Lazy Man and Money

How High-Risk Drivers Can Save Money on Car Insurance

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Last week I was in Washington DC to support my wife’s Veterans Day event at the White House. (I didn’t get to go, but she says the White House Lenox china is excellent. To make up for some missed time (and give me a little time to catch up) the folks from Marketwatch are here to provide you a little weekend reading.

Drivers with less than perfect driving histories often face higher car insurance rates. But there are ways to save money on car insurance if you know how to shop around. Here are some tips that can help high-risk drivers bring down their premiums and find the best car insurance for them.

What Is a High-Risk Driver?

Although it’s not an official legal or insurance category, a high-risk driver is generally someone with a poor driving record. This group can include drivers with:

  • DUI or DWI convictions: Driving under the influence of drugs or alcohol is illegal in every state. If you’ve been convicted of DUI, your car insurance rates will likely be high.
  • Traffic tickets: Drivers with a history of traffic violations tend to be at higher risk.
  • Multiple at-fault accidents: At-fault accidents that result in property damage and bodily injury are also high-risk factors. Insurers specifically look at your accident history in the past three to five years.
  • Driving without a license: Having a suspended or revoked license is another high-risk factor. In some states, it’s also a crime. Depending on the reason for the suspension, you could fall into the high-risk category.
  • A poor credit score: Insurers often check your credit report when you apply for car insurance. If your credit score is low, it could mean higher rates.
  • Multiple claims: Newer drivers are often given higher rates due to inexperience. It can also affect experienced drivers if they make too many claims. Car insurance companies may view many claims as a pattern and increase your rates.

Why High-Risk Drivers Pay More

When you apply for car insurance, insurers may use your DMV record to generate an “insurance score.” This score is an indicator of how likely you are to file claims. Typically, insurers look at the past three to five years of your driving history. A high insurance score will increase your premiums. For instance, someone with an accident on their record can pay 30% more for auto insurance.

How to Save Money on Car Insurance If You’re a High-Risk Driver

First, you need to ask your insurance company about its policy. Some insurers use credit scores to determine car insurance premiums rather than driving records. Another insurer may offer discounts for drivers who take a safe-driving course.

If you need to shop around for car insurance, remember that some insurers will charge a high rate from the start. Other companies may offer insurance rates to high-risk drivers. However, they may add conditions. For example, you may need to stay accident- and violation-free for a period, usually 12 months.

After that time has passed, you can contact the company and tell them that your record is clean. You may then be able to get a better car insurance rate with that company.

When shopping around for quotes, call at least three companies to better compare car insurance quotes. Give yourself ample time to compare car insurance rates, as well as to find the minimum liability limits you need for your state.

Reading customer reviews iis also an important part of the car insurance shopping process.

In most cases, getting cheaper car insurance as a high-risk driver is possible. But you have to be patient. Shop around for the best rates, take any safety courses or training you can, and give yourself enough time to stay accident-free.

Additional Tips for Lowering Your Car Insurance

Here are some additional steps high-risk drivers can take to find discounts and save money on car insurance:

  • Ask about discounts and promotions: Before you sign up, find out if the insurer offers any discounts based on your driving record or other factors. Make sure that the insurer you’re comparing rates with is offering discounts. If you’re not sure, contact the insurer and ask about any available discounts that would apply to your policy.
  • Raise your deductible: Raising your deductible can lower your premium payments. Although it’s not for everyone, increasing the amount you pay out of pocket before insurance kicks in is a good way to lower your premiums.

Find a Better Car Insurance Company

If you have a high-risk driving record, you can lower your rates by following these tips and tricks. It might seem like the odds are stacked against you but don’t give up just yet. The right auto insurance is out there.

Do I Have Enough Life Insurance?

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Over the last few months, I’ve been writing about life insurance. I covered why life insurance is important, the best times to buy life insurance, and the pros of cons of whole vs. term life insurance (the two major types of insurance).

Today, I’d like to cover the basic question that many people ask themselves, “Do I have enough life insurance?” I’ll do that by using myself an example. Everyone’s life situation will be different and your situation will be very different than mine. However, maybe by reading my thought process, you’ll get some insight into what may work for you. As always, I recommend hiring a professional advisor to help guide you through specific personal questions you may have.

With that out of the way, let’s dig in. Time to play, “Do I Have Enough Life Insurance?”

