-Leslie, California

Before you look into renewing your policy with the same company, take some time to reevaluate things. Have you made any additions to your home that would increase the amount of coverage you need? Do you have a floater (extra insurance for items in your home that aren’t covered by your standard policy) on your policy that’s irrelevant now?

You’ll also want to check and see if you’re eligible for any discounts with your current company before you decide to stay with your current provider or switch. Because you’ve had both your homeowners insurance and auto insurance with the same company for so many years I would say that you’re on track for a discount, if you’re not getting one already. Companies will often offer a discount for having both your auto and homeowners insurance with the same company. They’re also likely to knock a percentage off your premium for being loyal for a significant number of years. These discounts can be anywhere from 5-15%.

If you’ve put in a call to your provider and you don’t like the price you’d be paying if you renewed, do some shopping around. Sites like insure.com and insurance.com provide free quotes from a variety of different carriers. After you’ve got a rough idea of where you can get the best deal, make some calls to the different providers to get an idea of what your premium would be.

Ultimately, the premium you’re going to pay is based on the risk you present to the insurance company. If the company feels they’re taking a big risk by offering you coverage, you’re going to be paying a higher premium. Luckily, there are things you can do to downgrade the level of risk you’d present to the company.

For one, making your home more secure (by installing things such as deadbolts and a security system) can reduce your premium by about 5%. Minimizing the risk of fire by installing smoke detectors, kicking your smoking habit if you have one, and equipping your home with fire extinguishers also will result in a less expensive premium.

Then there’s the financial aspect. Raising your deductible can reduce your premium. Your deductible is the amount you agree to pay per claim toward the total amount of an insured loss. Most companies recommend that your deductible be at least $500. If you raise your deductible significantly, say from $500 to $1,000 you could potentially save around 25%. Just make sure that you’d be able to pay the higher deductible in the event that something did actually happen.

Keeping your credit score high affects how much you pay too. Your “insurance risk score”, which is similar to a credit score, is taken into account by providers to determine just how likely you are to file a claim. According to the Insurance Information Institute, people who have a poor insurance risk score are more likely to file a claim. But insurers aren’t looking at how much debt you have, they’re looking to see how consistent you are with making payments.

When you’re making calls to providers, keep in mind that many of them offer discounts for a variety of things. Does your employer administer group insurance programs? Are you part of a professional association that offers group insurance? Are you 55 or older and retired? These things might net you a better deal on your premium.

Once you’ve compared the costs, take a look at provider’s complaint ratios and financial ratings. You can check complaint ratios with your state’s insurance department or with the National Association of Insurance Commissioners. You’re also going to want to check the company’s financial ratings. You can do so through Standard & Poors or Moody’s.

One final word of advice: Don’t just choose a provider based on price alone. It’s definitely worth shelling out just a little bit more to get a financially stable provider that will be able to pay for a claim should one arise.

Question: “My life insurance company just had its rating taken down a notch. What does this mean? Should I be worried?”

Answer: Like the rest of the financial world, life insurance ratings aren’t immune to the effects of the recession. According to the American Council of Life Insurers, these ratings are used to help potential and current policyholders see the insurer’s present-day ability to pay claims. Ratings also provide an assessment of the insurer’s vulnerability to possible economic downturns. If your insurance company’s rating has gone down a notch, it means that the financial circumstances of your provider have changed in such a way that increases the odds that your insurer may not be able to pay all it’s expected claims. However, a rating downgrade doesn’t necessarily mean that your life insurer will have this problem. “A one notch downgrade is not serious…there are a lot of companies who are in good shape that have faced minor downgrades,” says David Wentworth of the American Council of Life Insurers. In short-if your insurance company’s rating has gone down slightly, I wouldn’t worry, as long as they had at least a fairly secure rating before the downgrade.

But how do you know if your insurer’s rating is good, or in this case, at least fairly secure? There are four separate organizations that rate life insurance companies: A.M. Best, Fitch Ratings, Standard & Poor’s and Moody’s. According to the ACLI, the way that they rate insurers varies by organization:

A.M. Best: A.M. Best assigns ratings ranging from A++ to F. Ratings from A++ through B+ are thought of as being “secure.” Ratings from B through F are thought to be “vulnerable.” Categories under the “vulnerable” heading range from “fair” to “in liquidation.”

