Archive for September, 2013:

what if my insurance company goes under?

Written on September 23rd, 2013 by Jamesno shouts

It seems like we are a long way from the financial panic of 2008 where consumers were wondering who was the next financial institution to be declared insolvent.  During that period consumers were wondering about the safety of their money in not only banks and brokerages but also insurance companies.  We all know that FDIC provides insurance for cash assets at banks and SIPC provides coverage for investment assets at Brokerage Custodians, but what safety net is there for your insurance and annuities?

As it turns out each state has its own Guaranty Association made up of the Insurers working in that state.  The job of the Guaranty Association is to provide a safety mechanism for consumers if their insurer were to be declared insolvent.  In most cases if an Insurer were to be declared insolvent the state Insurance Commissioner would put the company in receivership and begin a liquidation process.  Most of the customers (and their policies) would be transferred to another insurance company working in the state and everything would stay the same.  In most cases the policy and cash value would be protected.  However, as a consumer you need to know that the maximum amount of protection the Guaranty Association is responsible for is (Georgia specific numbers):

  • life insurance death benefit: $300,000
  • life insurance cash value: $100,000
  • disability, Long Term care benefits: $300,000
  • Annuity cash value: $250,000
  • Annuity in payout mode: $300,000

The remainder of the claim (if your cash amount in the life insurance or annuity was higher than these limits) would be made as a creditor of the liquidated insurance company, if assets were available after liquidating the company the consumer would be eligible for additional monies.

For additional info on this topic:  http://www.gaiga.org/home.cfm or http://www.nolhga.com/

Filed under Insurance Tags:,

state employee or muni investor?

Written on September 19th, 2013 by Jamesno shouts

If you are a state employee or invest in tax free municipal bonds, Morningstar has just released its report on the health of state pension plans.  Pension liabilities have a direct effect on a state’s municipal bond ratings as they are generally the biggest liability on a states balance sheet.  States with healthy funded pension plans will maintain higher bond ratings, those with underfunded plans have quite a bit more risk to both investors and pensioners.  (although a complete state bankruptcy would be improbable, with the recent issues in cities such as Detroit,  Stockton and San Bernadino it might be a good idea to pay attention)

Ranking high on the list were states in the Pacific Northwest, Wisconsin, Georgia, Florida, Tennessee and North Carolina among others.  Here is a link to Morningstar’s website for more info:  http://www.morningstar.com/cover/videocenter.aspx?id=610888

Filed under Investing Tags:

painted into a corner?

Written on September 18th, 2013 by Jamesno shouts

Did the Fed just admit failure?  My rant for the day………

The Federal Reserve shocked the markets today and decided not to taper their $85 billion per month bond buying spree.  After they hinted back in May that $3 trillion of money injected into the economy was working and they would slow down the printing presses,  today they said “never mind we were only kidding”!  Really?

So what they have really admitted is that they are stuck.  Instead of letting the economy heal itself after the financial crises in 2008, they decided to use unprecedented methods for stimulating the economy (see list below) without thinking about the long term effects.  They have succeeded in pushing up the stock market and keeping interest rates low, but at what ultimate cost?  What they admitted today was that the economy is NOT doing well enough to be taken off the life support.  Jobs and growth are not rebounding like they thought they would after $3 trillion of money printing.  So what is next?  Another $3 trillion, heck why not just hand everyone in the country $100,000 and let us spend it.  When I think of where we are I am reminded of several quotes, the first is from back in my engineering days studying physics, “For every action there is an equal and opposite reaction – Isaac Newton“.  Every time I hear that I think that the reaction to this grand experiment is not going to be pretty.

The other quote is more pertinent to our situation:

“To combat depression by a forced credit expansion is to attempt to cure the evil by the very means which brought it about; because we are suffering from a misdirection of production, we want to create further misdirection- a procedure which can only lead to a much more severe crisis as soon as the credit expansion comes to an end.” — Fredrich Hayek, 1933

The rationale from the Federal Reserve is that despite injecting $3 trillion of new currency in the system they show no signs of inflation.  This despite yesterday’s report from AAA that gas prices have been above $3 for over 1000 straight days.  My fear is that once inflation takes hold they won’t be able to stop it quickly enough.  In the meantime they will keep printing and the dollar will  drop in value. And despite stagnant wages you will be forced to do more with less purchasing power.  This especially hits those in retirement on fixed incomes.

I guess I should be thankful really, my clients bond funds and commodities fund allocations are going to rip higher but I still worry that 5 years from the financial meltdown and $3 trillion later our economy can’t function without government help.

