Beginner's Guide to Insurance

The contributing factors for the cost of car insurance

2006-08-11T17:49:18Z

Not every car insurance is created equal. Some car insurances will cost some less 200 dollars every six months, while some will be well over a thousand dollars. There is not just one factor that breaks down this cost. There are five major areas that contribute to the cost of the premium for your car insurance. The first is the characteristics of the car. This includes the color, the type of engine, any special security devices, On-Star capability, and price of the car. The speed of a car caused by the type of engine may cause the insurance to go up, because a faster engine may lead to more accidents. The second category that factors into the cost of the car insurance is the coverage selected by the drive. As stated in an earlier question liability will generally cost less than full coverage because you are just covering the cost of someone else's car - not your own. Also within full coverage there are a lot of options that a person can take. With each one of these options the price of car insurance goes up.

The third area that factors into the premium for your car insurance is you. Car insurance companies look at age, gender, history of accident, grades while in school, and even whether you drink or not. All of these factors can push up or bring down the price of car insurance. The fourth area of car insurance pricing is how much the car will be driven. A car that sits to be driven only on the weekends may cost less, because the lack of driving means that it has a lower chance of getting in an accident. Car insurance companies keep records of yearly odometer checks to make sure that this is kept ethically. And the fifth factor of the price of car insurance is what you are already doing with that company. If you have home insurance through All State, then there is a chance that you may be able to take some money off your car insurance. Plus, almost every single car insurance has multi-driver discounts, which means that the more drivers in your home with insurance the more discounts you, can take off of each total price.

Cafeteria Plans Overview

2006-08-14T15:43:25Z

A cafeteria plan allows an employee to pay for certain employee benefits on a pre-tax rather than an after-tax basis. IRS Code Section 125 makes this option for employers and employees legal. The cafeteria plan is also known as Section 125 plan because of the section in the IRS code and they are also called flexible spending accounts. A cafeteria plan is a wise choice for an employee. By using pre-tax dollars to pay for medical and life insurance, sick leave and sometimes even disability benefits, you have lowered your tax base. Option benefits also include dental insurance, eye glasses, over-the-counter drugs and prescription drugs and elder care. A cafeteria plan doesn't include transportation, school tuitions or retirement benefits. This flexible compensation allows an employee to decide upon his/her own benefit package. You decide the amount of money you wish to allocate from your salary pre-tax to spend on expenses during a fiscal year. Employers have utilized cafeteria plans to refrain from providing expensive employee benefit plans to all employees. Employers have also introduced benefits such as dental care without increasing costs. There are several types of plans including a pre-tax conversion plan, multiple plans plus flexible spending accounts and employer credit cafeteria plans. The pre-tax conversion plan enables employees to be covered by contributory medical plans. Flexible accounts provide employees the ability to establish a medical flexible account. Employer credit cafeteria plans is a program where the employer contributes a number of credits that the employee can spend on employee benefit plans or contribute to a flexible spending account. Employees may choose low-cost medical plans and life insurance coverage without having to spend his/her own money. If the employee chooses a more expensive plan than provided by the employer, then he/she may make contributions under the pre-tax conversion feature.

General Guidelines

2006-08-14T15:46:15Z

If you choose to participate in a cafeteria plan, your employer cannot discriminate against you regardless of your income, share holdings or your spouse or dependent. The IRS has ruled that amounts cannot be carried over into subsequent years. If you have allocated $3,000 for medical expenses this year and you don't use all of that money, then you lose the money. The cafeteria plan cannot include long-term care insurance. The minimum contribution is $5.00 per paycheck which is $120 annually. If you are newly hired, you usually have 30 days in which to enroll. Payment is made to you only after payment has been made to the doctor or pharmacy and you have presented your receipts to your employer.

In Writing: Cafeteria plans must be in writing with certain provisions. It must include: a description of benefits, periods of coverage for each benefit, eligibility rules, provisions for contributions and the plan year.

Guidelines: Benefit allocations must be made prior to a period of coverage. The amount of money you decide to contribute cannot change unless there are certain changes made in the family status. The change in money must reflect the change in the family. You must estimate the costs you will incur during a plan year and then the money is taken from your salary and placed in your cafeteria plan allotment.

