1. Health Insurance
  2. Disability Insurance
  3. Life Insurance- Whole Life,Term, Universal Etc.
  4. Long-Term Planning
  5. Home Owners Insurance
  6. Automobile Insurance
  7. Umbrella Liability Insurance
  8. Evaluating the Strength of Insurance Companies



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Health Insurance 

The following power point video is an very inexpensive way to get basic long-term care coverage at minimized cost, and get your money back if you do not use long-term care coverage.

Use our 24 Hour Quote Preliminary Application and a qualified representative will contact you.


Individuals Download your form here


  Small Groups Download your form here


Please click here to download and complete this census so that we can get you quotes from multiple insurance companies and give you the best benefits for the most reasonable costs. 


Call us with Special Requests so you can incorporate them into our proposals.


Managed Care Health Plan

You can typically obtain managed health care through your employer, a group such as a chamber of commerce, or as an individual through one of three options: (1) A Health Maintenance Organization (HMO), (2) a Preferred Provider Organization (PPO), or (3) a Point of Service Plan (POS). If you have the option to select one of these plans consider the following factors:


a. Health Maintenance Organization (HMO)

An HMO is a defined group of doctors and hospitals. HMO's can offer lower prices than other insurers partly because they sign up doctors and hospitals on contracts that give them volume discounts ranging from 10% to 40% on doctor services and hospital stays. Bigger HMO's can get larger discounts than smaller ones can. To gain access to specialists or hospital services, most plans require you to have the recommendation of a gatekeeper physician. Fees for services range from nothing to $30 and there is no deductible. The doctors may practice in a clinic or hospital, or work in private offices. All types of medical care is covered. The HMO plan usually has the lowest monthly cost.


b. Preferred Providers Organizations (PPO)

A PPO is a network of physicians and hospitals that agree to provide medical care to employers at a discount. You can also get care outside the network. The plan will reimburse you 80% to 100% of the cost of services if you use a doctor or hospital that is part of the network, or 50% to 70% for a service provided outside the network. The plan has a reasonable annual deductible that you must meet before you are reimbursed. The annual deductible is higher for access to physicians or doctors outside the network. Preventive health care services may be covered. Generally you are not required to have the approval of a gatekeeper doctor to gain access to specialists and hospital services. 


c. Point of Service Organizations (POS)

A POS is a combination of an HMO and a PPO. The POS is a network of doctors and hospitals, but you can also opt for treatment outside the network. In either case, you must get the approval of a physician gatekeeper in order to access specialists and hospital services. You pay a flat fee from $15 to $35 for care within the network and you also pay an annual deductible. For care outside the network you pay between 20% and 50% of the charges. Preventive care is generally covered. 


d. How To Evaluate The Doctors Of A Managed Care Network

To evaluate the doctors of a managed care network, ask the following questions:

  • How many of the doctors are certified by one of the boards recognized by the American Board of Medical Specialists (ABMS)? You can verify the certification status of a particular doctor by calling the ABMS at 866-275-2267 (866-ASK-ABMS). The plan's Physician Directory should provide certification information. At least 70% of the doctors should have recognized certification.
  • Determine whether the plan verifies all the details on applications completed by doctors in order to join the network. Also find out whether the plan has obtained a copy of each doctor's file from the National Practitioner Data Bank that has information on disciplinary action and malpractice suits. Find out how many doctors are rejected upon applying. Look for a rejection rate of at least 8%.
  • After obtaining a copy of the plan's Physician Directory call a doctor you may know and have confidence in, and ask his opinion of the other doctors. 
  • Find out what percent of the doctors leave the plan annually. The average for PPO's is about 5%, while the average for HMO's is about 10%. Find out if there is an additional charge for continuing with a doctor who leaves until your treatment is completed. 
  • Select a plan where there are about an equal number of specialists and primary care physicians. If you think you will need a certain type of specialist make sure there is one on staff. If you want to select a specialist without prior approval, choose a plan that doesn't have a gatekeeper.
  • If you have a doctor who you like who is outside the plan network, ask him to apply to join the network or to reduce his fees to make up for the additional cost to you. 


f. How To Evaluate The Quality Of Care Rendered By Managed Care Providers


  • To evaluate the quality of care rendered by managed care providers, make sure the plan has the answer to the following questions. No answer is a good indication that no one cares. 
  • Find out how many unplanned surgeries were performed the prior year and the total number of surgeries performed. The percentage of unplanned surgeries will let you know whether the doctors are detecting problems before they become acute.
  • Find out how many patients had to be readmitted to the hospital after being out for no more than 30 days. This will let you know whether patients are being sent home too soon.
  • Find out how long it will take to get an appointment and how long you will have to sit in the waiting room before you are seen. 
  • Find out how much time the doctors will spend evaluating your condition.
  • Find out the average age of the participants in the plan. If you are approximately the same age, it is more likely that the services you need will be available.
  • Find out whether the HMO has opted to be accredited by the National Committee for Quality Assurance (NCQA). You can call the NCQA at 1-888-275-7585 and request a free Accreditation Status List. The report will show whether your HMO was accredited for three years, one year, provisionally, or whether it failed accreditation. Because the HMO must pay a hefty fee to go through the review process (approximately $40,000), some HMOs opt not to be reviewed. If your health care provider is a PPO, find out whether it has opted to be accredited by the American Accreditation Program.
  • Find out whether the plan takes a survey of plan participants regarding their satisfaction with the doctors and other aspects of plan services. Also determine if doctors receive an incentive if they get good patient reviews. A doctor that is incented for good patient reviews is more likely to focus on keeping patients happy.
  • Find out whether the organization promotes preventative care through reminders by mail or telephone. 
  • Find out whether the plan has a formal complaint policy and a board of medical examiners that review the complaints. Also find out how many complaints are resolved within one month of submission.
  • Be sure to thoroughly read the plan's coverage booklet. Find out whether the plan covers preexisting conditions, mental health care, and experimental treatments.
  • Be sure to find out whether your friends and family who already belong to the plan are satisfied. 
  • If you already belong to a managed care plan be sure to ask for a second opinion or a new doctor if you have trouble getting approval for expensive tests or procedures to be performed. If you are denied a special treatment, appeal the decision and get a written explanation detailing why the treatment was denied so you can contest it if you want to. Ask that your appeal be reviewed by another specialist in the same field who is qualified to review your case. If the treatment denied was recommended by your primary doctors, be sure to have the doctor provide all the necessary support for why the treatment is necessary. If hospital services are denied while you are admitted, complain to the managed care department, patient advocate, or social worker. If you still don't get satisfaction, be sure to complain to your employer. If you feel you absolutely need the treatment that has been denied, get the treatment from a non-network provider and fight about the coverage later. Be sure to ask the non-network provider to lower its bill in light of your situation. 
  • Find out if the organization is run by a medical society or a large group of physicians who are inclined to make decisions based on good medical practice rather than good business practice.


