Insurance When a Child Goes to College
August 1, 2011 by Jean Keener, CFP, CRPC, CFDS · Leave a Comment
As you send your child off to college, you probably have a lot of things on your mind, such as whether your child will eat right and get enough sleep, how to pay tuition, and what to do with that empty bedroom. And although insurance may seem like a low priority, there are some important issues you should consider.
Health Insurance
Even if your child isn’t a student, the Patient Protection and Affordable Care Act requires your medical plan to extend dependent coverage for your adult child up to age 26. But if the plan is an HMO and your child’s college is far from home, you should check in advance on whether HMO-approved providers are available in the area. If they aren’t available, one option is to purchase health insurance coverage through your child’s college. Many colleges and universities offer low-cost health insurance for students.
Property Insurance
If your child will be living in a dorm or other university housing, his or her personal property will typically be covered under your homeowners insurance policy. However, you may want to check your policy for coverage limitations on certain items (e.g., computers and stereos). If your child moves out of the dorms and into an apartment, his or her personal property will usually no longer be covered under your policy. In that case, he or she should purchase a renters insurance policy to cover his or her possessions.
Auto Insurance
If your child will be taking a car to school, make sure that the car is properly insured. If the child owns the car, the insurance policy must be in his or her name. If the child is “borrowing” a family car, he or she must be listed as a driver on the insurance policy. Some insurance companies may require the child to be listed as the primary operator, since the car is in the child’s possession and not the parents’.
November Personal Finance Newsletter
November 10, 2010 by Jean Keener, CFP, CRPC, CFDS · Leave a Comment
The November personal finance newsletter is now available. It includes information 2011 retirement plan contribution limits — most are unchanged, but if you’re right on the edge of having too much income to make Roth IRA contributions, you should check out the slightly increased income phase-out ranges. The newsletter also covers inheriting propert in 2010 and what the one-year hiatus from the estate tax means to the step-up basis rules. In addition, we have info on homeowners insurance and liability coverage, a summary of the latest trends in college pricing and financial aid, and an investment market update. To read the newsletter, click here.
Keller Free Financial Workshop
October 16, 2010 by Jean Keener, CFP, CRPC, CFDS · Leave a Comment
How much insurance do you really need?
It can often seem challenging to get an objective answer to this question.
On Tuesday, October 19, at 6:30 pm, I will be presenting a free personal finance workshop at the Keller Public Library on life insurance, disability insurance, and long-term care insurance. We will cover the basics of each type of coverage: what it is, who should consider having it, different kinds, and criteria to determine how much (if any) to purchase. You will receive objective facts on these important insurance coverages to support your decisions on managing financial risks for yourself and your family. I’m a fee only financial planner which means I provide financial advice and planning, but I don’t sell financial or insurance products or receive any compensation from your purchases.
The Keller Public Library is at 640 Johnson Drive. RSVPs are encouraged to ensure adequate seating to library@cityofkeller.com.
When an Insurance Company Fails
May 10, 2010 by Jean Keener, CFP, CRPC, CFDS · 1 Comment
Last week I attended the Financial Planning Association annual symposium in Dallas, and one of the speakers was Bart Boles, executive director for Texas’ insurance guaranty association. He shared the association’s processes when an insurance company fails, and how we as the consumer would likely be affected. Some of the exclusions and limits are important information to consider in your individual planning process. With this information, you can make smart insurance purchase decisions and avoid any surprises if the worst happens.
If your insurance company fails, here are the limits to what the association would cover.
Funds required for this coverage don’t come from tax payer dollars. They come from assessments of other insurance companies.
Health Insurance (all per individual per insolvent company)
- $500,000 for hospital, medical & surgical and major medical
- $300,000 disability and LTC insurance
- $200,000 all other health insurance
Life Insurance (all per insured life per insolvent company)
- $100,000 of cash surrender value
- $300,000 of death benefits
- $5 million per owner of multiple non-group policies
Annuities (all per insolvent company)
- $100,000 of the present value of annuity benefits per insured life (individual and allocated group annuities)
- $100,000 per payee for structured settlement immediate annuities
- $5 million per owner of unallocated group annuity
Aggregate Limit
- $300,000 of aggregate benefits for an individual per insolvent company (with the exception of the individual limits listed above exceeding this amount)
Exclusions
Some of the exclusions include:
- Insurance policies with insurance companies not licensed to do business in Texas
- Benefits of an insurance policy that are not guaranteed by the insurance company (such as the non-guaranteed portion of a variable life insurance or annuity contract)
- Benefits for which the policyholder bears the risk (such as certain variable or indexed annuities). Specifically, equity-indexed annuities are not covered.
- Interest rate yields that exceed an average rate set by the terms of the Texas Guaranty Association law. This can come into play with some annuities offering high guaranteed rates.
