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5 Ways Critical Illness Insurance Can Be a Financial Life Saver

It was a world-famous heart surgeon, Dr. Marius Barnard, who created critical illness insurance, as he saw how the financial stress that accompanied cancer, heart attack and stroke was killing his patients. This type of insurance typically gives you a lump-sum cash payment if you are diagnosed with one of the illnesses specified in your critical illness policy.

No matter how you’d use the money, critical illness insurance always does one thing: It reduces financial stress.

But one of the challenges of critical illness insurance is understanding the many ways you can use the benefit—the money paid out—if you ever need it. Here are some of the ways I have seen:

1. To pay for deductibles, co-pays and other out-of-pocket expenses related to health care. This is the most obvious use, especially as deductibles and out-of-pocket expenses for health insurance plans continue to increase.

2. Expenses not covered by health insurance like travel, hotels, babysitting, etc. I know a person who had a great health insurance plan. He was diagnosed with colon cancer. His doctor told him, “You need to go to MD Anderson.” Complicating the whole issue, he and his wife had just had a child. So, they took his father-in-law along to watch his son. He had to charge airfare, meals and the hotel costs to his credit card. Several years later, he was still paying off that credit card.

3. Income protection, especially for the self-employed. If a self-employed person has an income-protection plan, including disability insurance, it most likely will have a 90-day elimination period before benefits are paid. One self-employed person I know was diagnosed with cancer. She would take her chemo treatments on Fridays. Then she would use the weekend to recover and try to be back at work on Monday or Tuesday. She did not miss enough days from work to meet her elimination period. Did cancer impact her income? Significantly!

4. Mortgage protection. Many people purchase life insurance so that if anything happens to them, the family’s home will be paid off and the family will be able to stay in the home. But what’s more likely to happen while paying on a mortgage—death or a critical illness? Depending on age, you could be as much as four times more likely to suffer a critical illness while paying a mortgage than to die.

Typically, insurance that covers from two to five years of mortgage payments will help significantly through the transition. A great thought-provoking question is, “Would it reduce your financial stress if you are diagnosed with cancer to know your mortgage will be paid for two years?”

5. Retrofit a home or car. I had a woman tell me that her husband had had a stroke. The couple had to take out a second mortgage to make modifications to their home, including a wheelchair ramp, significant changes to their bathroom, and the widening of doorways to accommodate the wheelchair.

No matter how you’d use the money, critical illness insurance always does one thing: It reduces financial stress. There is always emotional stress for a family with a family member who has a critical illness. Emotional stress increases directly with financial stress. A critical illness plan reduces the financial stress, which then reduces emotional stress. If you’d like to learn more about this important coverage, contact your insurance agent or advisor.

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How to Avoid Trading in a Car with Negative Equity

A recent survey DealerRater conducted for Automotive News looked at the different ways car buyers deal with negative equity on their trade-ins. It found that the majority of consumers deal with this all-too-common situation in the worst possible way. 

Automotive News-DealerRater Survey

The Automotive News informal survey, conducted by DealerRater, looked at the most common actions that buyers take when trading in a car with negative equity ("negative equity" is when your car's value is less than the loan balance).

From May 5th to the 24th of this year, DealerRater interviewed 88,874 consumers who visited a dealership to shop or to have their car serviced. Of those, 46,700 respondents traded in their previous car when they bought or leased their most recent vehicle.

Over one third (37 percent) of those 46,700 respondents said they had negative equity in their trade-in. Here is how those buyers dealt with that situation:

  • 54 percent rolled their negative equity into their next loan or lease.
  • 21 percent "took some other action" (Automotive News did not specify what these other actions were).
  • 19 percent increased the amount of their down payments.
  • 6 percent opted to buy or lease a different vehicle than they had originally planned to.

Over half of the buyers polled rolled the debt into their next loan or lease. From a financial point of view, this is disappointing since this is the worst way to deal with this situation. Not only does it make your next loan or lease more expensive, it can put you in a debt spiral that's hard to escape.

Avoid Trading in a Car with Negative Equity at All Costs

Having negative equity is sometimes also referred to as being "underwater" or "upside down." Regardless of the word you use, negative equity is a growing problem with loan amounts rising and loan terms increasing.

Having negative equity isn't typically an issue if you plan to keep your car for a while and/or pay off the loan in full. It only becomes a problem when your vehicle is totaled, stolen, or you want to trade it in halfway through the loan term.

Let's look at an example of why being upside down can present an issue if you want to trade in your car. Say you have a balance of $12,000 left on your auto loan, but the vehicle is only worth $10,000. This means you have $2,000 worth of negative equity—and it isn't going to just disappear. Your options are to either deal with it now or deal with it later.