Fitch Ratings: Fitch Ratings assigns life insurance ratings ranging from AAA to C. An AAA rating means that the financial circumstances of your insurer are “exceptionally strong.” A C rating means that the insurer is “distressed.” Ratings from AAA through A are thought to be “strong.” BBB ratings are thought to be “good.” A BB through CC grade denotes a “weak” rating.

Standard & Poor’s: Standard & Poor’s ratings range from AAA to R. AAA, AA and A suggest that the insurer is in a financial standing that is “extremely strong,” “very strong,” and “strong,” respectively. A BBB rating means your insurer is in “good” standing. BB denotes a “marginal” rating. B, CCC and CC ratings mean that your insurer is in “weak,” “very weak,” and “extremely weak,” financial standings respectively. R stands for “regulatory action taken.”

Moody’s: Moody’s ratings range from Aaa to C. Aaa means that your provider has “exceptional financial security.” A C rating suggests that your provider has “extremely poor prospects of ever offering financial security.” A Baa rating means that your insurer has “adequate financial security.”

You’ll be able to access ratings through each of the above company’s websites or at insure.com. For a more in-depth guide to life insurance-what the ratings mean, where they fit, where the division is between secure and vulnerable-check out the September issue of The Insurance Forum available here.

This morning, I joined Dr. Nancy Snyderman – author of Medical Myths That Can Kill You – on Today to talk about the number one cause of bankruptcy in the country.  If you watched the video above, you know it’s not unaffordable mortgages or even credit card debt.  

It’s illness. And cancer patients are suffering. They’re having trouble paying for life-saving care – running up large debts, filing for personal bankruptcy and even delaying or forgoing potentially life-saving treatment. Even having private health insurance (that you purchased or receive through your employer) isn’t enough to save you.

A new report by the Kaiser Family Foundation and the American Cancer Society notes that cancer patients in particular suffer financially because: 

• Even covering part of the cost can be hugely expensive. It’s fairly common for patients to max out on the number of treatments for, say, radiation, that your insurance policy will cover. Then you need to come out of pocket for those costs. And patients routinely hit the lifetime maximums their coverage allow and then are left on their own.
• Patients lose benefits by being too sick to work. If you’re sick and unable to work for 60 days or more, you could lose your job and with it your health coverage. You are eligible to maintain those benefits under COBRA for 18 months, but premiums for a family run $1,200, or sometimes more, a month.
• Pre-existing conditions. Private insurance companies often won’t cover people who have had cancer. Or, if they are willing, the premiums are again prohibitively expensive. One man, a 10-year survivor of prostate cancer, has to pay one-quarter of his income just to cover the premiums on his policy.

So what are patients – and the people who love them – supposed to do?

Talk to your doctor. When you receive a diagnosis, sit down with your doctor with pencil and paper – it’s very difficult to remember things when you’re under stress – and ask:

1. What type of treatment will I need
2. What are the side effects in relation to my job? And how can these be managed?
3. If I’m worried about managing the costs of care.  Who can help me?

Take that information to your benefits department, or if you work for yourself or a small company without a benefits department, talk to your insurer directly. You need to understand what is covered under your plan, what sort of pre-approvals you will need, how you can best work within their process to get your claims paid, and – if you can – find a person within that insurer that you can talk to if and when you have questions. The sad thing about health insurance, although it’s such a necessity these days, is that most people spend less than an hour deciding which of the plans they are offered makes sense for them. And very few people read the manual until they need it. We’ll have another open enrollment period in the fall, and it makes sense to spend a little time making sure you’re on the best plan for you and your family.

If you don’t have health insurance – if you’re one of the 45 million people without – understand that there is a much bigger, more democratic market for policies for individuals. A high deductible policy, which won’t cover your occasional visits to the physician, but will step in to help protect you from financial ruin if you’re facing cancer, is much more affordable and available than it used to be. Go to ehealthinsurance.com to get started.