- Items not part of the specific written terms of the policy, such as claims based on marketing materials, side letters, riders not part of the approved policy form, misrepresentation, etc. For example, if the agent wrote a note on your application guaranteeing a benefit that’s not expressly in the contract, that’s not covered.
- PBGC protected annuities
- Property and casualty insurance policies (such as auto, homeowner’s, workers compensation, etc.). This is covered by a separate guaranty organization. Their website is: http://www.tpciga.org/
There are other exclusions as well. For more information on this, visit the FAQ section of the Texas Guaranty Assocation’s website.
In addition to the limits, being aware of the exclusions is also an important part of the insurance purchase process. If your policy is fully excluded, an extreme amount of due diligence needs to be done on the company prior to purchase. If a particular guarantee is a critical part of your purchase decision, you need to read the actual contract and make sure it’s clearly communicated in the contract and not just in the marketing materials. You should also verify that the guarantee falls within the limits of what’s covered. If it’s above the limits, consider the worst-case scenario and ask yourself if you could live with that outcome and if your purchase decision still makes sense given that possibility.
New Health Care Law Highlights
April 2, 2010 by Jean Keener, CFP, CRPC, CFDS · Leave a Comment
If you’re like me, you found it challenging to keep up with the provisions of the health care bills as they worked through the legislative process. But now that the bill is law, it’s helpful to understand how it may affect your individual situation and any changes that need to be made to your financial plan as a result. An overview of some of the most significant provisions:
For individuals
- U.S. citizens and legal residents will be required to have health insurance by 2014, with some exceptions. Those without insurance will face a tax penalty of as much as 2.5% of taxable income.
- Existing employer-sponsored health insurance plans will be allowed to remain essentially the same except the plans will be required to extend dependent coverage to qualifying children through age 26, lifetime limits (and eventually, annual dollar limits) on coverage must be eliminated, waiting periods for coverage cannot extend beyond 90 days, and insurers will not be able to deny coverage or charge higher premiums to people based on their health status and gender.
- Medicaid eligibility will be expanded to include individuals under age 65 whose income is less than 133% of the Federal Poverty Level.
- For families with incomes up to 400% of the Federal Poverty Level, tax credits and subsidies will be available to purchase health insurance through state-run exchanges, and to offset out-of-pocket costs.
- Contributions to a health flexible spending account will be limited to $2,500 per year. Reimbursements from health FSAs and HRAs for over-the-counter drugs will be restricted, and tax-free reimbursements from HSAs and Archer MSAs for over-the-counter drugs will not be allowed, while the tax on HSAs and Archer MSAs increases for distributions not used for qualified medical expenses.
- A rebate of $250 will be available to Medicare Part D (drug coverage) beneficiaries who reach the coverage gap (donut hole) and the coinsurance rate for costs within this gap are gradually reduced to 25%.
- Adults with pre-existing conditions will be able to purchase coverage from temporary high-risk pools until 2014, when coverage cannot otherwise be denied for pre-existing conditions.
- A national program will be established to provide limited reimbursement for long-term care expenses for individuals who participate by contributing to the program’s cost through voluntary payroll deductions.
For employers
- Employers with 50 or more employees that do not offer health insurance coverage will generally have to pay a premium tax of up to $2,000 per full-time employee.
- Employers with more than 200 employees must automatically enroll employees in health insurance plans from which employees may opt out.
- Employers providing health insurance must offer a voucher to qualifying employees to purchase insurance through an exchange.
- Qualifying small employers may receive a tax credit for providing health insurance to employees.
Tax changes
- The threshold for itemized deductions for qualified medical expenses will be increased from 7.5% of adjusted gross income (AGI) to 10% of AGI, though a temporary exception will be maintained for those 65 and older.
- The tax for Medicare Part A (hospitalization coverage) is increased 0.9% for individuals with earnings exceeding $200,000, and for couples with joint earnings greater than $250,000. Also, high-income taxpayers will be subject to a surtax of 3.8% on unearned income, such as capital gains, dividends, annuities, and rental income.
- The law imposes a 10% tax on the amount paid for indoor tanning services.
As provisions go into effect and more details become known, it will be important to update your investments and insurance plans to minimize your tax burden, get the most insurance for your money, and stay in compliance with the law.
Free Financial Webinars
July 10, 2009 by Jean Keener, CFP, CRPC, CFDS · 3 Comments
The National Association of Personal Financial Advisors is starting a new series of free webinars on various financial topics including Money 101, Kids & Money, Investing Basics, Protecting What you Have, and more. These sessions are designed to provide a convenient, accessible way to get financial information to help you most effectively manage your finances. Each one is instructed by one of my fellow NAPFA members. The first session is August 7. For the full schedule and to RSVP, visit NAPFA’s website.