How Much Life Insurance Do I Have?

You answer any “enough” question you need to two components: 1) the amount you have and 2) the amount you need. Calculating what you have is always easy. If you have life insurance, you probably have the paperwork around somewhere.

Because I’m married, I’m going to answer this question jointly with my wife. I personally have $500K of term (20 years) life insurance. It was bought before my oldest son was born. The idea behind it was that if I died, it would comfortably cover child care expenses until he was in college. When we had a second boy nearly a year later, we didn’t make any changes. Raising two children with $500K is not quite as comfortable as raising one, but it’s still a healthy number, right?

My wife has $400K of life insurance through her employer, the United States Health and Human Services. Unlike when we bought insurance for me, we didn’t add more life insurance on her. Why? We were told that adding life insurance on a pregnant woman wasn’t particularly feasible due to possible complications of the pregnancy itself. I don’t know if this is really true, but with $400K under our belt and enough other things to think about (“OMG we’re going to be parents!”) we let that slide.

How Much Life Insurance We Need?

In the previous articles that I mentioned above, the point of life insurance is generally about insuring against financial obligations if you die.

Above, I mentioned two financial obligations, our two sons. (I’m sure they love being referred to as that when reading Dad’s blog years from now.) At ages 4 and 5, we still have a long way to go until they are on their own, but it’s already flying by too fast. On the other hand, we got through the first quarter of raising them. When they go to Kindergarten, child care gets a lot cheaper. With either of our deaths the $400K or $500K goes a lot further now. The $400K, left uninvested, would be $28,500 for the next 14 years, which feels fairly comfortable given our frugal lifestyle.

The other financial obligation we have is our home. We need to pay our mortgage. However, I considering that a “necessary expense” just like, “We need to buy food.” We have a very low interest rate, 2.75% on a 15-year mortgage with about 9 years remaining on it. We are currently paying around $32,000 a year on it. The $400K or $500K could be used to essentially eliminate one of the biggest expenses – a place to live. There’s tremendous overlap between the costs of raising two boys and the biggest expense of a place to live for all of us.

In either case, I can see $400K or $500K being enough to “get to the finish line” with the mortgage and the kids to age 18.

Now this presumes that there would be no other income coming in. I’m not sure that’s realistic. Let’s take the two scenarios:

If I died, my wife would be able to continue to work her 6-figure pharmacist position. In a year, she’s eligible to retire from active duty with 20 years of service as a commander officer, which makes her eligible for a pension. I estimate that to be worth around $50,000 a year. She could retire and work part-time at a local pharmacy for some extra money if necessary. With my $500K of life insurance, she could continue to earn six figures without working much at all until the kids are ready to take care of themselves.

If my wife died, things would be tougher. I don’t know whether there is a pension for suriving spouses who haven’t reached 20 years of service. For that reason, I’ll consider the pension a $0, but when she does become pension eligible, we’ll have an option to insure that pension. This is almost a type of life insurance in and of itself. In the zero-pension scenario, I’d use the $400K as a bridge to get to the finish line (kids become 18 year-olds). I’m fairly frugal which allows me to stretch a dollar further than most people. While blogging and dog sitting aren’t very steady forms of income, I feel fairly confident I can bring in a combined $25,000 a year with them in bad years. I’d actively look for a more traditional job using my computer science degree that would pay a lot better. Right now, I value the flexibility of blogging and dog sitting to support my wife’s career.

This article is already long enough, but I’m leaving out two more pieces of the puzzle. We have some cashflow-neutral investment properties that I estimate will pay around $40,000 a year in 10 years when the mortgages are paid. So that’s another positive. On the negative side, I presumed the kids will not need financial support after 18, which isn’t likely. I think these cancel each other out or lead to a net positive in cash flow down the line.

Final Thoughts

Based on this, I’m thinking that it would be best to supplement my wife’s life insurance by perhaps buying an additional $500K policy on her. The wild card is the pension, which can make a world of difference. Once I understand the rules around her pension in more detail, I will be better able to decide how much life insurance I would need for income replacement.

The above article is brought to you by Midland National. You can read the latest Midland National News here. These are my own words and thoughts.

