Insurance Quotes & Advice

As you grow older, the cost of insurance, especially for life and health can grow increasingly burdensome once you pass the age of 50.  Life insurance can be planned for more easily than for health insurance but even it can have it’s own problems.

For those that choose the term life option when they are younger as opposed to whole life, when your initial policy expires, the cost to renew can be prohibitive.  It may make more sense to switch to whole life at this point rather than taking out another term life policy.  One would also expect to be more financially secure the older you get so that you may not need as high a principal value for your policy.

Health insurance can be a large problem for Americans between the ages 50 and 65 years before you become eligible for Medicare.  Companies are also now able to reduce or eliminate some healthcare benefits for employees once they become eligible for Medicare so even after age 65 it’s no walk in the park.

After you pass the age of 50 and you are between jobs, it is imperative that you make the full use of your Cobra options because once you go 63 days without renewing your policy, insurance companies can legally turn you down or refuse to cover your pre-existing conditions.

Make sure also to use any tax related benefits that are open to you.  It may make more sense to switch to a high deductible policy and fund a Health Savings Account which can save you up to 30% for what you put into it.  You are also able to deduct all medical costs that exceed 7.5% of your annual gross income.

The fact of the matter is, you will more than likely have to make some sort of sacrifice in order to keep costs down.

The insurance industry is faced with the outlook of declining investment income for the foreseeable future with the economy in it’s current state. The industry’s losses due to the collapse of the subprime mortgage market is expected to eventually surpass the claims paid out for Hurricane Katrina.

What most people don’t realize is that a large percentage of the industry’s profits are derived from investment income rather than insurance premiums. For the most part, insurance companies tend to price policies to closely match what they expect to pay out in claims. They usually do this in an attempt to gain market share.

Now, it doesn’t take a genius to figure out that companies aren’t around to just break even. Most companies will have a target rate for Return On Equity(ROE) that they wish to achieve. But with investment income declining something has to give.

Even in relatively good times for the industry, they are usually involved in a number of disputes with state regulators over insurance rates. I’d say you can expect some bitter fighting later this year when companies submit their next annual rate proposals.

Many states make it illegal for companies to raise rates to make up for a previous year’s investment losses. However, companies do submit estimates on their projected investment income when they file rate proposals. With those projections expected to fall, there will be a growing pressure for insurance companies to raise rates to compensate.

Losses from the subprime mortgage collapse are finally catching up to the insurance industry.

“The collapse of the subprime mortgage market will lead to record losses for insurance companies, overtaking Hurricane Katrina, the worst natural disaster in U.S. history.”

Insurance losses to date from the subprime collapse is estimated at $38 billion and is expected to surpass the $41 billion the industry paid out for Katrina.

American International Group, the world’s largest insurance company has been the hardest hit so far with writedowns exceeding $11 billion.  Even more troubling has been the losses for the bond insurance industry which have caused severe disruptions in the normally placid bond markets.

This has caused a spillover effect to the rest of the financial sector as many institutions have had to writedown losses due to bond revaluation in their asset backed portfolios.  Municipalities are finding it especially hard to issue new debt even with their stellar default history.

While the insurance industry has historically fared better the other business sectors during a recession, even it has failed to escape the virus of the subprime mortgage collapse that has infected so much of the economy.  With credit markets steadily growing worse it’s not known how high these losses could rise.