A history of Fed intervention:

  • QE 1: 2008-2010
  • QE 2: 2010 – 2011
  • Operation Twist: 2011
  • QE 3: 2012

Rant Over…

Filed under General Tags:,

what would happen if…..

Written on September 11th, 2013 by Jamesno shouts

As a financial planner I am always reviewing client’s insurance coverage, not just their life and disability but their homeowners as well.  Normally  we are looking at what they are paying in premiums, if they policy would cover the replacement cost and also to make sure their liability amounts are at sufficient levels if someone were to slip and fall on their property.  However, one thing I have been negligent on is actually having clients take an inventory of their possessions.

So, what would happen if your home was destroyed by a fire or natural disaster such as a tornado?  Could you remember all of your possessions such that you could give an itemized list to your insurance provider?  I’ll bet none of us could truly remember all of the items we have accumulated over the years.  I’m 44 and have trouble remembering last week, let alone all the stuff I’ve accumulated over the years.

Now that our mobile phones contain high resolution video ability, there really isn’t any reason not to have at least a video of each room in your house.  Once you record it then simply upload it to whatever remote online storage provider you use.  If you have an Apple phone they give you Apple iCloud for free so just upload the videos to your computer when you connect to your iTunes account and then upload the videos to the cloud.  If you back up your computer files to a service such as Mozy, then file the videos away there.  Or how about another service?  This one was suggested on by someone on the FPA LinkedIn page:

Know Your Stuff

This is a free service from the Insurance Information Institute where you can itemize everything online and then upload videos of your room contents.

Probably not a good idea to post all of your home photos/videos on social media sites as you don’t know who might be staking out your big screen TV……However, getting your inventory uploaded to a secure place online would be advisable.

 

So your challenge this week is to begin an inventory of items in each room of your house.

Filed under Insurance, Miser Tip Tags:

Financial Planning Week is Oct 7th

Written on September 10th, 2013 by Jamesno shouts

Governor Nathan Deal proclaimed the week of Oct 7th as Financial Planning Week in Georgia.  On hand representing the Financial Planning Association of Georgia were myself, Niv Persaud, Laurence Devall, Gov. Deal, Marta Shen, Dawn Butler with the Foundation for Financial Planning and Chris Hardy.

Filed under General Tags:

it’s coming…..Oct 1…….get ready

Written on September 5th, 2013 by Jamesno shouts

The Affordable Care Act (aka Obamacare) is just around the corner.  Here are some important things to know:

  • Oct 1:  State / Federal Healthcare Exchanges open for enrollment.  Georgia’s is run by the Federal Government and can be found here:  Healthcare.gov
  • Jan 1: insurance mandate effective (you have to have coverage or will pay a fine to the IRS)

General:  all plans whether purchased direct or through employer must cover 10 criteria which could mean an increase in benefits, but costs as well.  All plans must cover everyone without exclusion for pre-existing conditions and the max cost for someone is capped at 3 times what anyone else pays for the same plan (ie: a 60 year old will pay no more than 3 times what a healthy 25 year old pays for the same plan)

The exchanges will offer 4 plan types:

  • Bronze covers 60% of costs
  • Silver covers 70% of costs
  • Gold covers 80% of costs
  • Platinum covers 90% of costs

Employer coverage:  If you have employer provided coverage you may not notice any difference other than your premiums going up a bit during this Fall’s open enrollment.  However, you are eligible to shop on the Exchanges for coverage as well.

Self Employed: your insurer may still allow you to maintain your current coverage, however costs may be going up if they are required to include more services in your plan.  You do have the option for shopping on the Exchanges to see if less expensive coverage is available.

Tax Credit:  a family of 4 with household income under $94,000 may be eligible for a tax credit up to $2600 to help offset the costs of insurance.

Employer Mandate:  although parts have been delayed for a year, employers of over 50 full time employees must offer coverage.  If the employer offers a plan that covers at least 60% of medical expenses and the premiums do not exceed 9.5% of an employees income, then the employee is not eligible for the tax credit even if they fall under the $94,000 household income level.  If the employers plan does not meet those criteria then the employee can shop on the exchange and get the premium tax credit.

Is this all confusing?  Here is a link to an info graphic that may help:  Kaiser Foundation Health Care Infographic

Summary:  It’s probably a good bet that for the majority of people your health insurance premiums are going to be more expensive.  The upside for those wanting to change jobs or retire early and have held on for medical insurance is that now you have an option and cannot be denied coverage.  Another link for more info:  Kaiser Foundation website

High Deductible plans with Healthcare Savings Accounts may start gaining in popularity very soon for cost reasons, but that is a topic for another post…..