g. Other Health Insurance Strategies

  • If your health insurance has a maximum life time benefit, be sure it is at least $1,000,000.
  • Typically, health insurance costs are lower when you participate in group health insurance plans. Group health insurance plans may be employer sponsored or available through professional associations.
  • If your group insurance coverage is inadequate, look for other group coverage through a professional association or purchase supplemental coverage with benefits that are coordinated with your existing health policy. If your spouse has group insurance coverage, be sure you take advantage of it.
  • If you terminate employment where you are covered under a group health insurance program, your employer must provide you with the opportunity to have a continuation of coverage for 18 months after your date of termination. Generally, you are responsible for paying the premiums. To qualify for this benefit you must work for a company that has at least 20 employees.
  • If your termination is the result of a disability, your employer must allow you to purchase an additional 11 months of coverage for a total of 29 months. In addition, if you become covered under another employer's plan, your previous employer may discontinue your coverage only if the new plan fully covers any preexisting conditions you may have had. If the new plan has limitations on your preexisting condition, you will be covered by both the new and old plans.
  • Beneficiaries of an employee who reaches age 65 and qualifies for Medicare must be entitled to an additional 36 months of coverage from the date the employee turns 65.
  • If you cannot participate in group health insurance coverage, your only other option for coverage is through an individual health insurance plan. Consider the following points when purchasing individual health insurance coverage:
  1. Reduce health insurance premiums by having a high deductible and co- insurance ratio.
  2. Be sure health insurance coverage is guaranteed renewable. A guaranteed renewable policy will protect you from having the insurance terminated because of the number of claims filed, or because of deteriorating health
  3. Obtain coverage for college-age children and other dependents.
  4. If you cannot obtain individual coverage because you are considered a high risk, contact your state insurance commissioner to see if the state sponsors coverage for individuals in your circumstances.
  5. To reduce the cost of health insurance, participate in your employer sponsored Flexible Spending Account or Cafeteria Plan.
  6. If you and your spouse both have family medical coverage at your places of employment, before one of you cancel coverage with one employer, make sure the plan has provisions allowing you back on the plan if the spouse who retains coverage becomes unemployed. Some plans require you to apply to get back on the plan within 30 days of the time your spouse loses a job; many plans require you to take a medical exam to regain coverage. If you reapply having a preexisting condition, you could end up without coverage.
  7. If you work for a company with more than 50 employees within a 75 mile radius, you will be eligible for as much as 12 weeks of unpaid leave of absence following childbirth or adoption, to care for a seriously ill parent, child, or spouse, or to recuperate from your own illness or operation. Your employer will have to continue your health coverage during this time and guarantee your job or a similar one unless you are a key employee defined as the highest paid 10% of the employees. Certain tenure requirements, verification of illness, and advance notice apply.

h. Medicare


  • Medicare is a federally funded health insurance program for eligible individuals. The program is funded by a payroll tax. You are eligible if you are age 65 and you have contributed to the program for at least 40 quarters (10) years. Medicare coverage is divided into two parts: Part A and Part B. Part A covers hospital charges, blood, and skilled nursing, home care, home health care and hospice care after a hospital stay. For 2001 you are responsible for paying a deductible of $792 during your first 60 days in a hospital. During the next 30 days (61st through 90th) you must pay up to $198 a day. For the next 60 days (91st to 150th) known as your reserve days, you must pay up to $396 a day. After 150 days you are responsible for all hospital charges. The 60 reserve days can only be used once in a lifetime. Once they are used, you have to pay all hospital costs after the 90th day during your next hospital stay. If you are released from the hospital or a skilled nursing home and are readmitted after 60 days you will have to meet the same deductible and benefit period again.
  • To be eligible for skilled nursing home care you must meet four requirements: (1) The facility must be approved by Medicare, (2) your physician must prescribe that you receive skilled nursing care on a daily basis, (3) you must be admitted to a hospital for a least three days (including the day you leave the hospital) before you enter a skilled nursing home, and (4) after you leave the hospital you must be admitted to the skilled nursing home within 30 days for the same medical condition that you were originally hospitalized. If you meet these requirements, for 2001 Medicare will pay 100% of the charges for the first 20 days, and $99.00 a day the next 80 days (day 21 through 100). Beyond 100 days you are on your own. If you are released from a skilled nursing home and readmitted after 60 days, you obtain a new benefit period with Medicare paying 100% of the first 20 days, etc.
  • Medicare Part B covers doctor's fees, medical services rendered while you are in the hospital, outpatient medical services, outpatient hospital services, home health care, and blood. For these services in 2001, you pay an annual deductible of $150 and 20% of the Medicare approved charges including the cost of prescriptions and most shots that you can administer yourself.
  • To reduce your out-of-pocket costs use doctors who accept Medicare assignment. A doctor who accepts Medicare assignment will only charge you the amount Medicare agrees to pay. The maximum amount a doctor can charge you for a specific treatment is 115% of the Medicare approved amount.
  • If you are eligible for Medicare, it is usually advantageous to elect Medicare part A and B. Part A provides hospital coverage and part B provides medical insurance. Part B is optional and costs $ 96 per month for 2010. You can continue to work past age 65 and still remain eligible for Medicare benefits.
  • If you are over age 65 and you are ineligible for Medicare, you can purchase both part A and part B coverage for a monthly premium. Part A cost $ 500 per month for 2010 and part B costs $ 96.00 a month. You can continue to work past age 65 without it effecting your eligibility for Medicare benefits.
  • As an alternative to the fee-for-service Medicare system, consider enrolling in a Medicare HMO. HMOs contracting with the Medicare program must provide the same coverage offered by fee-for-service Medicare plans, but Medicare pays them on a monthly prepaid basis for each participant. The same, and often additional benefits, are offered by Medicare HMOs. Once you enroll in a plan, it may charge you a nominal monthly premium and copayment instead of the deductibles and coinsurance amounts you would pay to a fee-for-service provider. In most cases, if you join an HMO, you will not need Medigap insurance because the HMO covers the cost of all or most all of the medical services. However, if you leave the HMO and return to fee-for-service after having canceled or passed up the opportunity to obtain a Medigap policy, you may not be able to obtain a Medigap policy if your health has deteriorated. 
  • If you are eligible for Medicare, you can elect to establish a Medicare + Choice Medical Savings Account in lieu of receiving Medicare benefits. The Secretary of Health and Human Services will make contributions to your account. You can use the monies accumulated in Medicare+ Choice MSA to pay for you medical services from medical providers of your choice. IRC 138 and IRC 220(b)
  • For more information on Medicare, request the free Guide To Health Insurance For People With Medicare by calling 800-638-6833 and leaving your name and address.


i. Medigap Policies

  • If you are over age 65 and eligible for Medicare coverage, consider purchasing supplemental Medicare gap insurance (a Medigap Policy) that pays some or all of the cost of medical bills not covered by Medicare Part A and B (known as the gap in coverage). You are guaranteed Medigap coverage if you apply for coverage within 6 months of enrolling in Medicare Part B. Consider purchasing one of the 10 standard Medigap policies authorized by the National Association of Insurance Commissioners. The 10 policies are categorized with the letters A through J. Each policy provides different types of coverage. Select a policy based on the following: (1) Your particular health care needs, (2) the benefits provided under health insurance you currently own, (3) whether or not your doctor accepts Medicare assignment, and (4) the amount of money you have to allocate to insurance premiums or to the costs of non-covered medical expenses. Once you select a policy (A through J) compare its cost at several different insurance companies. Be sure to find out what the cost of the policy will be as you grow older. A more expensive policy with stable premiums may be cheaper than a policy that's less expensive now but becomes unaffordable as you age. For more information on Medigap policies, request the free Guide To Health Insurance For People With Medicare by calling 800-638-6833 and leaving your name and address.

The basic benefit included in all plans consist of hospitalization Part A coinsurance plus coverage for 365 additional days after Medicare benefits end; medical expenses Part B coinsurance which is 20% of the Medicare approved expenses; and blood which consists of the first three pints used each year.

  • Try to purchase Medicare gap insurance through an employer plan, group, or association, such as the American Association of Retired Persons (AARP).


j. Medical Savings Accounts

Health Savings Accounts

  • If you are eligible for Medicare, you can elect to establish a Medicare + Choice Medical Savings Account in lieu of receiving Medicare benefits. The Secretary of Health and Human Services will make contributions to your account. You can use the monies accumulated in Medicare +Choice MSA to pay for your medical services from medical providers of your choice. IRC 138 and IRC 220(b)



Individuals Download your form here.

