I’m not an insurance or benefits expert, but while looking at life insurance I wanted to compare the coverage available from my employer vs. what I could buy on my own. As with most things insurance-related, there are big variations in group life insurance coverage, so I can only speak to what I have for the most part. We get a credit each paycheck for which we can spend on health, dental, life, and disability insurances.

Maximum Coverage
For my plan, I can only get up to $500,000 of coverage for myself and partner. So if I want more, my only choice would be to look privately for equivalent term life insurance.

Ability To Find Coverage
The best thing about group insurance from work is that your risk is spread across a big pool of people, so it should be easier to be granted coverage. But many workplaces still require you provide “evidence of insurability” once you increase your coverage limit past a certain amount. This may involve a simple questionnaire, or it could require a doctor exam and bloodwork. It seems unclear exactly how “healthy” you have to be in order to qualify for increased group coverage, but I’m guessing it would preclude major pre-existing conditions like cancer or heart disease. The limit where they start checking can also vary from $5,000 to $500,000.

Portability of Insurance
When you qualify for and buy a level term life insurance policy, you are guaranteed coverage for the length of that term (10, 20, 30 years, etc.). But if you rely on your employer’s group life insurance, usually the coverage stops when you leave the job. It’s almost like a 1-year term policy. My concern is, if you have you leave your job because you are seriously disabled, then you might end up both uncovered and unable to find new insurance.

However, looking around there might be some flexibility in certain plans. For one, you might have a “Waiver of Premium” benefit that continues the insurance protection through age 65 with no further premium payments should you become disabled. Or the policy may allow you to “continue coverage through an individual term policy without evidence of insurability as long as you continue to pay premiums”. Would this still be at the group insurance rates (minus employer subsidies)? A lot of this stuff seems to be left out of my Open Enrollment Guide, so I suppose an e-mail to the correct Human Resource person would be in order.

Cost
Many people get a certain amount of “free” life insurance from work, with the option to buy more. I think anything over $50,000 of coverage is paid with after-tax money, so I plotted out the monthly cost of my group plan vs. coverage levels below. I then went to Term4Sale and found the average of the top 5 quotes for both 15 and 30-year term insurance policy (rated A+ or better), for both the best tier of health (Preferred Plus) and the lowest allowable (Standard).

If you are youngish and in good health, even a long 30-year term policy is comparable to the group rates. Even if you are in average health, the cost of my employer group insurance is comparable to the premium on a 15-year term policy.

Summary
Again, this is only based on my plan, although I found my wife’s numbers to be similar. If you are lucky to have no-questions-asked insurance with high limits and you are in below-average health, it might be good to use your group plan. But if you are looking for extra coverage for a guaranteed period of time and are at least relatively healthy, it’s probably just as cheap if not cheaper to go with an individual plan. If you are an older worker, things may tilt back in favor to group life, but I haven’t run those numbers. In any case, it’s worth a comparison before your next Open Enrollment period.

We used to just buy some extra coverage from work due to the convenience factor, but why pay more when I could both save money and have a better, portable plan?

Up until now, there are two reasons I don’t have any privately-bought life insurance. For one, as I’ve mentioned nobody is actually dependent on my income. Wife is doing fine, don’t have any kids yet. We also have 1x annual salary’s worth of life insurance as a benefit from our employers, and she’ll get all my retirement account funds if something happens to me. The other reason is that I know that life insurance is priced based on tiers of health, and I’ve been secretly thinking that I can back into my high-school swim team physique and get the absolute cheapest level of life insurance.

However, I’m starting to think both of these reasonings are flawed.

I used to think that there was no need for life insurance if nobody needs your income. But perhaps I should amend this – You need to weigh the chances that someone will eventually need your income. For example, if I fully plan on having kids within the next 2-5 years then my income will probably be needed at that time. And as someone else mentioned in a comment, life is a funny thing and you never know when my wife might just get pregnant unexpectedly.

So the question is, do I really gain anything by waiting until the last minute? The risk I take is that in the meantime my health deteriorates and I become uninsurable. You might find out you have cancer, fight bank and end up in remission, and lead a long life. You develop a heart condition have it under control, and be perfectly functional. But in either case, nobody will be issuing you an affordable policy.

(This argument has also been used by an insurance salesmen telling me to insure my kids starting at birth with a whole life policy, but I think that is stretching things a bit.)

What about trying to get healthier first? The fact is that if I’m young and even slightly healthy, term life insurance is still going to be relatively cheap, whether or not I manage to stamp out my love of ice cream. One easy-to-use site to do some quick comparisons on is Term4Sale.com. Currently, it says I can get $500,000 of 20-Year Term insurance (non-smoker) for about $25 for the highest Preferred Plus tier. But the lower Preferred tier is only $5 more, and the even lower Regular Plus/Select tier is only $10 more per month. The site estimates that I can have both elevated cholesterol and raised blood pressure and still land in one of these groups.

