Upgrade Your Home Insurance

Nearly two-thirds of homeowners are underinsured. Make sure you're not one of them.

Hunkered down at home in Great Falls, Va., during the blizzard of 2010, Doug Colley and his wife, Christina, discovered a sparking surge protector that quickly set their bedroom on fire. Engulfing smoke drove the couple out into the cold with only their coats and Christina's purse. Fire trucks from several area firehouses responded, but they couldn't reach the house because 3 feet of snow covered the couple's half-mile-long driveway. The Colleys watched as the fire consumed their home of 32 years and, along with it, a lifetime of belongings.

Within days, the Colleys received a check for $225,000 from their insurer, Virginia Farm Bureau -- enough to rebuild their house (although they plan to build a slightly larger home with a first-floor master suite). As it turns out, the Colleys were fortunate: Their insurance agent had visited them the previous summer and helped them update their homeowners coverage. Had the fire occurred a year earlier, their check might have been smaller.

The take-away: When you get your annual insurance-renewal notice, don't just toss it into the to-file pile. Instead, review your policy and beef up your coverage if necessary. Insurer USAA recommends that its customers review their coverage every three to five years, and with good reason. Almost two-thirds of U.S. homeowners are underinsured, by an average of 18%, according to Marshall & Swift, which provides building-cost data to the insurance industry.

And don't assume that the cost to rebuild sank along with home values over the past several years. The price of building materials rose sharply in 2008, along with the price of fuel, before flattening in 2009 because of the recession, according to Xactware, which tracks trends in the property-insurance and construction industries.

Without adequate coverage, you may not have enough insurance to rebuild your home and replace its contents in the event of a fire, tornado or other disaster that leads to a total loss. If you let your coverage fall to less than 80% of the insurer-estimated cost to rebuild your home, your insurer may either reduce the amount it will pay to rebuild (for example, it will pay 75% of the cost on 75% coverage) or it might pay only for your home's actual cash value. Many insurers also require that you notify them within a certain time limit if the cost of an improvement to your home exceeds $5,000; if you don't, they may not cover the full cost to rebuild.

Build a Good Policy

Keep in mind that you're not insuring the market value of your land, just the cost to rebuild your home, garage and any other buildings. Your policy should include an inflation guard that is keyed to regional costs and, ideally, adjusts your coverage every year. Building costs can change not only with the economy but also after a disaster, when contractors and materials may be in short supply, says Don Soss, a vice-president of Fireman's Fund. That's one reason it's also smart to purchase extended-replacement coverage, which covers the difference if the price to rebuild exceeds your dwelling limit. Your policy probably already has 25% extra coverage built in, but you can buy more in 25% increments -- usually for $30 a year -- up to another 100%, says Michelle Rupp, an independent agent in Seattle.

New building codes often create a discrepancy between the limits of coverage and the actual cost to rebuild, says Kathleen Stalter, risk-services manager at Fireman's Fund. After a disaster, municipalities may quickly tighten their codes. Some insurers include full building-code coverage, but most include either an extra 10% of the dwelling limit or a flat $25,000, which may also have to go toward removal of debris. You can beef up your coverage by buying an endorsement -- often called a building-code upgrade. It will cost about $50 to $75 a year to double your protection to 20% of the dwelling limit.

Take Stock of Your Stuff

In the event of a total loss, you usually have 180 days to provide your insurer with a list of everything you owned, from sofas to soup spoons. Before the fire at their home, the Colleys had begun an inventory but hadn't finished it -- and it went up in smoke, too. "Think about having to imagine yourself in every room of your home, trying to remember everything in it," says Doug.

You can create a detailed listing or just take photos or make a video. Open cupboards, closets, drawers and storage boxes and shoot those, too. Not only will the images jog your memory, they will also assure insurance adjusters that your furniture really was high-end or antique, and not just starter stuff from Ikea. The Colleys have asked family members for holiday photographs taken in their home that show heirloom antiques in the background.