Benefits: Under some cafeteria plans, group life insurance, dependent care assistance, adoption assistance, vacation pay and cash may be a benefit. Scholarships, meals, lodging, long-term care insurance that is nontaxable and medical savings account are not provided as part of a cafeteria plan. If you elect to use a vacation day under the cafeteria plan, a participant can choose between additional vacation days or to cash it out. The benefits must be used before the end of the plan year. Cafeteria plans in some ways provides a means to partially exclude the government from your salary, legally! Cafeteria plans also can play children's day care expenses. Small business owners and their employees benefit from the cafeteria plan. It allows the owner to provide benefits that could otherwise not be available. The amount of money someone can save paying for medical expenses increases directly with the rate at which the person pays federal tax. There are also benefits to the employer. As employees reduce the amount that must be made to Social Security and Medicare, the taxes that must be made by the employer is reduced. If 12 employees elect to participate in a cafeteria plan and contribute $100 per month per employee, then the savings for the employer would exceed $1,100.

Repercussions: There a few negatives to a cafeteria plan. If you redirect your wages that would otherwise be taxed for Social Security, then you have slightly lower benefits at retirement. If you choose to use the daycare option, then the child care tax credit component of your income tax won't be available on your tax return. Once you decide to contribute to a cafeteria plan, you cannot change the amount unless there are emergency family situations. After deciding upon the amount, if you don't use it you lose it. Insurance premiums and childcare are easy to predict but out-of-the pocket medical expenses are harder to determine. The employer has some hassles with implementing cafeteria plans for it employees. There are administrative and bookkeeping concerns. The plans must be in writing, guidelines must be followed and plans must not be discriminatory. A tax return must be completed on the plan by the employer.

Types of Plans

2006-08-14T15:46:41Z

Medical Flexible Spending Account: This account allows participants to utilize the pre-tax money to pay for expenses that are not generally covered under your medical plan. Deductibles, co-insurance amounts (co-pays), and even cosmetic surgery can be paid through the cafeteria plan funds. The employee can be employer contributions or salary reduction amounts allocated by the employee. The money can be used to pay out of the pocket medical or dependent care expenses. The advantage to the flexible spending account allows you to pay for expenses you would be responsible for anyway with pre-taxed dollars instead of after-tax dollars. The coverage lasts 12 months except for a short plan year or it becomes defunct if the employee fails to make contributions. Proof of the expenses has to be provided before reimbursement occurs. Usually, a doctor's receipt is sufficient. A medical flexible account cannot be used to pay premiums for health insurance including health insurance that is provided by the employer or the spouse's employer.

Dependent Care Flexible Spending Accounts: The dependent care flexible accounts must be for qualifying persons. A dependent, a spouse who cannot care for him/herself or a dependent who was physically or mentally not able to care for him/herself and you claim as a dependent are considered qualifying people. You must also decide which route to take when claiming your children. The decision must be made if it is more beneficial to participate in the flexible spending account or to take the children care credit on your Federal Income Tax return. Your child is your dependent if the child is under 13. If he/she is over 13 then the child must depend on you for at least half of their support. They must spend at least eight hours a day in your household and is physically or mentally unable to care for themselves.

Premium Only Plans: This type of cafeteria plans can have their salary reduced pre-tax to pay medical premiums. Employers can ask the employees to contribute a portion of money to the premiums for health, disability or term life insurance policies. Since this money is easy to know at the beginning of a plan year, then the risk to the employee contributing too much money is not an issue. This plan is easy to implement and inexpensive.

