Are you considered a smoker?

If you give a “yes” answer to any of the two questions that go like: “Do you smoke?” or “Do you consider yourself a smoker?” - It means you really are one. By insurance standards, even if you smoke your cigarette once a year you are considered a smoker. In the cases of occasional smoking you need to answer the questions in the best possible way to profit yourself with the good insurance.

The cost of smoking

Research states that smokers pay three times the premium of non-smokers which is the reason why lots of people lie on their applications.

To lie or to speak the truth

You can never stop somebody from lying and some smokers do try to clean themselves from nicotine as it clears out of the system within 72 hours after smoking the last cigarette. If the urine test is taken after 72 hours it is possible for the nicotine to escape demodulation. Sometimes serious smokers get away with it too.

You passed! Now what?

The contract between you and the insurance company is hundred percent legal. This is why it is necessary to stay as frank as possible and reveal all of your smoking habits. If you were caught “cheating” with a cigarette, your rate would collide and changed into a smoker’s rate when the policy is confirmed. No insurance company will drop your case if you are found guilty in smoking but there will be some random phone calls made by the insurance companies to detect liars. The survey is designed to weed out liars by listening for inconsistencies in the applicants’ answers.

What happens if you are caught?

Nothing serious can happen. In the worst possible case your policy will be issued at a higher rate.

What if you start smoking after the policy is issued?

We are meant to be honest. It is so. When your application is on the table the insurance company expects you to play by their rules. It is preferable that you are truthful while filling out your life insurance policy but in the case when you started smoking after it is issued it is better to lie about it. It is for your own benefit, or sometimes even for the benefit of your whole family. If it happens so that you die and you life insurance policy is a non-smoker one when you were a smoker already, your death advantage won’t be endangered.

The alternative is a permanent policy which lasts for as long as you pay the premiums. There are several different types but the two more important policies are:
” whole life insurance which gives you a lifetime protection by guaranteeing both the death benefit and the cash value payable on death for a fixed premium; and
” universal life insurance which makes a number of assumptions about the interest rates that may be payable during your life and projects the premium needed to pay the nominated sums on death. If these assumptions prove wrong, you will be asked to pay a higher premium.

The advantage of policies like these is that they have a cash or surrender value. Unlike a term life policy where you get nothing back, permanent policies have investment elements. Over time, these build up in value. Should you die, the amount payable includes the investment sums. Thus, at the very least, your policy was inflation proofed. But if you have an emergency, say you have an accident and there is a need for surgery, you can draw on the cash element.

The difference between term and permanent can be put simply. A term policy covers you against the possibility you might die during the term. A permanent policy covers you against a certain event. Everyone dies. So long as you’ve kept up the premiums or have a policy that guarantees payment on death, your family is protected.

So what is it we’re buying? To be brutal, when you’re gone, the money that comes from the policy has to replace the money you would have earned. There should be enough to pay off your debts at death and leave enough over to cover those you leave behind until they can make some other arrangements - most people “guess” they need to leave about five years of wages/salary as a lump sum. There are calculators that help you total up and make a good guess.

Now you have a ballpark figure on how much cover you need, it’s time to get those online quotes. There are a growing number of sites like this which give you access to the main life insurance companies licensed to write policies in your state. These sites collect basic information about you and then send it out to the insurers. You get quotes back.

This personal information sets the basic cost. If you are young, healthy and have a good lifestyle, the cost will be quite low. But if you are older, your health is not so good (or your family history has close relatives dying young), you smoke, drink too much and compete in extreme sports events, the premium will frighten you. It’s all about statistics. Those insurance actuaries work out who’s likely to live longer and set the premium level accordingly.

But the issue you really need to get clear before you start is the type of policy to buy. If you want low-cost, very affordable premiums, look at term life insurance (but with the option to convert to a permanent policy later on). Pick a number of years and start getting those quotes. If you have a reasonably stable income and can afford to pay a higher premium, look at the different types of permanent policy and decide which one will suit your needs the best. Remember, all you are doing at this stage is get information. When you have collected as much as you can online, talk to some companies direct or to an agent. All of this is without obligation. It’s all about getting comparative information so you can make the best buy. When you find what fits your needs and represents the best value, then you buy.

