting the right homeowners insurance is essential, but doesn’t have to be difficult. Still, how do you know if you’re selecting the right type of insurance policy for your house? Read on for answers to some common questions you might have.

What is the purpose of a homeowners insurance policy?
A homeowners insurance policy is a contract by which an insurance company agrees to pay for repairs or to replace your home or property if it is involved in a covered loss, such as a fire. A home insurance policy may also offer you liability protection in case someone is injured on your property and files a lawsuit.

Do I have to have homeowners insurance?
Your mortgage company will probably require a homeowners insurance policy. A lender wants to make sure their investment is protected should a catastrophe strike. The mortgage company would need you to insure your home for the cost to replace it if it were to be destroyed in a covered accident.

How do I know how much insurance to buy for my home?
The limit – or amount of insurance you place on your home – is determined by several factors. The construction of your home is typically going to be the largest determinant of the cost to replace it. So consider what your home is made of. Construction types include concrete block, masonry, and wood frame. Also, consider the size of your home.

Personal property is another consideration when determining how much insurance to purchase for your home. A typical homeowners insurance policy usually offers a personal property limit equal to half the replacement cost of your home. So if your home is insured for $100,000, your policy may automatically assign a personal property limit of $50,000.

What is the best deductible for a homeowners insurance policy?
When it comes to deductibles, consider selecting one that you can easily and quickly come up with out of pocket, just in case. Homeowners insurance policy deductibles may range from $500 to $10,000. Some policies offer percentage deductibles for certain damages, such as windstorm damage. For example, a coastal resident may have a windstorm deductible of two percent of the dwelling limit and a $1,000 deductible for all other perils.

There may be some cost savings features when you select a higher deductible on your homeowners insurance. Talk with a licensed insurance professional about your deductible options and premium savings.

Know the policy exclusions
All homeowners insurance policies typically contain exclusions for accidents and damages they don’t cover. For example, your policy likely does not cover damage to your home caused by an ongoing maintenance problem. Also, most homeowners insurance policies don’t automatically cover losses resulting from a flood.

Exclusions are important because they drive coverage. Talk to your insurance professional about your policy’s exclusions.

Know the basics and talk to a professional
As far as homeowners insurance policies are concerned, it’s crucial for homeowners to know the basics – limits, coverages, deductibles, and special exclusions. If you have specific concerns about your homeowners insurance, seek guidance from a licensed insurance professional.

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This article is for informational purposes only and is not intended to promote any certain products, plans, or strategies that may be available to you. Before taking out any loan or enacting a funding strategy, seek the advice of a licensed financial professional, realtor, accountant, and/or tax expert to discuss your options.

March 25, 2019

Credit unions: What you should know

Credit unions: What you should know

If you’ve always used the services of a traditional bank, you might not know the ins and outs of credit unions and if using one might be better for your financial situation.

Credit unions are generally known for their customer-focused operations and friendliness. But the main difference between a bank and a credit union is that a credit union is a nonprofit organization that you have to be a member of to participate in its services. Credit unions may offer higher interest rates and lower fees than banks, but banks may provide more services and a greater range of products.[i]

Read on for some basics about what you should know before you join one.

Protection and insurance
Just like banks, your accounts at a credit union should be insured. The National Credit Union Share Insurance Fund (NCUSIF) functions to protect consumer deposits if the credit union becomes insolvent. The fund protects up to $250,000 per customer in deposits.[ii] Be sure the credit union you select is backed by the NCUSIF.

What credit union is best for you?
Today there are many credit unions available. Many now offer 100 percent online banking so you may never need to visit a branch at all.

The most important feature in selecting a credit union is to make sure they meet your personal banking needs and criteria. Here are a few things to consider:

  • Does the credit union offer the products and services you want? Can you live without the ones they don’t?
  • Do they have competitive interest rates when compared to banks?
  • Are the digital and online banking features useful?
  • What are the fee schedules?
  • What are the credit union membership requirements? Do you qualify for membership?

Take your time and do some research. Credit unions vary in the services provided as well as the fees for such services.

What to expect when opening a credit union account
Each credit union may have slightly different requirements when opening an account, but in general, you will most likely need a few things:

Expect to complete an application and sign documents. When opening a credit union account, you will likely have to fill out some forms and sign other paperwork. If you don’t understand something you are asked to sign, make sure you get clarification. Be prepared to show identification. You will likely be asked to show at least two forms of identification when opening an account. Your credit union will also probably ask for your social security number, date of birth, and physical address. Be prepared to show proof of your personal information.

Make the required opening deposit. On the day you open your credit union account, you’ll likely be asked to make an opening deposit. Each credit union may have a different minimum deposit required to open the account. It could be up to $100 (or more), but call the credit union to make sure.

Unique benefits
Credit union accounts offer some unique advantages for members. You may enjoy more comfortable access to personal loans or even auto financing and mortgages. Credit unions may offer other perks such as fee waivers, as well as discounts on other products and services that come from being a member.

If participating in a customer-owned bank sounds interesting to you, a credit union may be a good option. There are more credit unions available today than ever. Do your research. You may find an option that compares to your current bank, but offers some greater benefits that will make it worth the switch.