Get appraisals of valuables and, if necessary, purchase a personal-articles floater to cover them beyond the normal limits of your policy. Such coverage typically costs $17 per $1,000 of property value annually. Fireman's Fund even offers a "collections" endorsement that would cover the contents of a wine cellar.

Focus on the Fine Points

Rebuilding almost always takes longer than you anticipate, so look for a policy that provides 24 months of coverage for comparable housing and related expenses (called loss of use coverage). If your insurance company offers a fixed dollar amount with no time limit, divide that amount by 24 months to compare the coverage with that of other policies.

You'll need liability coverage in case you (or a family member) are legally responsible for causing injury to someone else at home or elsewhere. Given that medical (and legal) expenses can quickly mount, Rupp urges clients to buy as much liability coverage as they can afford. To increase the standard limit of $300,000 to $500,000 would cost about $20 annually, says Rupp.

Overlay your homeowners coverage with an umbrella policy providing at least another $1 million of liability protection. To determine your premium, insurers will assess your exposure to risk, including the number of homes you own (and their location), as well as your vehicles and whether you have young drivers in your family. The deeper your pockets and the higher your profile -- are you likely to be quoted in the media or do you sit on a nonprofit board? -- the greater your need for coverage.

You can get a $1-million umbrella policy for about $150 to $300 annually. The next $1 million of coverage will cost about $75; each $1 million after that, about $50. Before insurers sell you an umbrella policy, most will want you to have a minimum of $250,000 of liability coverage on your auto policy and $300,000 on your homeowners insurance, and they may require you to buy both policies from them.

Copyrighted, Kiplinger Washington Editors, Inc.

Health-Insurance Changes for 2011

Here's what to expect when your employer gives you choices during open-enrollment season this fall.

What differences can I expect to see in my health insurance for 2011 during my employer's open-enrollment season this fall?

Employers will be making some changes to their health-insurance plans for 2011 because of health-care reform — such as offering coverage to children up to age 26 — and as a way to help control rising health-care costs. A recent survey of large companies by the National Business Group on Health found that employers estimate their health-care-benefit costs will increase by an average of 8.9% in 2011, compared with an average increase of 7% this year. These employers are continuing to boost premiums and co-payments, but they're also beefing up programs that encourage employees to lower their medical expenses.

Higher Premiums and Co-Pays

Sixty-three percent of the employers surveyed plan to increase the percentage that employees contribute to the premium (on average, employees contribute 17% of the premium for single coverage and 27% for family coverage). And 46% plan to raise out-of-pocket maximums. About 40% of employers also intend to increase in-network or out-of-network deductibles.

These large employers have already been boosting employees' share of the premiums and co-payments over the past few years, and they realize that increasing employee costs cannot be their only solution — especially because many workers have had stagnant wages and may have a spouse who lost a job, says Helen Darling, president of the National Business Group on Health.

If employers increase co-pays too much, the employees may not seek care they need, which could lead to greater medical expenses in the future. And the claims costs have a direct impact on these employers, who are self-insured and pay claims from their own money, using an insurance company only for administration (a common practice for many large companies). These employers are targeting some of their increases at areas that will help encourage employees to be more careful about costs — such as increasing cost sharing for non-emergency care at an emergency room.

The Solution

If you have a choice of several plans, factor your potential out-of-pocket costs into the equation rather than looking just at premiums. Evaluate the new rules for co-payments carefully when deciding which type of care to use throughout the year.

More High-Deductible Health Plans and Health Savings Accounts

Sixty-one percent of the employers surveyed said they plan to offer a consumer-directed health plan in 2011 (usually a high-deductible health plan combined with a health savings account), which helps lower health-care costs because it encourages employees to become better health-care shoppers. In fact, 20% of the employers plan to make the consumer-directed health plan the only choice. Those that are offering several options are steering employees toward the high-deductible plans by reducing premiums and often contributing money to the employees' health savings accounts.

