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.

With the exception of a few high profile names, the insurance industry has weathered the sub prime collapse reasonably well as opposed to other segments of the financial sector.  However, profits for the fourth quarter were down significantly for the industry as a whole and many analysts expect that trend to continue for the next couple of years.

Underwriting profits have been trending downward for years since the high rates after Hurricane Katrina started to come fall.  With the lack of a major insured catastrophe in the last few years, price competition is expected to heat up which will be to the benefit of most consumers.  Rates are expected to fall for all segments of the insurance industry with the notable exception of health insurance which unfortunately is still expected to outpace inflation.

Investment income, which has made up the bulk of the industry’s profit has taken a big hit in recent months.  Increased volatility in the stock market as well as disruptions in the bond market have both been to blame.  It will become increasingly difficult to maintain the level of investment income of recent years with the economy in the state it’s currently in.

However, the financial strength of the industry is not in doubt.  Large capital reserves have been built up since Katrina and the claims paying ability of the industry is as strong as it’s ever been.