I would say if you’ve been harboring this desire to get healthy for more than 6 months or so and haven’t made significant progress, it’s time to give it up and pay the extra $5 per month. 🙂

Finally, the current cost of term life insurance is still historically low, so there is not much incentive to wait for better overall rates. Here is the general trend over the last 10 years for 30-year term (click to enlarge):

Yet another thing that reminds me that I’m not getting any younger…

I’ve been noticing that multiple banks like Washington Mutual, Bank of America, and other banks have been offering me “free” Accidental Death & Dismemberment (AD&D) Insurance. Usually I get around $1,000 to $3,000 of complimentary coverage, just for being a valued customer. Awww, how thoughtful! At first glance, it sounds pretty good. That could cover a few funeral expenses in case I decide to go sky-diving again.

Of course, they are always “proud” to be able to offer you more coverage at a rock bottom price. Additional covered for you is only $1 per month for each $10,000 of coverage. But wait, that makes my $1,000 of free coverage worth…. 10 cents a month Hmm, they must value me a lot to spare $1.20 a year for me…

As you might guess, the price isn’t that great. And again it only covers accidental death, so it’s not as comprehensive as traditional term life insurance. But it does cover dismemberment, and somehow my morbid sense of humor was amused by the dismemberment payouts. I can just imagine some actuary researching on how many people lose a thumb and index finger on the same hand. Just a thumb? They’ll be fine.

100% Benefit
Death 🙁
Both Feet or Both Hands
Entire Sight of Both Eyes
One Hand and One Foot
One Hand and Sight of One Eye
One Foot and Sight of One Eye
Speech and Hearing

50% Benefit
One Hand or One Foot
Entire Sight of One Eye
Speech or Hearing

25% Benefit
Thumb and Index Finger on Same Hand

So, should I bother taking it? I’ll probably pass, but it is still free. If I add up all my offers over time I might eventually build up a nice bounty. Probably not worth giving up the personal information needed, though. Anyone else sign up?

When we bought our house, the lender said we weren’t in a flood zone so we didn’t need to buy flood insurance on top of our homeowner’s insurance. I figured if the bank isn’t worried about it, then I shouldn’t be either. Apparently this might not be the best idea.

Virtually every home is in a flood zone
Unless you live on the top of a mountain, just about any area is susceptible to flooding. Heavy rains can make instant rivers where there wasn’t even a trickle before. All it takes is for a big storm to come after the ground is already saturated. Or you could simply ask some of the people who experienced Hurricane Katrina. Dams and levees fail. Just a few inches of water can cost tens of thousands of dollars worth of damage. In fact, 25% of flood claims come from low and moderate risk areas (areas not required to have insurance by lenders). Check out your local flood map here.

Where do I buy flood insurance?
Flood damage is not covered under homeowner insurance policies. You must buy it separately through the National Flood Insurance Program (NFIP), which is run and backed by the US government. However, nearly everyone is eligible to buy flood insurance regardless of risk level (although the premiums will vary).

The policies are available through private insurance companies and agents. You can find agents here for a free quote. Some insurance companies hint that they can offer discounted quotes, but this is not true. The price should be the same no matter who you go through. I actually tested this by asking 5 different agents both local and nationwide for quotes, and they were all exactly the same once adjusted for the same coverage and deductible. Therefore, I would simply get a quote from the same insurer I have for homeowner’s insurance.

How Much Will It Cost?
Chances are if your lender didn’t make you buy it for your mortgage, then your premiums won’t be too bad. You can estimate your flood risk and premium here. Remember, you have a few choices: Your building coverage amount (up to $250,000), your contents coverage amount (up to $100,000), and the deductibles for each (from $500 to $50,000). If you are in a moderate-to-low risk area, you might get coverage for $200-$500 per year.

With a few exceptions, there is a 30-day wait before the policy takes effect, so don’t be thinking you can just buy it at the last minute. Even if you aren’t a homeowner, flood insurance is available to renters who want to cover their contents.

So, it would seem that almost all homeowners should at least consider getting flood insurance even they are not required to. It can’t hurt to get a quote and research your flood exposure.

If you’re like me, you don’t rent cars very much outside of work. But when I do, I’m always of mixed emotion when it comes down to the inevitable question: Do you want to buy the Loss Damage Waiver (LDW)? It costs around $20/day, but it basically absolves you of any liability if the car becomes dented, breaks down, gets scratched, blown up, or whatever.

Your Existing Car Insurance Might Extend To Rental Cars
This is the most basic thing to know, but according to a survey by Progressive only about 25% of people bother to ask. Find out if your own insurance will act as your primary rental car insurance! My policy with State Farm does extended to the occasional rental car, but the deductible still applies.

But That Might Not Help…
I have high insurance deductibles, and I’m not worried about a full-on accident. I’m more worried about scratches and dents. If it was my own car, I’d never care about a dented bumper. But a rental car company can charge me $500+ for a new bumper, and also $75 a day that the car is unavailable for rental while they fix it (“loss-of-use” fees). Or they might just charge me $100 for a scratch because they want to squeeze every penny out of me… 2 months after I return the car.