The Solution

These extra incentives may make a high-deductible plan worthwhile, even if you aren't in perfect health. Also, most high-deductible plans now cover preventive care without cost sharing before you reach the deductible. Look carefully at the high-deductible plan option this year and consider adding some of your own money to an HSA (if you're eligible). Contributing to an HSA lowers your taxable income, and your money grows tax-deferred for the future and can be used tax-free for medical expenses in any year — even after you switch to a new job.

Better Deals for Primary-Care and Wellness Programs

Many employers intend to reduce or eliminate the co-pays for primary care and preventive care, which can help catch problems early and lower medical expenses in the long run. Employers have been experimenting with various forms of wellness benefits over the past few years, and most now give people bonuses for participating in wellness programs rather than penalizing them if they do not. "They like carrots more than sticks," says Darling. Forty-one percent of the employers are offering discounts for participation in wellness programs, and the average incentive to employees is $380; 22% of employers offered discounts on premiums for participating in tobacco-cessation programs.

The Solution

Employers realized that they needed to provide workers with better incentives to sign up for wellness programs. So if participating in one seemed like a hassle in the past, it may be worth a second look this year. Also, get a list of free preventive-care services and make the most of them throughout the year.

Extra Charges for Brand-Name Drugs

Over the past few years, more employers have been charging varying levels of co-pays for different types of drugs. Sixty-three percent now have a three-tiered design for their prescription-drug coverage, charging the lowest co-pay for generic drugs, the middle rate for preferred brand-name drugs and the highest co-pay for other brand-name drugs.

People also have to jump through more hoops to get their drugs. Seventy-three percent of employers now require prior authorization before they will let you use certain drugs, and many are using step therapy, which requires doctors to try a lower-cost drug first before certain higher-cost drugs will be covered. Employers are also changing co-pays to encourage you to get your drugs from a cheaper source. For example, some will fully cover the cost of maintenance medications only if you use mail-order pharmacies. If you choose to get the medication at a local pharmacy instead, you pay the difference between the cost of mail order and the retail price.

The Solution

If you take medications regularly, look carefully at how the drugs are covered and your potential out-of-pocket cost. Switching to generics, when possible, will always save you money, and the cost savings becomes even more pronounced if your employer charges a lower co-pay for the lowest-cost drug. Also reconsider where you buy your medications if your employer provides a higher level of coverage for mail-order pharmacies. And find out about any prior authorization or step-therapy requirements before using a new medication so you don't get hit with surprise charges if you don't follow the rules.

7 Ways to Save Money on Car Insurance

1. Drop Coverage You Don't Need

The beauty of doing a car insurance coverage checkup every six months or so is that even if it turns out that your current car insurance coverage is still the best value out on the market you may just find out that you are paying for a part of your auto insurance policy that you no longer need.

Not only do insurance rates change quite often but your insurance needs change more often than you may think. If you have a new teenage driver or have added a new car to your policy or have moved to a new zip code or--well, the list goes on and on. All of these things may potentially cause you to be paying for coverage that you no longer need.

2. Search for Discounts

Never assume that because you searched for all of the car insurance discounts available 6 months ago that now there are no new discounts that you may be eligible for. New opportunities for saving money with a car insurance discount program pop up all of the time as different companies announce different discount programs in order to increase their market share.

3. Improve Your Credit Score

It's no secret that a better credit score will result in better car insurance rates. You may have been working hard to improve your credit score over the last few months in order to qualify for lower interest rates for a home loan or auto loan and you are now starting to see some of your hard work pay off.

When you see an increase in your credit score don't let the opportunity slip by to check and see if this credit score improvement will result in an improvement in your auto insurance rates as well. You've worked hard to improve your credit score so why not spend a few minutes to see if that can only help you get a lower interest rate but a lower car insurance rate as well?

Take some of your car insurance savings and use it to treat yourself to a nice dinner at your favorite restaurant--you deserve it!

4. Pay Your Premiums With a Credit Card

Wanna shave off 1 percent to 5 percent off of your total car insurance premiums just by changing your method of payment? With the average cash back credit card earning you anywhere from 1 percent to 5 percent cash back that's like getting a bill from your insurance company and then having to only pay 95 percent to 99 percent of the total instead of the full 100 percent!