Except that’s actually the wrong way to look at it. There are two basic types of life insurance policies:
” Term life insurance covers you for a fixed term of years - it’s like a bet. If you die within the term, there’s a payment out to the guys you named in the policy. If you live on, there’s nothing, no payment, not a cent back.
” Permanent life insurance has a cash value. Yes, that’s right. Alongside the death benefit element (the bit you don’t really want to think about), part of your premium is paid into a cash reserve. It’s invested and, guess what, the tax is deferred. The neat part is you can access the investment element in different ways at different times of your life, say to help pay for education or to make your retirement more comfortable. There are several types, the most important being whole life and universal insurance.

Now, one of the interesting facts about life insurance is that it’s really cheap to buy when you’re young. Think about it. With life expectancy going up every year, it’s going to be a long time before anyone can collect on your death. So companies can take your premiums, invest them and get a good return for forty or fifty years. There’s no need for them to be greedy. They take lower premiums spread over a longer period of time.

You’re not going to live a life of celibacy are you, like go into a monastery or convent? If you’re like the majority, you’ll end up in a relationship and have kids. Let’s keep this real. You’ll be part of a family. Hey, all of a sudden, you’ve got responsibilities. Aren’t you glad you took out insurance when it was really cheap!

Better still, if you took out convertible term insurance you can convert it into a permanent policy. If you started with a permanent policy, there’s that cash element sitting there. It can help out in all kinds of useful situations.

Why buy life insurance? Because sooner or later, most people do and, the younger you are when you buy the policy, the cheaper it is - the better value it is.

The first key issue to clarify is the real cost if you have to make a claim. It’s not enough to look at the monthly premium instalment and decide it’s affordable. There are other costs that can be financially overwhelming if you’re not prepared. There are three words you need to learn:
1. Co-payments
In HMO and similar plans, these are the amounts you’ll have to pay every time you see a health insurance provider, have lab work done, go for prescription drugs, etc.
2. Deductibles
In most indemnity plans, you agree in advance to pay the specified amounts before the insurance company has to pay on any claim. Watch the way the terms are worded. Some policies set an annual maximum. Others require the deductible to be paid on every claim no matter how many (or few) claims you make. The larger the deductible you accept, the greater the discounts you receive.
3. Coinsurance
As if the payment of the deductibles was not bad enough, you can agree to pay an additional percentage of the medical costs. In effect, you are self-insuring. The idea is that you invest any savings on the premiums against the risk you have to make a claim.

Once you’ve put real numbers on to the co-payments, deductibles and coinsurance percentages, you can move on to the reality of the cover provided. Be very careful if you have a medical problem when you apply. This must be disclosed. Ask about waiting periods, whether you can continue seeing your regular physicians, and so on. Then you need to explore adding others to the plan, i.e. your partner and any children or other close relatives. Only through this kind of detailed discussion can you find out whether you can get the cover you really need.

Let’s start out with your first policy. This may be student or college health insurance. Then when you’re looking for your first job, one of the major considerations will be whether there is a health plan on offer. Wherever possible, you should be looking for affiliation with a group with a plan on offer. This starts with a school, college, employment, a club, association, etc. If not, you’ll be looking for a level of pay that can fund your own individual plan. Except that, if you are young, fit and full of confidence, you might decide to delay taking out a plan or only go for short-term health insurance until you can afford something more permanent.

This is all going to require effort on your part, particularly if you are looking to customize a private plan. The first step is research. You need to compare the rates for different plans. You can easily get ballpark quotes online from all the main medical insurers through sites like this. These sites make no charge for giving you access to multiple insurance companies. You should also consider talking to insurance agents. You are not obliged to buy any policy they recommend. To get the best and most affordable health plan, you need to collect as much information as possible on what is available. Only then are you ready for direct negotiations with those health insurance companies that have made the best quotes.

More people are forced into gambling with their own health because both the medical insurance premiums and the treatments themselves no longer seem affordable. Many wait until their conditions have worsened to an emergency so the hospitals will then treat them. That desperation brings people to sites like this because they can get multiple online quotes and find low-cost health cover more easily.

So what kind of individual health insurance plans are there? There are two main varieties. The first is known as an indemnity or reimbursement plan. This allows you to pick your own physician and it will pay some or all of your medical expenses up to a maximum per day for a given number of days. The second is a managed care plan, e.g. Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs) and Point of Service (POS) plans. These are more generous because you join a group and so get economies of scale when everyone uses the same physicians and care facilities.