The Best Times to Buy Life Insurance

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In personal finance we often say the best time to buy into the stock market was years ago… the second best time is now. For many people, buying life insurance is the same way. I should stress the “many” there, because not everyone necessarily needs life insurance. Let’s put aside “now” for now and get to some of the other best times to buy life insurance.

I think there are four major times in your life to consider buying life insurance. In my opinion one of them outweighs all the others. I’ll lead of with it because it’s when I bought life insurance:

1. When You Become a Parent

Creating and/or caring for very little human lives is kind of a big deal. After all, a career in baby modeling is kind of a long shot. They need someone to take care of them. Ordinarily, it’s a difficult job to do. It’s much more difficult if you are not living. Maybe a spouse or partner can do it, but they may need to work. That’s when it comes in handy to have a bunch of money around. Suddenly day care and babysitters are one less thing to think about.

2. When you Buy a House

As one real estate agent said to me, “A mortgage is an obligation.” I think he went on to say that if I died my estate would have sell the condo to pay back the bank. At the time, I was fine with that because I wouldn’t need the condo any more since I wasn’t living in it. However, what I didn’t know at the time was that the housing market was going to collapse. My property lost more 40% of it’s value. If I had died around that time, my estate would have to come up with the $80,000 difference.

Fortunately, I had decent assets in my retirement accounts at the time, so I decided against buying life insurance.

Double fortunately, I didn’t die and the housing market mostly recovered.

3. When you Start on Your Own

When you leave your parents’ nest and have to live on your own, it’s worth looking into buying a small amount of life insurance… enough to cover funeral services. The idea is not to be a financial burden on your loved ones. This came up in the comments of my previous article, and I dismissed it. My thinking was that you can always plan for a frugal funeral if that’s your concern. If you do that and keep an emergency fund of a thousand or two you should be fine. In fact, perhaps you have possessions like a used car that could be used to pay for funeral services.

I had some people say that I shouldn’t dismiss the costs so quickly. Out of respect for their opinions, I include this on the list.

4. When You Become a Parent (Part 2)

You’re not imagining things, this is a re-run of #1 above. However, in #1, I was talking about buying life insurance for yourself. Instead, I’d like to talk about buying life insurance for your child. It may sound silly buying insurance for a baby. I thought it was silly the first time I read about it here. However, take a minute and think about it. I know it’s difficult, because it’s essentially the worst thought to have in head. However, not thinking about it doesn’t make it go away.

What if you did lose your child? Would you be able to work? I can’t imagine that I’d be able to focus very well. If you have an understanding employer perhaps you can get some time to grieve. Money isn’t going to heal those wounds. However, it can buy some time to try to put your life back in order as best you can.

Can you think of other times that are great for buying life insurance? Let me know in the comments.

The above article is sponsored by Midland National. If you are in the market for life insurance they have a great BBB rating. Even though this is a sponsored article, these are my own words and thoughts.

Pros and Cons of Whole and Term Life Insurance

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Did you know that September is Life Insurance Awareness Month? It is according to the National Association of Insurance and Financial Advisors (NAIFA).

You are probably thinking, “That’s great, but ummm, isn’t this the last day of November?!?!” That’s a great question. I wrote this article back in September, but a series of unfortunate events brings me to publishing it today.

It’s one thing to procrastinate in publishing a life insurance article. It’s quite another when it comes to buying life insurance.

Let’s get back to NAIFA. They have a scary message for America:

1 in 3 households would have immediate trouble paying living expenses if the primary wage earner died, according to the 2016 Insurance Barometer Study by Life Happens and LIMRA. And the study also found that 40% haven’t bought life insurance or more of it because they’re unsure of how much or what type to buy.”

I take away two main thoughts from that:

  • As they used to say at my college, “Look to the left of you and look to the right of you. One of you isn’t to graduate in this major.” With life insurance, it’s look to the left and look to the right. One of you isn’t prepared if an unexpected death were to happen.

  • We need to talk more about what types of life insurance is available. Personal finance bloggers (starting with me!) need to do a better job.

I’m going to set aside the question of how much life insurance to buy for another article in the next couple of days or weeks. For now, let’s cover the two main types of life insurance to buy.

What are Term and Permanent Life Insurance?

Term life insurance is what you might expect… insurance for a term (number of years) of your life. Your coverage lasts for your policy’s particular term, like 10, 20, or even 30 years. At the end of the term, the level premium expires.