   Small Groups Download your form here



Disability Insurance

Use our 24 Hour Quote Preliminary Application and a qualified representative will contact you - Click here to view form

The probability that you will experience a disability that will last more than 90 days is statistically more likely than the probability of your premature death even at age 60.  For this reason, disability insurance coverage is of primary importance in your financial planning.  Your personal resources and your disability insurance policy should be able to replace at least 60 to 70 percent of your pre-disability income.  Disability insurance provides you monthly payments when you are unable to work because of illness or injury.

Short term disabilities can usually be covered by your emergency fund and savings, vacation or sick leave benefits, or in some cases, short-term disability coverage available from your employer.

Please click here for a helpful Disability Insurance Calculator.  


When considering the purchase of long term disability insurance, consider the following:

  • Annual renewable disability insurance is typically the least expensive way to purchase disability insurance.
  • A step rate or level premium disability insurance plan, purchased from a participating (dividend paying) insurance company, will also reduce the long-term costs of a disability policy.
  • Purchase a policy that is guaranteed renewable and non-cancellable.  With the guaranteed renewable option you have the right to renew the policy annually, regardless of your current health, up to a maximum age, generally age 65.  With a non-cancellable option, if you pay the premiums, the insurance company cannot cancel or modify the provisions of the policy although they can increase the premiums for an entire group of policy holders.  Many companies are charging extra for the non-cancellable option.
  • Purchase a policy that provides guaranteed  future insurability.  This feature allows you to increase your benefit without proving evidence of insurability.
  • Disability insurance should cover both sickness and accident.  Choose a policy that covers sicknesses when first manifested and not first contracted.  An illness may not manifest itself until after you purchased the policy although it may have been contracted before you purchased the policy.  Also select a policy that pays benefits if you lose your vision or the use of your arms or legs.  Avoid contracts that require the severance of your limbs.
  • A good disability policy will cover you in the event you cannot perform the usual and customary duties of your own occupation.  A more restrictive policy, and less expensive, will only pay benefits if you cannot perform the duties of any occupation to which you are reasonably suited by education, training or experience. 
  • The disability policy should also have a provision to pay a residual disability benefit.  This coverage is payable if you can only return to work part-time. 
  • If possible, obtain a policy that will pay benefits for your lifetime or at least until age 65.
  • Reduce the cost of disability insurance by selecting a long waiting period between the time the disability occurs and the time payment of the benefit begins.  Be sure you have enough money to survive the waiting period.  Usually a 90 day waiting period or longer will create a dramatic reduction in disability premiums.  Waiting periods are typically 30, 60, 90, 180, or 365 days.  The policy should have a provision for recurrent disabilities.  This provision provides that if you return to work after being disabled for some time period and then become disabled again by the same condition, a new waiting period is not triggered.
  • Premium costs for disability insurance may be discounted for non-smokers and good health.
  • The insurer should be willing to waive your premiums during any period of time that you are disabled and receiving a disability benefit.
  • The policy should provide an option to increase your benefits to reflect an increase in the cost of living (inflation indexing).  Some policies place a ceiling on the amount the coverage can increase.  This ceiling is usually two or three times the basic coverage.  Find out what the ceiling is before you pay for this additional benefit.
  • The policy should pay for physical and occupational rehabilitation costs.
  • A waiver of premium provision that allows the annual premium to be waived until 60 day after complete recovery.


Consider purchasing a policy that pays a benefit for partial disability.

  • If you have more than one source of coverage, ascertain whether there is a coordination of benefits provision.  With a coordination of benefits provision, the benefits paid under one policy will be reduced by the benefits paid under another.
  • Your disability insurance benefit should not be reduced by any Social Security disability benefits you may be entitled to if you are permanently disabled.
  • If you are on a tight budget consider a step-rate plan where premiums start off low for several years then increase to the normal level.
  • When considering the purchase of disability insurance, ask the agent to provide you with the company's history regarding the payment of disability claims.  Ask to see the payment of claims ratio.  A low ratio of 80 percent or less may indicate that the insurance company is too restrictive in the payment of claims.  The claims information is presented in the Argus Chart.  A good agent will be pleased to provide you the information.
  • Determine the financial stability of the insurance company before you purchase a policy.  Depending on your age, the policy may be in force for 20 to 40 years.  Select a company that has top ratings from three of the five rating companies, and that will not likely be a candidate for acquisition or merger with another company.  Mutual companies have a better chance of avoiding a merger. (See: How To Evaluate The Strength Of An Insurance Company).  In addition, select a company that writes little or no group health or disability insurance where AIDS claims and other underwriting weaknesses could result in higher future rates or company financial weakness.
  • If you are a partner or an owner of a closely held corporation, consider funding a buy-sell agreement with disability insurance in the event of your disability.  Under this arrangement, the company generally would pay the premiums for the coverage.  Upon your disability you would receive payments in exchange for your ownership in the enterprise.
  • If you are an owner of a business and you have an employee that is indispensable to your business, consider purchasing a Key Employee Disability policy.  If your key employee becomes disabled you will receive a monthly payment to cover expenses for additional help or to replace lost profits.  Benefits are generally paid for a period no longer than 24 months.
  • If you are a business owner, consider the purchase of business overhead expense insurance.  This insurance covers business expenses such as rent, salaries, utilities, lease payments, insurance premiums, and other obligations should your income cease as a result of your disability. 
  • Your disability benefits will be received tax-free to the extent you paid the premiums.
  • Long-term disability insurance can be purchased less expensively if it is group coverage.  Request that your employer offer group disability insurance, provided there are other employees who will participate.


Life Insurance - Whole Life,Term, Universal Etc.

Life insurance is designed to replace the income earning capabilities of a provider in the event of his or her untimely death. 

Use our 24 Hour Quote Preliminary Application and a qualified representative will contact you.  Click here for an interative calculator to find out how much life insurance you may need.


How Much Life Insurance Do You Need?

  • If you are single and have no dependents, there is generally no need to buy life insurance except to cover burial costs, final expenses, and unsecured debts.
  • Generally, do not insure children unless the life insurance is incidental to your medical insurance coverage at no additional cost.
  • Ask your financial advisor to calculate whether your life insurance coverage is appropriate, too low, or too high.  This calculation of how much life insurance you need is commonly called a Capital Needs Analysis.  Have your advisor consider the following factors in making this determination:
  1. The present value of the annual living expenses of your survivors, exclusive of nonrecurring debts and income taxe
  2. The life expectancy of your surviving spouse or the expected period of support for other dependents
  3. The present value of the financial needs of extended family members you may be responsible for (e.g. parents, handicapped children, and siblings)
  4. The amount of your outstanding debts
  5. The present value of college education and job training for your survivors
  6. Burial expenses, probate, administrative costs, death taxes, and  generation skipping taxes.
  7. The present value of the after-tax earned income of your survivors and the period of years it will be earned
  8. The present value of your pension benefits payable to your survivors
  9. The present value of your survivor's own pension benefits
  10. The present value of your survivor's social security benefits
  11. The present value of your investment portfolio
  12. The present value of personal assets that could be liquidated for the living expenses of your survivors (e.g., automobiles, personal residence, etc.)
  13. The present value of a future inheritance to be received by your survivors
  14. The value of your current life insurance coverage
  15. The estimated average annual inflation rate over the remaining life of your survivors.  Consider a rate of at least 4 percent.
  16. The estimated tax bracket of your survivor
  17. The before-tax rate of return your survivors can earn on their investments


  • Based on the factors above, determine whether coverage is needed on the life of your spouse as well.  Don't overlook the economic value of a spouse who is a homemaker or breadwinner.