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This article is for informational purposes only and is not intended to promote any certain products, plans, or strategies for saving and/or investing that may be available to you. Any examples used in this article are hypothetical. Before investing or enacting a savings or retirement strategy, seek the advice of a licensed financial professional, accountant, and/or tax expert to discuss your options.

[i] https://www.creditkarma.com/advice/i/difference-between-credit-union-and-bank/
[ii] https://www.ncua.gov/support-services/share-insurance-fund

February 4, 2019

Renter or Owner: What type of insurance do you need?

Renter or Owner: What type of insurance do you need?

Whether you’re renting or you own your home, there are various insurance options you may want to consider.

Like any insurance, they’ll help provide financial coverage in the event of an unexpected disaster. There are also varying levels of insurance that you may choose.

For Homeowners
There’s a general category known as “homeowner’s insurance”, which usually covers four categories: interior and exterior damage, damage to or loss of possessions on the property, and personal liability coverage that will help cover the cost of injuries sustained while on the property (such as if a guest slips and falls down the steps to the front door). The damages section of the policy usually won’t cover acts of war or nature, the latter including things like volcanic eruptions or floods. However, many policies will cover lodging and meals while the property is under construction and not able to be inhabited for the duration, such as if an exterior wall is destroyed by fire.

For geographical areas prone to certain disasters, a separate, specialized insurance policy may need to be purchased in order to cover damages or loss caused by such disasters. For example, for areas that are low-lying and near rivers where frequent heavy storms occur, general insurance may not cover damage to the property. Conversely, properties in mountainous areas are unlikely to need flood insurance but may need earthquake and/or landslide insurance if such events are more common there.

For Renters
While homeowner insurance will cover damage to the property – which is a major concern for those with a financial stake in the property – renter’s insurance usually covers damage to and loss of possessions, and also offers coverage for personal liability for injuries sustained on the property. The landlord likely has an insurance policy on the property to help protect against financial loss in the event of physical damage, but their insurance unlikely will extend to the tenant’s possessions or guests’ injuries. Thus, those who rent the property will need to consider insurance policies for these events.

Which Policies to Choose
As with any insurance policy, there may be deductibles, liability limits, covered and noncovered events and assets, and premiums. Generally the higher the limits and the broader the group of included incidents or assets, the higher the premium will be.

Some issues to consider:

  • If you choose a high deductible you may have a lower premium.
  • If you have guests over regularly, greater coverage for personal liability may be worthwhile.
  • If you travel often, an extension to protection may be a good idea. This is because many insurance policies may not cover theft or certain damages (like those arising from fire) for “vacant” homes, since these can be a greater risk when no one is living there for an extended period.
  • Many companies and policies may offer discounts to the premium if you have certain protections, like an alarm system, if you regularly perform maintenance, or opt for fire-retardant materials.
  • Some companies offer premium discounts if you have for example, both your car insurance and your renter’s or homeowener’s insurance with them.

The bottom line is that you should shop around for the best rates and coverage. Each individual will need to find the best fit. Make sure you have coverage for any specific circumstances that may be common in your area. And most importantly, make sure you thoroughly read and understand your policies, and the situations they cover, and don’t cover.

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December 3, 2018

Home Insurance: A Primer

Home Insurance: A Primer

A properly set up home insurance policy can be peace of mind.

Home insurance is designed to help you financially if something goes wrong with your home. It’s one of the most important insurance coverages you can have because it protects the very place that protects you.

Home insurance is a contract. Your policy lays out what it covers and what it doesn’t cover. It also includes your rights and responsibilities and those of your home insurance company. So how do you know if you have the right type of home insurance policy? How can you help ensure your home insurance will cover what you need it to cover? Read on to learn some basics.

What does a home insurance policy cover?
Basically, home insurance pays to repair or replace your home or property if it’s damaged in a covered loss, such as theft or fire. A proper home insurance policy also should offer liability protection if someone is injured on your property and then sues you.

Do you have to purchase homeowner’s insurance?
Homeowner’s insurance may be required if you have a mortgage. Your bank will want to make sure the asset is protected, so they’ll likely require you to purchase a homeowner’s policy. They’ll also want to see proof of coverage – sometimes called a binder or an Evidence of Insurance certificate. Such a document will list the insurance limit, deductible, and declare the bank as the mortgage holder.

How much insurance do you need on your home?
The limit for your home policy is based on the cost to replace your home – not the value of the home – and on several other factors. Considerations for replacement cost include:

Construction: The replacement cost of your home will depend greatly on the construction. Is it a wood frame? Masonry? Concrete block? What is the square footage? How about roof construction? All these construction features will help determine the replacement cost of your home.

Personal property: The policy limit for your personal property typically defaults to a percentage of the amount for which your home is covered. For example, if your home is insured for $100,000 and the percentage is 50%, the default personal property limit would be $50,000.

Bonus tip: Highly valuable personal property is excluded from typical homeowner policies. Special property such as antiques, fine art, or jewelry may be covered only up to a certain sublimit. If you have highly valuable property stored within your home, talk to your insurance professional about getting the proper coverage for these items.