If you want to trade in your car, rolling the balance over into a new loan means paying on the new vehicle, plus the $2,000 from your last car. This means you're making payments on two cars at once, and your monthly payment and interest charges will be larger, as a result.

Worse yet, it typically means you'll be further upside down in the new loan. Rolling negative equity into a new loan just compounds your problem, which can create a debt cycle that can quickly spiral out of control.

For these reasons, every expert on the subject, including the team here at Auto Credit Express, will tell you that trading in a car with negative equity should always be viewed as a last resort option. This statement rings more true for those dealing with less than perfect credit, especially considering the higher than average interest rates these borrowers face.

Instead, it will be in your best interest to look at these alternatives:

  • Cover the negative equity out of pocket.
  • Find a new car with a big manufacturer rebate attached. If you don't have the cash to cover the difference out of pocket, this is a good alternative to explore.
  • Hold off on trading in your vehicle until you are no longer underwater or you have paid off the loan. Try making larger payments than your minimum amount to take care of this faster.
  • Try to sell the car yourself to get more than you would if you were to trade it in.

The Bottom Line

In an ideal world, you would always have equity in your vehicle so you could avoid this situation. Because negative equity is a common issue, however, it's best to figure out a way to avoid trading in a car when you are upside down in your loan. Buyers, especially those dealing with credit issues, should do whatever it takes to avoid this situation.

Another car buying roadblock can be your credit. Having bad credit or no credit can make it difficult to get approved for a car loan. Luckily, Auto Credit Express is here to try to make that process easier.

We connect car buyers to local special finance dealerships that know how to work with challenging credit situations. Our service is free of charge and obligation, so go ahead and get started by filling out our car loan request form right now.

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How to File an Insurance Claim After a Fire

Many households share one common fear: house fires. Aside from the danger associated with them, house fires put your personal belongings at serious risk. People without homeowners insurance can pay thousands of dollars just to replace the items lost in a fire, not to mention the damages done to the structure of the home itself.

Fortunately, if you’ve obtained a homeowners insurance policy before the incident occurs, you’ll be in much better shape. Paying for repairs after a fire or other disaster strikes out of pocket can cost an arm and a leg. If you have an adequate amount of home insurance coverage and are keeping up with your premium payments, any damage that was caused by a fire in your home should be covered.

Following these steps will make the claims process as painless as possible. Though you’ll want your home repaired and items replaced as soon as possible, patience is required if you want to maintain a positive relationship with your insurance company.

 

Before You File a Claim:

Go Shopping

When you were evacuating your home during a fire, you probably didn’t have time to grab much, if anything at all. You can ask for an advance payment from your homeowners insurance company to cover some essentials, like a toothbrush and toothpaste, deodorant and other hygiene products, and even clothes that you’d wear to work. Fortunately, your home insurer wants to be convenient, so you won’t need to file a claim before you buy these items. Instead, ask your insurer for an advance in the form of a check or wire transfer. Make sure you save your receipts and don’t spend above your (and your insurer’s) means, as you’ll need to pay the difference. In other words, when you’re buying a replacement suit to wear to work, head to Macy’s, not to Gucci.

 

Mitigate the Damages

As a homeowner with an insurance policy, it’s your duty to make sure that no extra harm comes upon the home. Do what you can to keep this bad situation from getting any worse. After the fire is extinguished, assess the damages and take steps to protect your home and belongings from an incident resulting from this destruction. If there’s a hole in the exterior wall, for example, board it up to keep vandals or thieves out. If your roof experiences damage from a fire, lay a tarp over the exposed section to prevent rain from creating water damage. Stay on top of things to make sure no new issues arise as a result of the fire damage.

 

Filing the Claim:

Call Your Insurer

Make your claim as soon as possible. Calling your insurer directly is the most proactive, effective way to do this. The insurance agent will ask you about details regarding the accident and its aftermath so the insurance company can get an accurate report. After you speak with an agent, you’ll be asked to submit a proof of loss claim, which details the items lost from the fire, along with their values. This might sound obvious, but the sooner you file the claim, the higher priority your claim will be and the faster the damages will be fixed. Once the claim is initially made, your insurer will bring on a claims representative, who will take a look at your policy, what it entails, your deductibles and any other useful information. Your claims representative will send you a detailed letter documenting this information. This process should take less than 30 days.

 

Be Assertive

After filing the claim, if you feel that your insurance company is taking their time in responding to your initial claim, don’t be afraid to call or write to them. If there’s no question about whether or not you’ll receive coverage from the damages to your home, your repairs should be started in a relatively timely manner. If you’re still feeling tossed aside, you might need to send a letter to your state’s Department of Insurance. This letter can even be a copy of the same email or letter you sent to your insurer. If your insurer is taking too long, the Department of Insurance will reach out to them. This should light a fire under your insurance company, figuratively speaking.