Term Life Insurance

  • Term insurance is the least expensive form of life insurance if you believe your life insurance needs will disappear after your dependents have left home or after you have retired.  There are three types of term insurance policies available: (1) Annual Renewal Term (ART), (2) Level Term Insurance, and (3) Decreasing Term Insurance.
  • Annual renewable term typically provides a level amount of life insurance coverage.  It is usually the lease expensive form of life insurance coverage.  The cost increases annually.  The policy automatically renews each year when the premiums are paid.
  • Purchase annual renewable term (ART) insurance that is guaranteed renewable until you are at least age 65.  A policy is guaranteed renewable if it can be renewed regardless of your health.  ART policy premiums may increase annually.
  • Level Term insurance is designed to allow the life insurance coverage and premiums to remain level for a specified period of time, usually 3, 5, 10, 15 or 20 years.  Over long periods of time, the cumulative cost of level term insurance is generally less than the cumulative cost of ART.  To be sure that the premiums remain level during the period of years,  purchase a policy that is fully guaranteed. 
  • Level term insurance will be more expensive than ART if the coverage is dropped within the first few years.
  • Do not purchase a policy that requires re-entry in order to renew the policy term at favorable rates.  To re-enter you must pass a physical examination.  If you don't pass, the premiums will escalate.  Most level term policies can be renewed at a level premium until age 65 at which time rates will increase annually.
  • When comparing the cost of various ART and/or level premium term policies having the same benefit, select the policy with the lowest discounted present value premium amount.  Ask your financial planner to calculate this figure for you.
  • To determine which level term policy will have the lowest renewal premium over the next holding period, ask your agent for the policy's 10-year net payment cost index.  The policy with the lowest index may be your better buy.
  • Cash value policies are generally less expensive than term policies if the holding period is greater than 15 years.  If you are age 50 and you have a continued need for life insurance you should consider converting your existing term insurance into a cash value policy.  At about age 50 cash value policies can be less expensive than term insurance over the remainder of your life.  One major positive aspect to converting from term to a cash value policy is that most companies will not require you to pass a medical exam to be eligible for the permanent policy.
  • Buy enough insurance to meet your needs.  If the only way you can presently afford the needed coverage is through term insurance, then buy term.  If your financial situation changes and you can afford the higher premiums of level term or permanent cash value insurance, then make the switch.  Some term policies may be convertible to cash value policies.
  • Decreasing term insurance coverage decreases annually while the premium remains level.  It is typically the most expensive form of insurance coverage and should be avoided.

Cash Value Life Insurance

  • With cash value life insurance a portion of each premium payment is set aside in a cash account that earns income.  Cash-value policies can be used as a forced savings tool if you have trouble saving money on a monthly basis.  Your checking or savings account can be automatically debited for the monthly premium.
  • You may borrow the cash value in permanent policies without triggering tax on the accumulated earnings.  To qualify for tax-free borrowing, premiums must have been paid over a period of no less than seven years.  If you have a lump-sum with which to make the premium payments consider purchasing an immediate seven- year annuity that will cover the future premiums.  The interest the annuity earns will be taxable over the seven-year period using the favorable annuity income tax rules.  IRC 7702A
  • Consider transferring the cash values of poor performing life insurance policies to a newer more competitive policy, to a tax deferred annuity, or another investment having a higher yield.

If you will have a permanent life insurance need consider the purchase of the following permanent or cash value policies.

Whole Life Insurance

  • With a Whole Life policy you generally pay a fixed premium over the life of the policy.  The younger you are when the policy is purchased the lower the premiums.  A portion of each premium covers the cost of insurance and a portion is allocated to a savings component known as the cash value.  Income accumulated as a part of the cash value isn't taxed until the policy is surrendered.  You can borrow your cash values at a favorable interest rate without triggering taxation of the accumulated earning, or the cash values can be remitted to the insurance company to purchase additional paid-up insurance. Some policies add a portion of the cash value to the death benefit.

Universal Life Insurance

  • Universal life insurance is a very flexible policy that allows you to periodically adjust the premiums and level of life insurance coverage.  The policy consists of both term insurance and a cash-value savings fund.  As long as the policy has enough cash value to cover the cost of the term insurance you can choose the amount of the premiums and when you will pay them.  You can withdraw a portion of your cash value or you can borrow against it.  However, as a good rule of thumb, never borrow more than 95% of the cash surrender value, as the remaining 5% is used to cover ongoing mortality and operating expenses.  As with whole life insurance, income accumulated in the cash value fund is not taxed until it is withdrawn.  Universal life policies can be purchased to pay both the cash value and the face amount of the policy or to pay just the face amount.  The premiums on the latter will be lower.

Single Premium Whole Life

  • With a Single Premium Whole Life policy you make one premium payment, almost all of which become the cash value of the policy.  The death benefits are much lower than a regular whole life policy because the emphasis is on increasing tax-deferred cash values.  Cash values generally grow at variable interest rates.  This type of policy is designed for individuals over age 59 who seek tax-deferred growth and tax-free death benefits.
  • If you are currently uninsurable due to poor health, keep your existing cash value insurance.  However, you may want to consider borrowing against the cash value and invest the money elsewhere at a rate higher than the rate you will be charged on the loan.

Group and Supplemental Life Insurance

  • Take advantage of group life insurance plans provided by your employer and  professional associations.

Group life insurance is often less expensive than other forms of life insurance coverage.  However, additional or supplemental life insurance purchased through your employer for which you pay the entire cost is often more expensive than if you purchased a policy on your own.  The reason: Supplemental Life is often more expensive because most supplemental policies do not require a physical, they guarantee insurability, and make no distinction between healthy and unhealthy applicants.  The healthy end up paying for the unhealthy who die earlier.

Joint and Survivor Life Insurance

  • Consider the purchase of a joint and survivor life insurance policy.  This type of policy pays a death benefit upon the death of the second spouse. Because the death benefit is not paid until the last spouse dies, the premium is generally lower than if the policy had been taken out on either spouse individually.
  • Consider a joint and survivorship policy to fund the payment of estate taxes due upon the death of the last spouse.
  • Almost all survivorship policies can be split if the spouses divorce.  However, avoid policies that force you to prove that you are re-insurable at the time the policy is split.  In addition, avoid policies that impose a penalty for splitting the policy.
  • Avoid policies that have term riders that make the policy sensitive to slight changes in interest rates and mortality charges.
  • Examine the effect the first death has on the premium payment schedule.
  • Because a Joint and Survivor policy may be in force for many years, you may want to consider a Variable Joint and Survivor policy that allows you to direct the investment of your cash values into mutual funds.  The two principal benefits of this option are the potential for higher investment returns which in turn means either lower premiums or higher death benefits, and protection from bankruptcy of the insurance company.  Bankruptcy protection is achieved because your cash values are invested outside the company in mutual funds.  If the company is seized by state regulators your cash values will still be available to you.
  • Consider using a Joint and Survivor policy as a way to ensure the lives of two key employees that would create cash flow problems for your company should they both pass away.