In addition, your own auto insurance may cover collision (damage to the vehicle), but not other things like those “loss-of-use” or other administrative fees. Finally, making a claim on your insurance may jack up your future rates, which is partially why my deductibles are so high in the first place.

Credit Card Secondary Coverage To The Rescue?
The next layer of protection to consider is that offered by your credit card company. All of the biggies – Visa, MasterCard, American Express, and Discover offer some sort of coverage. According a review of the policies done on Wikipedia:

The main difference among the four credit card companies listed below is that MasterCard and Amex cover collisions, theft, vandalism and weather; Visa covers collisions and theft, but omits vandalism and weather; while Discover covers only collisions. However MasterCard is not useful in areas with dirt or gravel roads [paved roads only].

However, details can still vary depending on the specific type (Classic, Gold, Platinum, etc.). Look for specific wording in the paperwork that they mail you with the tiny print on amazingly thin paper. Here’s an excerpt from MasterCard coverage:

MasterRental will pay for covered damages on a secondary basis for which you are, or any other authorized driver is, legally responsible to the rental agency.

Covered damages include:
–Physical damage to and theft of the vehicle, not to exceed the limits outlined below.
– Reasonable loss-of-use charges imposed by the vehicle rental company for the period of time the rental vehicle is out of service. Loss-of-use charges must be substantiated by a location- and class-specific fleet utilization log.
– Reasonable towing charges to the nearest factory-authorized collision repair facility.

If you have, or an authorized driver’s primary automobile insurance or other indemnity has, made payments for a covered loss, MasterRental will cover your deductible and any other eligible amounts not covered by other insurance.

Secondary insurance means that they will cover what your primary insurance doesn’t. Together, this seems like a pretty solid combination. Of course, I’ve never made a claim through any of these card companies so I have no idea how easy they are to deal with. (Anyone have stories?)

An Immature Reason To Buy The LDW
I couldn’t find the clip online, but I remember a stand-up act by Jeff Foxworthy or somebody about rental car insurance that went something like this…. “You mean for 15 bucks I can drive this car like a maniac? Heck yeah I want that insurance! Time to grab some airtime!” I must say that the only time I’ve ever been in a car that did a doughnut in a empty parking lot…. that was a rental car. Of course I don’t drive like that. However, I will admit that have tested to 0-60 times of a few of my rental cars. Too bad in a Chevy Aveo that’s about 38 seconds downhill…

In the end, I have gone both ways depending on my mood. I have bought the waivers on short rentals because I just didn’t want to deal with any potential hassles. Most times, I have refused. I am making another rental later this week, so that’s why I’m pondering this…

Starting a new job means signing up for benefits. In terms of health insurance, this has usually boiled down to choosing either an HMO or PPO plan for us. I still have never been offered the option of a High Deductible Health Plan (HDHP) with a Health Savings Account, even though I think it would be neat to have one.

After reading through all the paperwork and talking to the benefits administrator, talking with my parents (who’ve had lots of different insurance companies), and reading various articles online – here is my limited understanding of the differences, at least in my case. Please add your own thoughts too.

Health Maintenance Organizations (HMOs)

• Usually have the lowest premiums and lower annual deductibles. In return, you must submit to various cost-saving restrictions.
• You must get care from providers in your HMO network. You can’t use a doctor from outside the network unless in some special case it is explicitly approved (unless you pay for it yourself).
• You must find a primary care physician (PCP) who acts as a gatekeeper to other (in-network) specialists. For instance, your PCP decides if you need to see a cardiologist, dermatologist, urologist, whatever. Although this is designed to limit unneeded care, it can also be frustrating if you disagree with your PCP. It also underscores the importance of finding a good PCP.
• Often have less paperwork and forms to fill out.
• You are still covered for emergencies at whatever hospital can best provide care at the time, although they may transfer you shortly afterwards to an in-network hospital.

Preferred Provider Organizations (PPOs)

• Usually have higher premiums and higher annual deductibles than HMOs. In exchange it offers more flexibility.
• You can see any doctor, but the costs for you are lower if you see an in-network provider vs. an out-of-network provider. In-network doctors have agreed to a discounted fee schedule for people in the PPO, essentially providing a bulk discount. This is the PPO method of limiting costs.
• Even if you disagree with your PCP, you can still go to whoever you want (in-network or not).

In the end, I guess one has to balance the details of each HMO and PPO plans carefully with the price differential. How much choice do you give up by going with your specific HMO? Do they have a history of complaints? In looking at cost, it’s important to understand the whole picture beside just premiums – there are also annual deductibles, co-pays, and lifetime maximum benefits.

In our case, the HMO and the PPO are by the same big insurance company, so that simplifies things for us. In addition, our family actually already has an PCP that they’ve been going to for a while, so I’m pretty sure we’re going to go with the HMO over the PPO. The HMO is $200 cheaper per month, has no annual deductible, and has lower co-pays. Otherwise, I think the best bet is to ask co-workers and friends who have the same insurance plan about their experiences and if they know of a good PCP.