Whichever kind of plan you look at, make sure it will give you the cover you really need. So don’t be hypnotized by the big ticket items like surgeon’s fees and hospital bills. Be practical. What prescription drugs are included; how often can you see your physician and what level of co-payments is involved? Is preventative care included? There are a list of very necessary things you need to see included in a plan before you buy. Look after your own and your family’s interests. Make sure the plan you choose is good value.

What are the issues? First off, you should not look at the amount you borrow. The key amount is the cost of rebuilding. Looking around the country right now, you see falling house prices. In part this is the end of a housing bubble. In part it is a feature of the credit crunch. Whatever the reason, the price of the land and what people are prepared to pay for the building on it are falling. But the cost of building materials and labor are increasing. Go back a few years and houses were appreciating assets. So you have to keep the amount of insurance up to date with the rebuilding costs, making sure that, should all else fail, you always have enough to pay off the amount outstanding on the loans you have secured on the property.

There are two kinds of homeowners insurance for this purpose. The first is replacement cost. This is a limited figure. If your house does burn down, you get the actual rebuilding costs up to this amount. The second is extended replacement cost. The premiums for this are slightly higher but it gives you a buffer to provide against the costs going up during the year. If inflation takes off, the number you fix at the beginning of the year may be out-of-date by the end of the year. The buffer usually allows up to 20% more than estimated building costs.

In all this, remember that it’s all down to you to get the rebuilding costs. No-one else is going to take responsibility for you. So think about it. Your mortgage is essentially going to be the same liability. The amount you have specified as the cost of rebuilding is the maximum amount payable (unless you have extended cover). If you have done your sums right, the house will be rebuilt and the lender will be happy. But if you’ve underestimated the cost of rebuilding, you may not be allowed to start the rebuilding work unless you can guarantee the shortfall out of your own savings. That means you may have a forced sale of the land with the insurance paying off the mortgage and nowhere to live. Do it right every time you renew or else you may pay a big penalty.

So what exactly is covered? The usual rule is you cannot benefit from the insurance unless it’s built into the terms of the policy. That means you’re entitled to the fair value of your contents unless you signed up for a “new for old” policy, i.e. you’re entitled to replace your “old” stuff with “new” stuff. To make everyone’s life easier, most insurers accept general estimates of value for “everyday” contents. Some even provide you with guideline figures. But if you have anything that is particularly expensive or it’s going to difficult to replace for some reason, you need to have those items specially endorsed on the policy. Now we’re into the whole different ballgame of expensive watches and jewelry, antiques and other collectibles. There may also be items of sentimental value that you would want recreated, e.g. an engagement ring. For all these items, you’re going to meet an appraiser, agree a value, take photographs, and generally establish trust on both sides.

Why trust? Because fraud is not uncommon when it comes to insurance claims. Thus, you first have to prove that you have these items and they are worth what you say they’re worth. Then you have to protect them. Burglar alarms and other security measures may be required. Should there be a loss, you’ll also have to prove the items are genuinely lost - charred remains from the fire, water damage from the flood, and so on. Always get a police report for theft claims to prove forced entry.

The standard policies cover you against damage to the building(s) and to most of the contents. But you need to read all the small print to find out exactly what kind of damage is covered. Insurance companies are very good on the big promises and then find different ways to exclude or limit the amount they have to pay out. It’s in your interests to spend the time necessary to read policies before you buy one. That way you understand exactly what protection you are getting. If there is any doubt, ask someone at the insurance company for an explanation. It’s far better to get everything clear before you start. If you leave it until your first claim, the whole atmosphere has changed. You’re no longer a customer to be wooed. You’re one of those dangerous people claiming money and the whole relationship changes. Hard though it may be to understand, the company becomes much less willing to explain what you can claim after you’ve made a claim.

The usual events covered are damage from storms (that’s “ordinary” wind and rain, lightening, etc. - but watch out for the terms that get written in if you live in states prone to flooding, hurricanes or tornados), ice and snow (including frozen pipes), fire and smoke, and theft. If you live in an area at risk from earthquake or flooding, there may be special cover available. Make enquiries before you buy the house. The usual run of furnishings and contents are covered without you having to list everything. Mostly, you can give a ballpark estimate of value. But you must identify anything that is particularly valuable or special for some reason.

Finally, look carefully at the third party liability cover offered. If someone comes into your home and is injured, you could face a claim. With medical expenses rising fast, you should carry at least $100,000 to guard against this kind of risk.