Split Dollar Life Insurance

  • If you are a closely held business owner, to minimize the cost of executive life insurance, consider a split dollar arrangement.  Under a split dollar plan both the employer and the employee share in the cost of the insurance according to a predetermined arrangement.  Upon the death of the executive, the corporation is reimbursed the premiums it paid and the balance of the death benefit is paid to the executive's beneficiaries.  Premium payments by the corporation are not deductible and they may result in taxable income to the executive.  The payment of the premiums can be split in the following ways:  Revenue Ruling 64-328
  • Paid 100 percent by the corporation
  • Split equally
  • The company pays the premium to the extent they match the annual increase in cash value.  The executive pays the balance.
  • Level premium payments by the employee for a period of years, with the corporation paying the difference.
  • Employee pays the premium up to the cost of term insurance for the same level of coverage.
  • Regardless of the split arrangement the employer can make an annual loan to the employee to cover his share of the cost with the proviso that the loan be repaid from the death benefits.  Alternatively, the corporation can pay a cash bonus to the employee to cover his share of the premium.  The bonus is deductible under IRC 162.  A split-dollar arrangement allows you to be flexible in choosing employees you cover and in selecting the dollar amount of coverage.
  • The IRS has announced interim guidance for equity split-dollar life insurance arrangements in IRS Notice 2001-10; 2001-05 IRB 1.  The notice states that the IRS will generally accept the parties' characterization of the employer's payments under a split-dollar arrangement as long as the characterization is consistent with the substance of the arrangement, has been followed consistently from inception, and fully accounts for all the economic benefits conferred on the employee.  The IRS will permit the employer's payments to be characterized as loans (with the requirement for adequately stated interest), without resulting in additional compensation income under IRC 7872 or property transferred to the employee under IRC  83 as compensation.  If the payments are not consistently treated as loans, the parties must fully account for the economic benefits, including the employer being treated as having acquired beneficial ownership of the life insurance contract, the employee recognizes compensation income under IRC  61 and 83.  In addition, the IRS has revoked Rev. Rul. 55-747 and will no longer accept the P.S. 58 rates.  This will impact so-called "reverse split-dollar" value of current life insurance protection, but taxpayers may use the P.S. 58 rates for tax years up to the end of 2001.  This is a complex notice, the implications of which are not fully apparent at the time of this update.  You should seek current guidance before establishing an equity split-dollar arrangement.

Buy-Sell Agreements Funded With Life Insurance

If you are the owner of a closely held business consider a buy-sell agreement funded with life insurance to ensure money is available for the purchase of the corporate stock from the decedent shareholder's family.

Stock-redemption Buy-Sell Agreement

Under a stock redemption buy-sell agreement the corporation is the owner, beneficiary, and the party that pays the premiums on the policies on the insured shareholder.  The agreement binds both the corporation and the decedent shareholder's family to buy and sell, respectively, the stock at a specified price.  This amount however, must reflect the fair market value of the company.  The life insurance proceeds are used to fund this transaction.  This type of agreement may trigger the Alternative Minimum Tax (for a C Corporation) and insurance proceeds may also be subject to the claim of creditors. IRC 2703

Cross-purchase Buy-Sell Agreement

Under this arrangement, the agreement to buy-sell shares is between shareholders.  Shareholders purchase insurance on each other.  When a shareholder dies the surviving shareholder(s) receive life insurance proceeds which are used to purchase stock from the decedent's family at a fixed prearranged amount.  This amount however, must reflect the fair market value of the company.  This arrangement is easy to establish when there are less than four shareholders.  A cross-purchase buy-sell agreement provides the new owner with a higher tax cost than is available through a stock-redemption agreement.  IRC 2703

Tax Consequences of Corporate Owned Life Insurance

Life insurance death benefits and increase in cash value are generally tax-free.  However, as a result of the Corporate Alternative Minimum Tax (AMT) these benefits may be taxable.  To avoid the AMT on corporate owned life insurance consider the following:

  • Convert to S corporation status.  S corporations are not subject to the AMT.
  • Use a cross-purchase buy-sell agreement instead of a stock redemption agreement.  Life insurance used to fund cross-purchase agreements is owned directly by shareholders and not the corporation as is the case with a stock redemption agreement.  As a result, it is not subject to the AMT.
  • If the corporation needs both key-man insurance and resources to fund a stock buyout, the AMT can be minimized if separate insurance is purchased.  The key-man insurance would be owned by the corporation and would be subject to the AMT.  The insurance to fund the stock buyout would be owned by the individual shareholders and would not be subject to the AMT.
  • Set up corporate owned life insurance to pay death benefits in annual installments rather than in one lump sum.  In conjunction with proper overall AMT planning, the AMT will not be triggered.
  • If the previous planning ideas are not used, the corporation can plan for the payment of the AMT by purchasing additional life insurance to cover the tax.  Alternatively, profitable corporations will be able to reduce their future regular tax by claiming a tax credit for the AMT paid on the death benefit.  The AMT, then becomes a matter of timing cash flows.

Evaluating Life Insurance Illustrations

  • Be wary of illustrations and proposals for the sale of life insurance.  Be sure the interest rate and/or dividend assumptions on cash value insurance are reasonable.  Insist on a conservative illustration that uses an interest or dividend rate no greater than the rate on a five-year CD as published in the Wall Street Journal.
  • Review the cost of insurance assumptions for gimmicks or tricks.  Are expenses and mortality charges projected to be lower than what they presently are?  If so, why?  On the other hand, be wary of guaranteed mortality charges that are 30 percent higher that those used in the illustration.  The company may increase the mortality charge to the guaranteed rate which means more premium dollars will be used to pay for insurance and less will go to cash values.  Ask to review the policy illustrations prepared five to ten years ago, then inquire how the policies actually performed.
  • Don't shop for policies based on illustrated values alone.  Be sure you are fully aware of all of the features and benefits.  You may prefer a more expensive policy with all the bells and whistles. 
  • Universal life and whole life insurance is often illustrated and sold based on the concept of vanishing premiums.  A vanishing premium policy is one where premiums are paid for a period of years after which the policy generates enough income to become self-sustaining.  A self-sustaining policy allows the policy holder to stop making premium payments.  Be aware of best case interest or dividend rate assumptions that are used in vanishing premium illustrations.  Ask that the illustration be presented with conservative rates.  If the policy does not live up to the investment rate assumptions, the initial payments may not be sufficient to cover the on-going premiums.  As a result, the policy may self- destruct or lapse, or you may have to make additional premium payments to keep it in force.
  • Find out the company's current interest rate, the guaranteed rate and the assumed rate used in the illustration.
  • Determine the method for crediting earnings to your policy.  Do all policies earn the same amount based upon the amount the company earns on its portfolio?
  • Are all policies sold in a given year grouped and credited with earnings based upon prevailing yields?  This method permits an insurance company to show illustrations based on the current year's higher yield without diluting it by the company's lower overall portfolio yield.
  • Be wary of Interest Rate Bonus Illustrations.  Frequently cash-value projections show a one percent interest rate bonus for policies held 10 years or more.  Often this bonus is not guaranteed and its inclusion in the projection can dramatically distort projected cash values.  If there is to be a bonus, be sure to get the guarantee in writing.
  • If you own a vanishing premium policy, annually compare the cash values shown on the most recent annual policy statement with the cash values shown on the projection when you purchased the policy.  If your actual values are lower than the projected, ask questions.  For a clearer picture, periodically ask your agent for an in-force illustration.  An in-force illustration is a projection showing how an existing policy will perform in the future based on current rates and other assumptions.  This exercise is particularly important when rates are falling.
  • Before you cancel a cash value policy, determine the projected rate of return (ROR) for the policy's cash value as shown on the in-force illustration.  The ROR calculation ignores the value of the death benefit and computes the interest rate on the cash values alone.  Don't forget that the income earned by the policy is tax deferred, and in many cases may end up being completely tax-free.