Liability insurance: As stated, a basic home insurance policy should come with some liability coverage to protect you if you end up in a lawsuit. Such a suit may stem from someone getting injured on your property.

Bonus tip: Homeowners should have some extra liability protection. An “umbrella” liability policy can add more liability coverage in case you end up in a lawsuit.

What type of deductible should I select?
A typical homeowner policy deductible is between $500-$1,000 (this can vary by state).[i] But there are options for $5,000 all the way up to $100,000 deductibles. Some policies offer percentage deductibles where the deductible is counted as a percentage of the policy limit. For example, if your home is insured for $150,000 and you carry a 10% deductible, your out-of-pocket cost in the event of a claim would be $15,000.

Many homeowners opt for a high deductible to save on the cost of the policy. Bonus tip: Select the highest deductible you can afford. Just keep in mind that if you have a claim, you are responsible for paying the deductible. If the damage is less than the deductible, you will have to make the repairs without the help of insurance. Know your risks and select the right policy.

Home insurance policies don’t cover everything. They contain exclusions. For example, many homeowners policies don’t cover flood damage. Flood insurance must be purchased separately. If you live in a coastal area or near a large body of water, consider purchasing a flood insurance policy.

Bonus tip: Flood insurance has become more important for homeowners in recent years. Flooding can cause catastrophic damage and can also affect homeowners who are not in a so-called “flood zone”.

Knowledge is power. The more you know about homeowners insurance, the better prepared you’ll be if something goes wrong with your home. Get to know your policy’s limits, coverage, and deductibles, so you can help ensure you have the coverage you need, when you need it.

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Please consult with a qualified professional and read all of your homeowners insurance documents carefully. Make sure you understand your policy(s) and know what situations are covered or not covered.

[i] https://lendedu.com/blog/average-homeowners-insurance-deductible/

November 12, 2018

Starting a business? Here's what you need to know.

Starting a business? Here's what you need to know.

Starting your business requires making a myriad of decisions.

You’ll have to consider everything from a marketing budget to the theme of your website to how you’re going to arrange your office. But if you give careful consideration to the financial decisions concerning your business, you’ll start off on the right foot.

What is your business structure going to be?
Business structures have different tax and liability implications, so although there are only a few to choose from, make your selection carefully. You may consider:

Sole Proprietorship: A sole proprietorship is the simplest of business structures. It means there is no legal or tax difference between your personal finances and your business finances. This means you’re personally responsible for business debts and taxes.

Limited Liability Company: Under an LLC, profits and taxes are filed with the owners’ tax returns, but there is some liability protection in place.

Corporation: A corporation has its own tax entity separate from the owners. It requires special paperwork and filings to set up, and there are fees involved.

Do you need employees?
This may be a difficult decision to make at first. It will most likely depend on the performance of your business. If you are selling goods or a service and have only a few orders a day, it might not make sense to spend resources on employees yet.

However, if you’re planning a major launch, you may be flooded with orders immediately. In this case, you must be prepared with the proper staff.

If you’re starting small, consider hiring a part-time employee. As you grow you may wish to access freelance help through referrals or even an online service.

What are your startup costs?
Even the smallest of businesses have startup costs. You may need computer equipment, special materials, or legal advice. You may have to pay a security deposit on a rental space, secure utilities, and purchase equipment. Where you access the funds to start your business is a major financial decision.

Personal funds: You may have your own personal savings to start your business. Maybe you continue to work at your “day job” while you get your business off the ground. (Just be mindful of potential conflicts of interest.)

Grants or government loans: There are small business grants and loans available. You can access federal programs through the Small Business Administration. You may even consider a business loan from a friend or family member. Just make sure to protect the personal relationship! People first, money second.

Bank loans: Securing a traditional bank loan is also an option to cover your startup costs. Expect to go through an application process. You’ll also likely need to have some collateral.

Crowdfunding: Crowdfunding is a relatively new option for gathering startup funds for your business. You may want to launch an online campaign that gathers donations.

What’s your backup plan?
A good entrepreneur prepares for as many scenarios as possible – every business should have a backup plan. A backup plan may be something you go ahead and hammer out when you first create your business plan, or you might wait until you’ve gotten some momentum. Either way, it represents a financial decision, so it should be thought out carefully.

Develop a backup plan for every moving part of your business. What will you do if your sales projections aren’t near what you budgeted? What if you have a malfunction with your software? How will you continue operations if an employee quits without notice?

How much and what kind of insurance do you need?
Insurance may be one of the last things to come to mind when you’re launching your business, but going without it may be extremely risky.

Proper insurance can make the difference between staying in business when something goes wrong or shutting your doors if a problem arises.

At the very minimum, consider a Commercial General Liability Policy. It’s the most basic of commercial policies and can protect you from claims of property damage or injury.

Make your financial decisions carefully
Business owners have a lot to think about and many decisions to make – especially at the beginning. Make your financial decisions carefully, plan for the unexpected, insure yourself properly, and you’ll be off to a great start!

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This article is for informational purposes only. For tax or legal advice consult a qualified expert. Consider all of your options carefully.

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