Selecting an Insurance Agent Overview

2006-08-14T15:47:25Z

Choosing the best insurance agent to meet your needs can be a daunting experience. Comparison shopping between agents and policies may be time consuming but wise. An insurance agent sells and services policies. Agents usually specialize in a particular type of policies such as life or health. Sometimes you can purchase your insurance needs from one insurance broker, but other times you may need more than one. It is important you feel comfortable talking to your agent and that he/she understands your business or individual needs. If your needs are business related, make sure the agent understands the risks involved in your job. A commercial contractor or home builder would require different insurance needs than a manufacturer. Your insurance agent should be easy to reach by Internet or phone. The first step is deciding what kind of insurance you want from your agent. Do you need auto, home, life, health, disability, long-term care or other types of policies? One advantage to choosing one agent to handle all of needs is his/her ability to see your overall coverage and make sure there aren't gaps. If possible, identify 3 agents you want to talk to and work with before making your decision and purchasing policies. You will want to ask for references from people whose financial wisdom you respect. Ask that person about their insurance agent's overall job performance and the financial savings their agent provides. If you decide on an insurance company, then you can request names from them or you can get a listing on the company's website. Agents prepare reports, maintain records, seek out new clients and help policyholders wade through insurance claims. It is important to note that insurance agents are increasingly offering comprehensive financial planning services. These services include retirement planning, mutual funds, annuities and securities.

Tips

2006-08-14T15:48:20Z

It is important to inquire about the experience the agent has had with various types of policies. You need to know if the agent will personally handle your account or if someone else will have that responsibility. An insurance agent should have experience in assisting people in different situations. How long has the agent been in the business and has the agent worked with people who have similar needs as you. You need to know if the agent is a member of any special professional associations or if he/she has any type of special degrees.

Time & Options: A good insurance agent will ask you a lot of questions and will attempt to understand you and your family situations. If you have two policies with one agent and one policy with another, it is possible you many want to transfer all policies to the agent you feel more comfortable with. You should be offered options to consider, and a good agent won't pressure you. They should present you with options and let you make the final decision. It is crucial that your insurance sales agent maintain regular contact with clients to ensure needs are continuing to be met and updated depending on life changes.

One Agent/Advantages: If you use one agent to handle your needs, he/she can ensure you don't have gaps in your coverage. One agent can also tweak your policies as different needs arise in your family. By taking a personal interest in your account, your agent can address all of your needs. One agent can ensure your policies provide consistent coverage. If you have liability insurance for your car and the coverage is $100,000 and your homeowner's policy is $400,000, there shouldn't be such a discrepancy in policies. One provider can offer discounts for your premiums because you have been loyal to him/her and purchased multiple policies. Time is an issue in most people's lives. One provider is easier to contact and do business with if you have to file any claims. Your agent knows your coverage, needs and policies.

Different Providers/Advantages: If you use more than one provider, you can shop around for the lowest premium for a particular coverage. You can buy policies from companies that specialize in those policies. Policies offered by many providers give you many choices.

Services: An insurance agent sells policies such as property, casualty, life, health, disability and long-term care. Property and casualty agents sell policies that protect individuals and businesses from financial loss as a result of accidents, fire, theft, storms and other reasons for loss. They sell policies to pay beneficiaries when a policyholder dies. Life insurance agents all sell annuities for a retirement income. Health insurance agents sell policies that cover the costs of medical care. They sell dental insurance and short/long-term disability insurance. The sky is endless when it comes to choices of insurance policies. This is one reason why a competent insurance agent or agents is a must. They rely on referrals and word of mouth for new accounts so efficiency and competency is a must in the insurance business.

Technology: The technology age has revolutionized insurance companies. It has become fast and efficient to offer clients price quotes, processing applications and service requests are faster. Clients can do their own investigating online and then contact companies for information and agents.

Business Insurance: If you have a small business, you need to know what kind of insurance you require to protect your investment. Your agent should offer you property insurance to cover your business in case of loss due to vandalism, fire and other unforeseen crisis. You should also talk to your agent about liability insurance. Whether you have a small business or large firm, you must choose an agent or broker who understands your business needs. Your broker or agent must understand the type of insurance of coverage you need depending on the risk factor of the business.

Types of Agents

2006-08-14T15:48:48Z

All insurance agents must obtain a license in the state in which they sell policies. Separate licenses are required for agents to sell life, health, property and casualty insurance. There are state exams, pre-licensing courses and laws that must be followed.

Independent Agents: An independent agent handles different types of coverage from different companies. This agent generally has a greater knowledge of different types of insurance policies and their coverage. The independent agent networks with many firms and policies to offer you the best coverage to meet your needs.