Other Life Insurance Strategies

  • If you own a closely held corporation or participate in a partnership, consider insuring the lives of key persons in the event that their untimely death would effect the profitability of the business.
  • If you are an owner of a closely held corporation, in lieu of purchasing group term insurance consider purchasing permanent insurance for company executives through an Executive Bonus Plan.  Under this arrangement the corporation pays the entire premium which is considered to be a taxable bonus to the executive and a deductible expense by the company.  Upon retirement the employee will own a policy that provides permanent coverage and may have a significant cash value.  An executive bonus plan allows you to be flexible in choosing employees you cover and in selecting the dollar amount of coverage.
  • Do not buy life insurance on a piece meal basis.  You will generally experience a reduction in premiums if you have one large policy rather than several small ones.
  • Because the life insurance industry is so competitive, you should shop and compare rates at least every three years in an attempt to reduce your life insurance premium.
  • It is generally not wise to buy credit life insurance because of the high premium.
  • It is generally wise to avoid the purchase of mortgage redemption insurance.  Consider increasing your individual life insurance coverage to reflect the outstanding debt.
  • Due to sales commissions, level term, whole life, and universal policies must be held for a long period of time in order to be cost effective.
  • When comparing the cost of policies issued by different companies ask the agents to quote premiums for both standard and preferred risks.  A standard risk premium is for the applicant who is basically healthy, whereas the preferred risk premium is for someone who has exceptionally good health.  The preferred risk premium is always lower.  Be sure you know the criteria used by the insurance company to be considered a preferred risk.
  • Obtain a least three proposals from three different (commissioned) agents who were recommended by other financial professionals before you purchase a policy.  Compare levels of coverage recommended, premiums, projected cash values, and recommended types of policies.  Finally, consider paying a fee-only consultant to evaluate the proposals for the best policy.


No Load (Commission) and Low Load Policies

  • When purchasing permanent cash-value life insurance consider purchasing a no- load or a low-load policy in order to minimize the cost of your insurance and maximize you cash values.  No-load  or low-load policies pay little or no sales commission which generally eat up the first year's premium and part of the second year's.  As a result, with a no-load or low-load policy most, if not all, of your first year's premium is allocated to the cash value.  In addition, no and low-load policies generally pay higher net investment returns because their annual expenses are lower.  The reason: there are no sales force recruiting or training costs associated with the policy.  In addition, if you decide to bail out of the policy within the first few years, you will walk away with a lot more than if you had bought a fully loaded policy.  A no-load policy is ideal for insuring a key- employee or funding a buy-sell agreement because the corporation can recoup most, if not all, of the premiums paid if the employee unexpectedly leaves or the business is dissolved.  For more information about no-load or low-load life insurance read the Individual Investor's Guide to Low-Load Insurance Products (International Publishing).
  • The following are a few of the major companies that offer no-load insurance products:  (1) Ameritus Direct (800-255-9678), (2) USAA Life Insurance Company (800-531-8000), and (3) Message Center (800-305-0135), and (4) GE Financial Service (800-874-5662).
  • Many insurance companies now offer low-load term and universal life policies but they don't promote them because their agents that sell them have to take a 50% to 75% cut in their commissions.  If you have a good relationship with a commissioned agent and you are comfortable with the strength of the company he represents, ask if you can acquire a low-load policy through him.


Long-Term Care

The following power point video is an very inexpensive way to get basic long-term care coverage at minimized cost, and get your money back if you do not use long-term care coverage.

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  Costs of Care in Your State


Long-term Health Care Insurance provides coverage for a long-term illness that results in a nursing home stay or in-home nursing care.  The average cost for a one-year stay in a nursing home is approximately $150,000 to $400,000 depending where you live in the United States.  If you are approaching retirement or you are currently retired, consider offsetting the costs of an extended nursing home stay by purchasing long-term health care insurance.  Long-term health care insurance is ideal if: (1) you have assets in the $200,000 to $1,000,000 range, (2) you want to preserve those assets for your children, and (3) you can free up about 2-5% of your annual income to cover the premiums.  Long-term health care insurance comes in two broad varieties: "Qualified" coverage, the cost of which may qualify as a medical deduction on schedule A of your tax return, and "non-qualified" coverage. Premiums you pay for qualified long-term care insurance are deductible as a medical expense subject to certain limitations.  A qualified long-term care policy must meet the provisions of Internal Revenue Code section 7702B.

Medical Services That Should Be Covered

  • Skilled, intermediate, and custodial levels of care.  Covered custodial care should be available in senior day-care centers and assisted-living facilities also known as congregated care centers.
  • Home care coverage.  Look for a policy provision that specifically covers home health care that meets state licensing requirements, if any.  The daily benefit should be at least 75% of the benefit payable for nursing home care.
  • Optional respite care. Option respite care is a short nursing home stay to allow families providing home care a short break.
  • Alzheimer's Disease and Senility.  Avoid contracts that only cover demonstrable organic illness.  Alzheimer's Disease can only be definitively proven with a brain biopsy.  Benefits should be payable based on a doctor's diagnosis.
  • A preexisting condition exclusion of six months or less.  This clause will ensure that you will be covered for conditions that take longer than six months to show up such as Alzheimer's.
  • Multiple stays in the hospital
  • Costs of care rendered after you return home to convalesce
  • Optional adult day care

Policy Features

  • The policy should not require you have to be hospitalized or have a skilled nursing home stay before paying intermediate, custodial, and/or home health care expenses.  A doctor's order should suffice.  In addition, the policy should not require that the facilities be licensed by your state if your state doesn't license custodial care facilities.  An acceptable policy restriction would require state licensing only where state law requires it.
  • A good Long Term Care policy will be guaranteed renewable.  This will prevent the insurance company from canceling your coverage due to the number of claims you file or due to your deteriorating health.  This does not mean that the insurance company cannot petition your state to increase the premium for all policies of the same type.
  • Benefits should be payable when you cannot perform two or three of the following activities known as activities-for-daily-living or ADL's: (1) eating, (2) toileting, (3) transferring, (4) bathing, (5) dressing, or (6) continence.  Be sure to understand how ADL's are defined by the policy.  For example, eating could be broadly defined to include intravenous feeding as opposed to a more narrow definition such as using a utensil. A good policy will pay benefits when you cannot perform ADL's whether the reason is a physical or cognitive impairment.  For example, it is possible to be able to perform all of the ADL's but not know when to perform them.
  • A long-term health care policy should waive the payment of premiums while  you are collecting benefits from the policy.
  • Purchase a policy having a restoration of benefits provision.  Under the provision, 100 percent of your benefits will typically be restored if you haven't received benefits for at least six months.
  • According to the Health Insurance Association of America ( , the leading Long-term Care policies covering one person cost an average of $ 1,645 at age 50,  $ 3,488 at age 65, and $ 10,480 at age 79.  The policy has a daily benefit of $ 200 for four years of coverage, with a 20-day waiting period, and some inflation protection.
  • Consider a policy that requires front-end underwriting where you are required to provide proof of your health before the issuance of the policy.  Companies that issue policies using back-end underwriting usually wait until after the first claim is presented before they scrutinize the application.  Errors and omissions in the contract can result in delays and denied claims.  Front-end underwriters generally have reduced costs and more stable premiums.
  • Pre-existing conditions that would preclude you from receiving benefits under the policy should only be considered if they existed six months before the effective date of the coverage.

Benefit Amount and Coverage Period

  • The insurer should allow you to choose the amount of daily benefit (coverage) you desire.  Daily benefits generally range from $100 to $ 400.  Alternatively, the company should allow you to choose levels of actual expense coverage for a given period.  Neither the daily benefit nor the actual expense coverage is superior over the other.
  • The insurance company should allow you to choose the length of time your long term care benefit should be payable.  A reasonable range of options should be from two years to lifetime.  Typically, the longer the benefit you choose, the more expensive the coverage will be.  In addition, the maximum benefit should be expressed in total dollars not days.  If a two-year policy pays $150 a day and you are only charged $100, at the end of the two years you coverage period will be extended.  Not so with a policy where maximum coverage is stated in days--after two years the policy will end.
  • The daily benefit (coverage) should be adjustable for inflation if you want to purchase such a benefit.  You can choose the rate at which the coverage will increase based on simple or compound interest adjustments.  A compound adjustment will result in a larger benefit over time.  Another approach is to buy additional coverage now to compensate for the effects of inflation over time.