One to 5 percent may not seem like much but as you can see with a cash back credit card calculator that money can quickly start to add up--depending upon how much money you spend each month if you use that cash back card for many of your purchases then your savings could end up being enough to pay for an entire year of college tuition after 15 to 20 years!

5. Tell Your Kids to Keep Their Grades Up

Virtually all of the major car insurance companies offer some form of good student discount. If your kids get good grades then you save money. Some companies offer savings for a lackluster C while most offer savings for you that range from 5 percent to 15 percent if your student maintains a B or an A on their report cards.

Maybe it's time to pass along some of that savings to your kids as a financial incentive to keep their grades high (after all, why not just let the insurance company pay your kids to get good grades rather than you?)

6. Take a Driving Course

OK, maybe you don't want to tell your spouse that you are signing up for a driving course because no one wants to admit that they may not be the world's best driver BUT if signing up for a defensive driving course that will take up minimal time and save you money--why not?

After all, at least you aren't one of the world's worst drivers - at least I hope not! Taking a driving course just one time can result in lifetime savings on your car insurance.

Check with your car insurance company as to what type of courses and course providers they will recognize for a discount on your policy.

7. See If Your Occupation Can Save You Money

Did you know that when car insurance actuaries calculate car insurance rates that they actually assign different risk classes to different types of occupations? Some occupations have cheap car insurance rates while other occupations get assigned an added level of risk that increases their rates.

The various occupation risk assessment algorithms will vary from one insurance company to the next but generally speaking professions like engineering and teaching will receive lower car insurance rates than business owners and attorneys. So what do you call yourself if you are an engineer that owns their own business? You tell me.

12 Car Insurance Cost-Cutters

1. Insure Multiple Cars/Drivers

If you obtain a quote from an auto insurance company to insure a single vehicle, you might end up obtaining a higher quote (per vehicle) than if you inquired about insuring several drivers and/or vehicles with that company. This is because insurance companies will offer what amounts to a bulk rate because they want your business, and under some circumstances, they are willing to give you a deal if it means you'll bring in more of it.

To obtain a discount, ask your agent/insurance company to see if you qualify and get a quote. Generally speaking, multiple drivers must live at the same residence and be related by blood or by marriage. Two non-related people may also be able to obtain a discount; however, they usually must jointly own the vehicle.

Incidentally, some companies may also provide an auto insurance discount if you maintain other policies with the firm (ex. homeowner's insurance). Check with your agent/insurance company to see if such discounts are available and applicable.

History of insurance

In some sense we can say that insurance appears simultaneously with the appearance of human society. We know of two types of economies in human societies: natural or non-monetary economies (using barter and trade with no centralized nor standardized set of financial instruments) and more modern monetary economies (with markets, currency, financial instruments and so on). The former is more primitive and the insurance in such economies entails agreements of mutual aid. If one family's house is destroyed the neighbours are committed to help rebuild. Granaries housed another primitive form of insurance to indemnify against famines. Often informal or formally intrinsic to local religious customs, this type of insurance has survived to the present day in some countries where modern money economy with its financial instruments is not widespread.

Turning to insurance in the modern sense (i.e., insurance in a modern money economy, in which insurance is part of the financial sphere), early methods of transferring or distributing risk were practised by Chinese and Babylonian traders as long ago as the 3rd and 2nd millennia BC, respectively. Chinese merchants travelling treacherous river rapids would redistribute their wares across many vessels to limit the loss due to any single vessel's capsizing. The Babylonians developed a system which was recorded in the famous Code of Hammurabi, c. 1750 BC, and practised by early Mediterranean sailing merchants. If a merchant received a loan to fund his shipment, he would pay the lender an additional sum in exchange for the lender's guarantee to cancel the loan should the shipment be stolen or lost at sea.