Direct Writers: A direct writer represents one insurance firm. The agent can offer different policies such as auto, home, health and life. The commission you pay the agent should be lower because you are purchasing the insurance from the source.

Insurance Broker: An insurance broker negotiates with different insurers for different types of policies. You may have auto insurance from one company and home insurance from another, but you would only have one agent. An advantage to a broker is his/her representation and loyalty to you not an insurance company. A broker is very savvy and adept at dealing with many companies and business negotiations. A broker's fees will usually cost you more because you pay for the expertise.

Increasing competition among insurance companies has been a boost to clients. They provide accessibility 24 hours a day, 7 days a week. Customer service reps are being hired to assist with routine questions, processing claims and attempting to sell more products to clients. Pleasing the customer is crucial in the insurance business. Above all, you must feel at ease with your insurance agent. He/she should listen to you, ask about your needs and offer you policies you really need and can afford. Your agent should be flexible, confident, disciplined, hard working and have the ability to be a problem solver while keeping their cool.

Should I worry about getting in a car accident?

2006-10-05T21:26:33Z

Every year thousands of people are involved in traffic accidents. They can happen any time at any place.

Over 6.3 million police-reported motor vehicle crashes occurred in the United States in 1998. Almost one-third of these accidents resulted in injury. In 2001, nearly 42,000 people died on America's roadways. Clearly, accidents are a part of life in America.

Even if you've been fortunate enough to be wreck-free this far in your driving career, you never know what's going to happen. The most careful drivers and the most reckless ones can both find themselves in a fender-bender or a multi-car pileup. Car accidents are a part of life and it's important to know what to do if it happens to you.

What should I do if I'm in an accident?

2006-10-05T21:27:35Z

The Consumer Protection Association of America has made a big step in raising public awareness on what to do after being involved in an accident by designating the week before Memorial Day each year "National Driver Education Week." The Association has developed a list of suggestions to help drivers anticipate what they need to know about dealing with an accident.

Dr. Ray Bruce, president of the Consumer Protection Association of America said, "These tips can make a big difference in everything from protecting yourself and your passengers to ensuring that you won't be without a car while yours is in the shop."

The first step is to keep an emergency kit in your glove compartment or trunk. Chances are you already carry a cell phone, but you'll also need a working pen and some paper for taking notes. It also helps to have a disposable or digital camera to take photos of the vehicles at the scene, and a card with information about medical allergies or conditions that may require special attention if there are serious injuries. You should also keep a list of contact numbers for law enforcement agencies handy in your car or in your cell phone contact list. A set of cones, warning triangles or emergency flares should be kept in the trunk in your emergency kit.

Second, keep safety your first priority. Drivers involved in minor accidents with no serious injuries should move their cars to the side of the road and out of the way of oncoming traffic. Leaving cars parked in the middle of the road or in a busy intersection can result in additional accidents and injuries. If a car cannot be moved, drivers and passengers should remain in the cars with seatbelts fastened for everyone's safety until help arrives. Make sure to turn on hazard lights and set out cones, flares or warning triangles if possible.

Once everyone is safe, exchange information. It is important that you exchange your name, address, phone number, insurance company, policy number, driver license number and license plate number for the driver and the owner of each vehicle involved in the accident. If the driver's name is different from the name of the insured, establish what the relationship is and take down the name and address for each individual. Also make a written description of each car, including year, make, model and color -- and the exact location of the collision and how it happened. Finally, be polite but do not, do not, do not tell the other drivers or the police that the accident was your fault, even if you think it was.

After exchanging information, photograph and document the accident. Use your camera to document the damage to all the vehicles. Keep in mind that you want your photos to show the overall context of the accident so that you can make your case to a claims adjuster. If there were witnesses, try to get their contact information; they may be able to help you if the other drivers dispute your version of what happened. This is very important; use your camera phone if you have to.

The next step is filing an accident report. Although law enforcement officers in many locations may not respond to accidents unless there are injuries, drivers should file a state vehicle accident report, which is available at police stations and often on the Department of Motor Vehicles Web site as a downloadable file. A police report often helps insurance companies speed up the claims process.