Waiting Period

  • You should have a choice of waiting periods.  The waiting period is the time that must elapse before the insurance company begins to pay the claim.  Typically, the longer the waiting period the lower the cost of the coverage. Most waiting periods will range from 20 to 120 days.   However, because the chances of staying in a nursing home for more than 120 days is not as high as staying for shorter periods, it is generally better to opt for a shorter elimination period.  Because a shorter elimination period will result in a higher premium you may want to settle for a lower daily benefit to reduce your premium if cost is a major issue.
  • Avoid policies that measure waiting periods in consecutive or contiguous days.  This type of policy will cause you to wait longer before benefits are actually paid.  For example if you receive care only four days a week, you would use only eight days of the waiting period in two weeks instead of 14 days.

Qualified Long-term Care Insurance

Qualified long-term care insurance is any long-term care policy that meets the requirements of Internal Revenue Code section 7702B.  The policy premiums of a long-term care insurance policy that meets the requirements of section 7702B are deductible by the individual policy holder or employer, and benefits paid within certain limits are nontaxable.  To qualify for these benefits, a qualified long-term policy must meet the following requirements:

  • The policy can only provide necessary medical and personal care services which are required by a chronically ill individual.  A certified licensed health care provider must certify that (1) the individual is unable to perform, without substantial assistance, at least 2 activities of daily living for a period of at least 90 days, or (2) the individual requires substantial supervision to protect himself from threats to his health and safety due to severe cognitive impairment (such as Alzheimer's disease).  IRC 7702B(c)
  • Long-term care coverage is the only coverage that can be provided under the policy. IRC 7702B(b)(1)(A)
  • The policy cannot pay or reimburse certain amounts covered by Medicare including a deductible or coinsurance amount.  IRC 7702B(b)(1)(B)
  • The policy must be guaranteed renewable.  IRC 7702B(b)(1)(C)
  • The policy cannot provide for a cash surrender value that can be paid, assigned, pledged as collateral for a loan, or borrowed. IRC 7702B(b)(1)(D)
  • All refunds of premiums and all policy dividends are to be applied as a reduction in future premiums or to increase future benefits. IRC 7702B(b)(1)(E)
  • A policy with a level premium payment must offer a minimum non-forfeiture benefit in the event the policyholder defaults on his payments.  One of the following non-forfeiture benefits must be provided: (1) Reduced paid-up insurance, (2) extended term insurance, (3) shortened benefit period, or (4) some other similar benefit.   IRC 7702B(g)(4)
  • For 2009 qualified long-term care insurance premiums are deductible up to the following amounts based on your age at year end:

40 or less                              $320 for 2009
Over 40 but less than 50      $600
Over 50 but less than 60      $1,150
Over 60 but less than 70      $ 3,180
Over 70                                $3,980
                          IRC 213(d)(10)


Other Long-term Health Care Insurance Strategies

  • Find out which illnesses and services are excluded from coverage.
  • Long-term health care benefits should be paid in addition to any other insurance benefits you may be collecting, including Medicare benefits.
  • If your employer makes long-term care insurance available be sure that you can take the policy with you in the event you leave.
  • Determine the financial strength of the insurance company.  See: How to Evaluate the Strength of Your Insurance Company.
  • Prior to purchasing a long-term care policy, ask the insurance companies your are considering to provide you reports showing the percentage of  claims  they denied during the previous five years.  Steer clear of companies that can't  justify a high denial rate.  
  • As an alternative to long-term health care insurance, consider a continuing-care retirement community and other types of housing for senior citizens who can't quite manage on their own but don't need continuous nursing care.  These communities offer independent living and skilled nursing care, as well as assisted living to bridge the gap between the two.  You pay an entrance fee ranging from $25,000 to $250,000, and you're guaranteed access to nursing care.  In effect, the entry fee buys long-term care insurance.  Continuing-care communities vary widely in how much nursing care is provided in exchange for the initial fee. Study the contract carefully.
  • Periodically insurance companies upgrade their policies.  Ask how often they upgrade, whether you as an existing policy holder will be notified, whether you will be able to participate in the upgrade, and what the cost of upgrades, if any, is likely to be.  
  • Because of constant changes to long-term health care policies and national health care, be sure to reevaluate your policy ever two or three years.  Compare your policy to the most recent policy issued by the company and its competitors. 
  • Find out from your state insurance regulators whether the company has been approved to do business in the state where you live.  In addition, think twice about buying long-term care insurance from a company that hasn't been offering long-term care insurance for at least 8 years and that doesn't have assets of at least 10 billion.
  • Be sure to read the actual policy and not just the marketing materials.  By taking the time to read the policy you can ensure that the policy features promoted in the sales literature actually exist as you were made to believe.
  • For more information on Long-term health care policies, request a copy of A Shopper's Guide to Long-term Care Insurance by writing the National Association of Insurance Commissioners, 120 W. 12th Street, Suite 1100, Kansas City, MO 64105.
  • To obtain a copy of the Guide to Choosing a Nursing Home, write to Medicare Publications, Health Care Financing Administration, 6325 Security Boulevard, Baltimore, MD 21207


Home Owners Insurance

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  • Structural coverage should be equal to or greater than 80 percent of the value of your home.
  • Review your homeowners coverage at least annually to be sure that it is adequate and that the coverage has been adjusted  for appreciation.
  • Coverage on furniture, personal possessions, collectibles, jewelry, etc. should be equal to their replacement cost.
  • Purchase replacement cost coverage rather than actual cash value coverage.  Obtain replacement cost coverage on the home, furniture, and personal possessions.
  • Inventory all household articles by item, description, purchase date, cost, and appraised value, if any. Consider making a video recording or taking photographs of household articles and keeping them with the inventory.  The inventory and the video recording or photographs should be kept off-site in a safe deposit box or in some other safe location.
  • Purchase a personal articles floater to insure expensive personal items, such as collections and jewelry.
  • If you own a personal computer find out whether the policy covers damage to software and hardware caused by a power surge or software virus, and theft or damage to laptops and notebooks outside your home.  If the policy doesn't provide coverage you may be able to buy a rider that does.
  • Ask your agent to explain the details of your coverage and whether all covered items have to be included in your policy.
  • Do not purchase earthquake and flood insurance unless you are in a government- designated earthquake zone or flood plain.
  • If you are renting, purchase a tenant's policy.
  • If you own rental property, consider purchasing an owners, tenants and landlords policy.
  • Your premiums can be reduced by raising the deductible to $500 or more.
  • Consider liability coverage of at least $300,000.
  • If you own a condominium consider obtaining coverage to help cover your responsibility as a unit owner to pay some of the homeowner association deductible or uninsured loss incurred by the association and assessed to you as a unit owner.  The loss must be a result of a peril covered under the unit owner policy.  Carefully compare your personal insurance contract with those of the association to identify possible gaps in coverage.