 

Come to a Settlement

If you disagree with your insurer’s analysis of your policy, you are entitled to respond to their initial statement. Just because your home insurer is the one covering the damages doesn’t mean you have no say. Try to come to an agreement on this claim. Once the settlement is reached, the claims representative will either make the payments immediately or decide to investigate further to make sure no fraud is occurring. If the representative wants to go with the latter step, your insurer will send an investigator to look at the damages on your home. If no fraud is detected, the cost estimates to repair or replace features of your home will be put in place by your insurance company.

 

Track Your Living Expenses

If you were forced to relocate from your home to either a friend’s house or a hotel, you might be making various out-of-pocket expenses that you otherwise wouldn’t have made. If your hotel room doesn’t have a kitchen, you might be getting takeout meals more frequently. If you normally pay $300 per week for groceries but spend $450 one week for primarily takeout meals, you should be reimbursed $150 that week from your insurance company. This comes from the loss of use clause, which entitles you to additional living expenses that you are making while living away from home during the claims and repair process. Under this clause, your insurer will most likely pay your motel or hotel bill. However, as with shopping for essentials on your insurer’s dollar, be reasonable with your spending and lodging choices.

 

Get a Repair Estimate

This is where the type of homeowners insurance you have comes into play. If you have an “actual cash value” policy, you will be reimbursed the amount of money these damages items are worth at the time of the fire. If you lose an outdated piece of technology, like an old TV or computer, you’ll receive the amount of cash the item is worth in the present, not what you bought it for. “Actual cash value” policies take objects’ depreciation into account. On the other hand, if you have a “replacement cost” policy, you will be reimbursed the amount of money it would take to replace the object. If you lose a laptop that you bought in 2011 with this sort of policy, you will receive the cost it takes to buy a brand new laptop, not the amount the exact laptop is worth in present day.

 

It’s Not Over Yet

When you filed the initial claim, you might have overlooked other damages. For that reason, leave the claim open with your insurer for a few months after the repairs have been completed. That way, if you come across an issue that emerged from the fire damage, you won’t need to pay a second deductible. Your insurance company will want to close the claim as soon as possible for this reason, but don’t hesitate to keep it open just in case.

 

This sounds like a long process. Unfortunately, it may take a few months to file a claim and receive repairs on your home following a fire; this seems like a long time, especially if you’ve been relocated from your home. However, your insurance company wants to make it as seamless and efficient as possible. If you work with your insurance company cooperatively yet assertively, you will make this process much easier on yourself and them.

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Separating Fact From Fiction When It Comes to Long-Term Care Insurance

Few people are prepared to handle the financial burden of long-term health care. In fact, many people have a false sense of security when it comes to long-term care. Let’s separate fact from fiction:

“Medicare and my Medicare supplement policy will cover it.”

FACTS:

  • Medicare and “Medigap” insurance were never intended to pay for ongoing, long-term care. Only about 12% of nursing home costs are paid by Medicare, for short-term skilled nursing home care following hospitalization. (Source: Guide to Long-Term Care Insurance, AHIP, 2013)
  • Medicare and most health insurance plans, including Medicare supplement policies, do not pay for long-term custodial care. (Source: 2017 Medicare & You, Centers for Medicare & Medicaid Services)

“It won’t happen to me.”

FACTS:

  • Almost 70% of people turning age 65 will need long term care services and supports at some point in their lives. (Source: LongTermCare.gov, November 2016)
  • About 67% of nursing home residents and 70% of assisted living residents are women. (Source: Long-Term Care Providers and Services Users in the United States, February 2016, National Center for Health Statistics)

“I can afford it.”

FACTS:

  • As a national average, a year in a nursing home is currently estimated to cost about $92,000. In some areas, it can easily cost well over $110,000! (Source: Genworth 2016 Cost of Care Survey, April 2016)
  • The average length of a nursing home stay is 835 days. (Source: Centers for Disease Control and Prevention, Nursing Home Care FastStats, last updated May 2014)
  • The national average cost of a one bedroom in an assisted living facility in the U.S. was $43,539 per year in 2016. (Source: Genworth 2016 Cost of Care Survey, April 2016)
  • Home health care is less expensive, but it still adds up. In 2016, the national average hourly rate for licensed home health aides was $20. Bringing an aide into your home for 20 hours a week can easily cost over $1,600 each month, or almost $20,000 a year. (Source: Genworth 2016 Cost of Care Survey, April 2016)

“If I can’t afford it, I’ll go on Medicaid.”

FACTS:

  • Medicaid, or welfare assistance, has many “strings” attached and is only available to people who meet federal poverty guidelines.

Whether purchased for yourself, your spouse or for an aging parent, long-term care insurance can help protect assets accumulated over a lifetime from the ravages of long-term care costs.

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