When you get home, scour your insurance policy - although you should already know it. The whole insurance process will be easier following your accident if you know the details of your coverage. For example, don't wait until after an accident to find out that your policy doesn't automatically cover costs for towing or a replacement rental car. Generally, for only a dollar or two extra each month, you can add coverage for rental car reimbursement, which provides a rental car for little or no money while your car is in the repair shop or if it is stolen. Check your policy for specifics.

Who pays for the damages?

2006-10-05T21:27:59Z

If the accident was minor, you and the other drivers may decide to handle the damages yourselves without the involvement of an insurance company. But this isn't always the best idea for several reasons.

While the other driver may agree to pay for the damage to your car on the day of the accident, he may see the repair bills and decide it's too high. At this point, time has passed and your insurance company will have more difficulty piecing together the evidence if you file a claim.

Also, keep in mind that you have no way of knowing whether another driver will change his mind and report the accident to his insurance company. He may even claim injuries - such as whiplash - that weren't apparent at the scene of the accident and show up the next day. This means that your insurance company may end up paying him a hefty settlement or worse yet, you could be dragged into a lawsuit.

Make sure that your company has your version of what happened and check your policy -- if the damages paid out by your insurance company are below a certain amount, the accident may not be considered chargeable. And you will avoid the penalty of a premium hike.

What should my emergency kit contain?

2006-10-05T21:28:23Z

You can put a great emergency roadside kit together in a coffee can. Get a coffee can from home or work, clean it out, line it with a plastic bag from the grocery store and start putting your kit together. A #10 coffee can with a plastic lid is what is recommended. This coffee can kit will be able to get you out of most jams.

• One box cutter w/extra blades
• One can opener
• Two candles
• One cigarette lighter
• One compass
• One page of first aid instructions
• One notepad and a few pens
• Three matches
• Two plastic bags (1 kitchen/grocery-sized and one 30-gallon trash bag)
• One small sponge
• One sewing kit
• One hand towel (preferably a strainer cloth)
• One small roll of string
• One dust mask
• One Swiss Army pocket knife
• One roll of toilet paper
• One triangle bandage
• One pack of twisty ties
• One small roll of wire
• One small can of multi-oil
• One envelope with some extra cash and change

This kit isn't only good to have in car accidents; it's good for any roadside mishap that might come your way. It's a small piece of your truck to donate to get a large return in peace of mind.

Sources:
http://www.edmunds.com/ownership/driving/articles/43805/article.html
http://www.baproducts.com/coffecan.htm

Flexible Spending Accounts Overview

2006-10-05T21:28:51Z

If you work at a corporation you probably get paid a salary or work for hourly wages and get many benefits. Some of your benefits may include holidays, sick day, vacation, and health insurance. Many corporations take so much money out of each employee's paycheck to cover for many of those benefits. And when they do it is taken out after taxes in most cases. However, there accounts you can get into that offer a better way to get benefits and save on taxes to. This type of account would be flexible spending accounts. With flexible spending accounts (FSA) you can pay for your medical or dental expenses and other benefits on a pre-tax basis. This will also help you lower your tax burden as well. Just what types of benefits can you get with FSA? Here is a couple you will find available:

• Tax benefits: According to the IRS, certain benefits are tax exempt. They are classified by the IRS as qualified benefits. By having a FSA, you could pay for these qualified benefits with pre-tax dollars. Such benefits could include health coverage, medical expenses that are not covered by the health plan, any deductibles, and co-payments associated with the health plans. Dental and vision benefits can also be included.
• OTC (over-the-counter) drugs: After September, 2003, anyone who has a FSA can use pre-tax dollars to get OTC drugs. But their employer's FSA plan has to allow it. The only expenses that will be allowed would include treatments for personal injuries, sickness, buying cold medicines, antacids, and pain relievers. Buying vitamins and food supplements are not included.

What is a Flexible Spending Account (FSA) and how does it Work?

2006-10-05T21:31:24Z

If you have heard of a FSA but not sure what it is, a FSA is a flexible spending account. It is one type of cafeteria plan that was developed and authorized under Section 125 of the Internal Revenue Code. FSA allows employees to purchase certain benefits that they may normally get, but as a pre-tax basis. For more information about cafeteria plans you can go here: http://www.afscme.org/wrkplace/cafe.htm. Having an FSA can give you many benefits you normally would not get.