Automobile Insurance






  • Review your automobile insurance at least annually.  When reviewing your coverage, consider the following ideas:
  • Liability limits should be at least $100,000 for one injury, $300,000 for all injuries, and $50,000 for property damage.   Be sure to carry uninsured motorist coverage unless you live in one of the few states that has no-fault insurance laws.  No-fault insurance states generally require your insurer to pay for your damages even if someone else caused the accident.  If you do live in a no-fault state you may have to buy personal injury protection (PIP).  This covers your medical bills and  a portion of lost wages if your are disabled in an accident.
  • Premiums can be reduced by raising the deductible limits on comprehensive and collision coverage.
  • Before you buy a new car, find out the cost of automobile insurance--it may cause you to want to buy a less expensive car or a different model.
  • Take advantage of auto insurance discounts. Discounts are given for the following reasons: (1) A good driving record, (2) the use of anti-theft equipment, (3) senior citizens, (4) successful completion of driver education and training courses, (5) multiple cars insured with the same insurer, (6) a nonsmoker, (7) a nondrinker, (8) participation in car pools, (9) the use of passive restraint devices, (10) college students, (11) low yearly mileage, and (12) students who are drivers and have good grades.
  • Do not carry additional insurance coverage, such as towing, car rental insurance, death and disability benefits, or wage loss substitutes. Purchase separate life and disability policies, if needed. Drop towing insurance if you belong to a club like AAA.
  • List children who drive as occasional drivers. This will help reduce premium costs.
  • Shop and compare auto insurance rates and coverage.  It pays off.
  • Before you drive faster than the posted speed limit, find out how much a speeding  ticket will increase your insurance premiums.
  • If you own motorcycles or snowmobiles used seasonally, obtain separate six or nine month insurance policies if it will reduce your insurance cost.
  • If you lease your car, the insurer may only pay replacement cost if the car is stolen or totaled.  Replacement cost may be thousands of dollars less than the unpaid lease amount.  Consider paying a one-time premium to fill this gap.


Umbrella Liability Insurance

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Umbrella Liability Insurance provides additional coverage when your personal liability coverage under an automobile and homeowners policy ends.  Adequate liability coverage will protect you from a legal judgment against your future income.  When purchasing Umbrella Liability Insurance, consider the following:

  • Purchase an amount at least equal to your net worth, and any additional legal costs for your defense.  Typically, umbrella liability insurance is purchased in one million dollar increments.
  • Coverage is usually coordinated with auto and homeowners coverage.  Therefore, it may only be available to you through your primary property and casualty insurer.  The annual premium for a one million-dollar policy should be less than $200.
  • If the policy stipulates that the cost of your legal defense will be subtracted from the face value of the policy, consider increasing your coverage.
  • Be sure that the policy has provisions for the coverage of children who are away at college and a provision for the payment of claims that arise from damages caused by your pets and animals.
  • Find out whether the policy requires disclosure of potential liabilities to the insurer.


Evaluating the Strength of Insurance Companies

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Obtain a safety rating from the following companies:

A. M. Best Company
                        Ambest Road
                        Oldwich, New Jersey 08858
                        (908) 439-2200
Top rating symbol: A++

Best ratings can be found in Best's Insurance Reports, a volume published annually and available in most libraries.  Ratings can be obtained over the phone for a nominal fee.  The cost to insurance companies to be rated A.M. Best is $500.

Standard & Poor's Corp.
                        25 Broadway
                        New York, NY  10004
                        (212) 208-1527
Top Rating symbol:  AAA

Ask your insurance agent for a photocopy of the rating report.  Ratings for up to five companies can be obtained over the phone at no charge.

Standard & Poor's also provides a Qualified Solvency Rating which focuses on companies most likely to face financial difficulties in the future.  Although the rating process is not as in depth as its claims paying rating, the rating will provide some comfort regarding financial strength.  The rating covers all insurance companies not just those who are willing to pay the steep fee associated with the claims paying rating.  The top solvency rating is BBBq, which implies above average security.

Moody's Investor Service. Inc.
                        99 Church
                        New York, NY  10007
                        (212) 553-0377
Top Rating symbol: Aaa

Ask your insurance agent for a photocopy of the rating report. Ratings for up to three companies can be obtained over the phone at no charge.

                        55 East Monroe Suite 3500
                        Chicago, IL  60603
                        (312) 368-3157
Top rating symbol:  AAA

Ask your insurance agent for a photocopy of the rating report.  Ratings for up to three companies can be obtained over the phone at no charge.

Weiss Research
                        2200 N. Florida Mango Road
                        West Palm Beach, FL  33409
                        (800) 289-9222
Top rating symbol:  A+

Weiss Research provides the following rating services:  (1) Personal Safety Report, an 18-page detailed safety report for $45, (2) Personal Safety Brief, a summary of the Personal Safety Report for $25, and (3) a verbal rating between A and F and the meaning of the rating.  Cost is $15 per company.

Evaluate the following financial ratios:

  • Total Capital to Invested Assets Ratio                      

The capital ratio should be 7% or more to absorb business or investment losses.

  • High-Risk Assets to Capital Ratio

The ratio should be less than 200 percent.  High-risk assets include non-investment grade bonds, mortgages overdue more than 90 days, mortgages in the process of being foreclosed, real estate acquired by foreclosure, and troubled real estate.  The higher this ratio, the greater the possibility the company's capital and its ability to pay claims will be jeopardized.

  • Non-investment Grade Bonds (Junk Bonds) to Capital Ratio

This ratio should not exceed 50 percent.
The ratios shown above can be found in the Insurance Regulatory Information System (IRIS) ratios published by the National Association of Insurance Commissioners.

  • Risk-Based Capital Ratio

This ratio measures how much capital an insurance company has to support the risk inherent in its investments and insurance activities.  The ratio is designed to act as an early warning signal to help regulators identify companies who might be in trouble.  The ratio also empowers regulators to take measures against the company.  The ratio is calculated by dividing a company's capital by a minimum amount that insurance regulators believe is needed to support its activities.  If the ratio falls below 125%, a state insurance department can request more information from the company.  If the ratio falls below 50%, the state regulators can take over the company, and if it falls below 25%, the state must take over the company.  Insurance companies are not allowed to use this ratio in their marketing materials.

Other steps for evaluating the company strength include:

(1) Review the company's statutory report, or 10-K, filed with the state insurance department; (2) find out if the state where you live has a state guarantee fund that guarantees the claims of defunct insurers.  Also investigate the strength of the guarantee fund; (3) determine whether the company has sufficient products to allow it to survive if one product is made obsolete due to tax or other legislative changes; (4) compare the turnover ratio of the sales force with that of other companies. A company that has a low turnover ratio generally has lower operating expenses; and (5) compare the persistency rate--how long the policy holders stay with the company, with that of other companies.  A high persistency rate of  60% or better means that the company is going to be more efficient and have a longer investment strategy that can endure declines in investment cycles.

  • Deal only with insurance companies that have an A++ rating from A. M. Best and a top rating from at least one other rating service.  Stay clear of any company that does not receive one of the top four grades of any rating service.
  • If the insurance company you do business with is in financial trouble consider the following before you take your cash:
  • Will you be subject to surrender penalties and taxes if you withdraw your funds?
  • If you own life insurance will you be able to qualify for coverage with another company?
  • If you own cash-value insurance consider taking out the accumulated cash through a policy loan.
  • If you are receiving monthly payments from a fixed annuity you generally cannot bail out.
  • If you wish to bail out of an insurance or annuity contract without triggering taxable income, consider an Internal Revenue Code section 1035 exchange.  After you provide the 1035 exchange form to the new insurance company they will arrange for the transfer of the funds.
  • If you receive cash upon surrendering your life insurance or annuity contract to a financially troubled insurance company that is subject to rehabilitation, conservatorship, or insolvency or similar state proceedings, you must reinvest or rollover the money in a single policy or contract of another company within 60 days.  Revenue Procedure 92-44
  • To make it less expensive for you to move from one insurance company to another, consider purchasing no load or low load commission life insurance.