Achaemenian monarchs of Ancient Persia were the first to insure their people and made it official by registering the insuring process in governmental notary offices. The insurance tradition was performed each year in Norouz (beginning of the Iranian New Year); the heads of different ethnic groups as well as others willing to take part, presented gifts to the monarch. The most important gift was presented during a special ceremony. When a gift was worth more than 10,000 Derrik (Achaemenian gold coin) the issue was registered in a special office. This was advantageous to those who presented such special gifts. For others, the presents were fairly assessed by the confidants of the court. Then the assessment was registered in special offices.

The purpose of registering was that whenever the person who presented the gift registered by the court was in trouble, the monarch and the court would help him. Jahez, a historian and writer, writes in one of his books on ancient Iran: "[W]henever the owner of the present is in trouble or wants to construct a building, set up a feast, have his children married, etc. the one in charge of this in the court would check the registration. If the registered amount exceeded 10,000 Derrik, he or she would receive an amount of twice as much."

A thousand years later, the inhabitants of Rhodes invented the concept of the general average. Merchants whose goods were being shipped together would pay a proportionally divided premium which would be used to reimburse any merchant whose goods were deliberately jettisoned in order to lighten the ship and save it from total loss.

The Talmud deals with several aspects of insuring goods. Before insurance was established in the late 17th century, "friendly societies" existed in England, in which people donated amounts of money to a general sum that could be used for emergencies.

Separate insurance contracts (i.e., insurance policies not bundled with loans or other kinds of contracts) were invented in Genoa in the 14th century, as were insurance pools backed by pledges of landed estates. These new insurance contracts allowed insurance to be separated from investment, a separation of roles that first proved useful in marine insurance. Insurance became far more sophisticated in post-Renaissance Europe, and specialized varieties developed.

Some forms of insurance had developed in London by the early decades of the 17th century. For example, the will of the English colonist Robert Hayman mentions two "policies of insurance" taken out with the diocesan Chancellor of London, Arthur Duck. Of the value of £100 each, one relates to the safe arrival of Hayman's ship in Guyana and the other is in regard to "one hundred pounds assured by the said Doctor Arthur Ducke on my life". Hayman's will was signed and sealed on 17 November 1628 but not proved until 1633.^[15] Toward the end of the seventeenth century, London's growing importance as a centre for trade increased demand for marine insurance. In the late 1680s, Edward Lloyd opened a coffee house that became a popular haunt of ship owners, merchants, and ships' captains, and thereby a reliable source of the latest shipping news. It became the meeting place for parties wishing to insure cargoes and ships, and those willing to underwrite such ventures. Today, Lloyd's of London remains the leading market (note that it is an insurance market rather than a company) for marine and other specialist types of insurance, but it operates rather differently than the more familiar kinds of insurance. Insurance as we know it today can be traced to the Great Fire of London, which in 1666 devoured more than 13,000 houses. The devastating effects of the fire converted the development of insurance "from a matter of convenience into one of urgency, a change of opinion reflected in Sir Christopher Wren's inclusion of a site for 'the Insurance Office' in his new plan for London in 1667." A number of attempted fire insurance schemes came to nothing, but in 1681 Nicholas Barbon, and eleven associates, established England's first fire insurance company, the 'Insurance Office for Houses', at the back of the Royal Exchange. Initially, 5,000 homes were insured by Barbon's Insurance Office.

The first insurance company in the United States underwrote fire insurance and was formed in Charles Town (modern-day Charleston), South Carolina, in 1732. Benjamin Franklin helped to popularize and make standard the practice of insurance, particularly against fire in the form of perpetual insurance. In 1752, he founded the Philadelphia Contributionship for the Insurance of Houses from Loss by Fire. Franklin's company was the first to make contributions toward fire prevention. Not only did his company warn against certain fire hazards, it refused to insure certain buildings where the risk of fire was too great, such as all wooden houses. In the United States, regulation of the insurance industry is highly Balkanized, with primary responsibility assumed by individual state insurance departments. Whereas insurance markets have become centralized nationally and internationally, state insurance commissioners operate individually, though at times in concert through a national insurance commissioners' organization. In recent years, some have called for a dual state and federal regulatory system (commonly referred to as the Optional federal charter (OFC)) for insurance similar to that which oversees state banks and national banks.