How does an FSA work? FSAs in three different ways. These ways include:

• Voluntary participation: Once a year employees can sign up for a FSA and have a certain amount of funds deducted from their gross pay. Once this plan is initiated, a certain prescribed amount will be taken out of the employee's paycheck each pay period.
• Employer's obligation: When the employee signs up for the plan, the employer must compensate the employee whenever a claim for reimbursement is initiated. An example of this would be if the employee was to designate $2000 per year (which equals about $167 a month), that employee would be able to get reimbursed up to $2000 in the first month the plan went into effect, if the employee has qualified reimbursable expenses.
• Salary reduction amount: As stated under voluntary participation, when the employee signs up, he/she will decide the amount he/she wants taken out of his paycheck for the health car benefit prior to the plan starting. If the employee decided to use the FSA plan only as a premium conversion plan, the deductions will be automatic. Once this plan goes into affect, it cannot be changed unless the employee has a change in family status.

Advantages and Disadvantages of Using Flexible Spending Accounts

2006-10-05T21:31:56Z

Having a FSA plan is good for the employee because it gives him/her the ability to have benefits he/she would not normally have. But there are advantages and disadvantages to having one. Here are some of the advantages:

• Pay expenses: Employees can use the plan to pay expenses that they normally would not have been able to pay with after tax dollars.
• Tax savings: Employees also enjoy a tax savings including their federal, state, and local income taxes. Plus employees do not have to pay Social Security or Medicare tax on the amount deducted.

Here are the disadvantages:

• Use the money or lose it: If the employee takes out this plan and has money stored in it at the end of the year, he/she will lose it. The money legally becomes the property of the employer.
• Pension: If the money coming out of the employee's paycheck is based on salary, the FSA plan will be reduced unless the employee evaluates the plan and makes revisions to avoid this problem. Any employee, who is near to retirement and has a FSA, can find it will have an affect on his pension, since the pension is based on an average salary that the employee received in the last number of years.
• Life insurance and disability: Life insurance and disability are usually based on salary. In this case the employer has to decide whether to deduct these types of benefits first before deducting the FSA.
• Workers Compensation: Regarding workers compensation and unemployment benefits, since these are based on the average salary or monthly wage of the worker, for those who earn above the maximum monthly wage, their benefits could be reduced.

How to Plan Your FSA

2006-10-05T21:32:24Z

When looking into signing up for an FSA plan, it would do you well to review carefully your personal and family medical needs. What if you don't need certain medical expenses? If this were the case, you would be wasting money, money that you would loose at the end of the year. What you do is take a check on the previous year's medical costs to see how you stand. If you see your expenses are not enough to defray the costs of starting an FSA, then don't get into one. However, if you see your medical expenses were high, and you anticipate your medical expenses to be just as high this year, you may need to consider setting up a FSA account.

Once you sign up for the plan, you cannot change it. The only way you could possibly change the plan is if you had some kind of life-changing event or family status change. Then you could change the plan accordingly.

Of course, this is not the only issue involved. There are more issues relating to FSAs. Here are some concerns people have regarding FSAs:

• Reimbursable expenses: When you are looking into an FSA you would want to know what a reimbursable expense is and where to find information on it. One place that has information about this is at http://www.asiflex.com/. They have information about what FSAs and what is reimbursable or not.
• Refund money: Another concern of employees is getting their money back if they can't use it. You can get your money back but you would have to fill out form and submit it to your employer. You would have to request this form from your employer.
• Maximum contribution: If you start a FSA plan, you can only contribute a maximum of $5000. If you find you need more than this, perhaps you should consider an alternative medical plan besides this one. Otherwise, you may have a problem covering your medical expenses if your expenses exceed $5000 for the year.
• Qualifying dependent: When employees sign up for the plan, they usually indicate who is going to be on this plan. The only person who can be included on this plan is someone who meets the qualification as set forth by the employer or plan provider. In most cases, the qualifying person would be your dependent who is under 13 years of age, your spouse (someone who is physically or mentally handicapped), and any dependent who is physically and mentally unable to care for him or herself, and you claim that person on your tax return.