Permanent life insurance is also what you might expect… a permanent insurance policy designed to last your entire lifetime. As long as you keep paying the required premium, your beneficiary will receive the death benefit payout when you die.

Pros and Cons of Term and Permanent Life Insurance

The main pro for permanent life insurance is that as long as your policy is in good standing, your beneficiary will get the payout of the money no matter when you pass away. The con is that you may have to pay the premiums for your entire life. Let’s say you buy it at age 30. The price might seem inexpensive cheap, but if you are lucky you’ll be paying for it for more than 50 years. That’s a long time to be paying money, month after month.

The main pro for term insurance is that it is less expensive. You and the life insurance company have a shared interest in you living past that term. You want to life past the term, because living is kind of the main goal in life. The insurance company wants you to live past the term, because then they don’t have to pay out the death benefit to your beneficiary. That’s the main con, you might spend money on your premiums, and if you live past your term, your beneficiaries don’t get a death benefit if the policy is not renewed.

At first glance term life insurance might not sound attractive. In the best case scenario, you are paying an ongoing premium to the insurance company. However, we are talking about insurance and a basic principle of that is paying money in hopes that something doesn’t happen. You might have fire insurance on your house. You aren’t looking for a fire to happen. You simply want to know that if it does happen, the money you receive will get you through the disaster. And if you’re lucky, and your house never burns down, you don’t get the money you spent on fire insurance back. You just chalk it up to the price of financial protection.

So how should you use term life insurance? Here’s an example from my own life. When my wife was pregnant with our first son, I bought a 20-year term life insurance policy. I’m not looking to die in the next 20 years, but if the Land Shark appears at my door tomorrow, my wife will receive enough money to ease the burden of raising the kids. That’s true even though I’m a stay-at-home dad. I still greatly prefer Plan A: living, but I can sleep well at night knowing that either way the kids will be cared for. We have similar term insurance for my wife… I’ve read that the Land Shark prefers females.

By going with term insurance, we were able to pay a lower, affordable premium. You might ask what happens after 20 years. The hope is that the kids can fend for themselves by that time. If not, we still have numerous other investments in retirement accounts and real estate. With 20 years of investment growth, the surviving spouse could use some of that money to give a little helping hand without the insurance money.

As usual, you need to consider what’s best for you. I think it’s always smart to consult your financial professional when making financial decisions like these. That qualified person will be able to explain the pros and cons of various life insurances better than I can in this space.

The above article is sponsored by Midland National. However, these are my own words and thoughts.

The Importance of Life Insurance

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I think I was around 13 or 14 the first time someone asked me about life insurance. My mother described a policy where I could pay some ridiculously low amount, I think around $6 a month for whatever the coverage was. The big question she had for me was whether I’d continue to pay it for the rest of my life to keep it active.

"Do you have a moment to talk about life insurance?"

I like to think I was a responsible early teen, but I didn’t think it was wise to make such a commitment. I only had a very, very high-level understanding of what life insurance was. Looking back at it now, I’m happy I didn’t make a decision to buy back then. Even if I would have ended up saving money over the long haul (and I’m not sure I would), I am more confident in my ability to make financial decisions now than I was as a 14-year-old with limited life experience.

The next time I thought about life insurance was after I closed on my first condo when I was 28. At around the same time one of my good friends became an insurance salesman. He put together an in-depth analysis for me to review. The analysis made the point that if I were to die my estate would still be on the hook to make payments on the condo. However, since I was living there by myself with no dependents, I didn’t really care what happened to the condo.

Finally, at the age of 36, I found myself buying life insurance. What changed? My wife and I were expecting our first child. We both earn an income, but if one of us were to die life would be very, very difficult. In fact, raising a child by yourself and working seems impossible to me. I don’t know how some people pull it off. In an upcoming article, I’ll dig into what kind and how much life insurance we bought and why.

The financial support that life insurance would provide can make a world of difference. Money can be used to buy time, buy day care, camps/after school programs. It simply changes everything.

What’s disappointing to me is that I’ve read that too few people have life insurance. It makes sense to me as it isn’t the kind of thing they teach in school.

If you are looking for a place to get started with life insurance, you might want to consider Midland National’s awards or contact them through their LinkedIn account.

While the above article is sponsored by Midland National, these are my own words and thoughts.