Also know that there is a network of organizations that offer financial assistance for everything from travel (including corporate jets, private pilots and transportation for families of the patient as well as the patient), housing (there is a network of more than 150 nonprofits that provide lodging and support to people receiving treatment away from home), medication (through various prescription assistance groups), and out-of-pocket medical costs that insurance doesn’t cover.  Go to cancer.net or cancercare.org for comprehensive lists.

Unfortunately, most of us don’t prepared for these crises before hand – and then make some wrong early moves when they actually hit.

Q: How unprepared are we?

A: According to the study, out this week, that depends on which crisis we’re talking about.

51 % were unprepared to deal with job loss
44 % were unprepared to deal with the disability/serious illness of a child
42 % were unprepared to deal with disability/serious illness of a spouse
35 % were unprepared to deal with divorce

And the mistake we make is turning to our nearest and dearest.  Friends and family may provide the shoulders we want to lean on, but don’t often have the correct answers.  Yet that’s where we go.

Q: We think of these as life catastrophes.  You say they’re financial ones?

A: Absolutely, and the sooner you start to think of them in that regard the better off you’re going to be.  60 percent of Americans who experienced a long term job loss reported a significant impact on their finances.  50 percent said the same of a serious illness.  We already know that health events are the things that drive the most Americans to bankruptcy.  And divorce is the dissolution of a business partnership as much as it is an emotional ones.

Q: And you say women get the worst of it?

A: I say it, and so does the research.

65% of women vs. 49% of men were likely to have had a crisis
66 % of women vs 49% of men suffered a significant financial impact because of job loss
46 % of women vs 17% of men suffered a significant financial impact because of death of a spouse

Q: So let’s talk about what you SHOULD do, knowing that the likelihood is one or more of these crises will eventually head your way – and in case one does.

1.  Job Loss is crisis #1 these days with the unemployment rate rising to 8.1% in February, and according to yesterday’s jobs number 669,000 jobs lost last week (up 12,000 from the week before).  What do you have to do to prepare for the possibility that this could happen to you.
•    Be realistic.  You may feel as if your job is secure.  It may all be a mirage.  With the economy in turmoil, your best defense is a good offence.  If you are not networking, not polishing your resume, not considering a sideline business just in case, you’re kidding yourself.
•    Stop spending.  There is one thing you need to get you through a long and extended layoff: Cash.  The key is to raise some without raiding your retirement accounts, maxing out your credit cards, and depleting your home equity.  That argues for doing the thing we’ve been talking about for weeks, beefing up that emergency cushion by taking an axe to all unnecessary expenditures. Jeff Yaeger said early this week you could save $20K this year by eliminating your cell phone and other major moves.  You may not want to do it.  You may have to.
•    And if it happens: Look into continuing your insurance at group rates, negotiating your severance package, whether or not you have to repay loans from your retirement plan and whether or not you can use accrued vacation time to extend your unemployment benefits.

2. Disability.  According to the survey, 84 percent of people under 60 have life insurance, yet only two-thirds have disability.  That’s a risk because disability or serious illness ranked second as a financial hardship.
•    Know what you have.  A number of employers still offer disability insurance their menu of benefits.  You should know what you have in terms of coverage and consider extending your benefits with gap coverage.  Many people don’t do this because it’s expensive.  But you can bring the cost of disability insurance down by waiting 90 days for benefits to kick in.
•    If it happens. Look into whether you have paid time off – i.e. sick leave – that you can be paid for.  You may be eligible for workers compensation if it happened on the job.   Make sure you continue your health insurance coverage because it can be much harder to get if your coverage lapses – especially following a disability and what you have may be now considered a pre-existing condition.  Look into whether you qualify for disability benefits through the Social Security Disability Insurance program (it depends on the number of years you contributed to social security and your wages.)

3. Longterm Illness.
•    Many of the same things that apply in the case of disability apply here, including the importance of maintaining your health insurance policy.
•    Consider other sources of income.  If the illness prevents you or a spouse from going back to work, you’ll want to start to look into other sources of income above and beyond SSDI.  Are there businesses you could start from home?  Would your former employer work out a flexible arrangement?
•    In the case of a child’s illness or disability, it is important to speak to an estate planning attorney about setting up a special needs trust.  You want to put aside funds for your child but do it in a way that it won’t impede your child’s ability to get state assistance.  This typically means one or more special needs trusts.  Professional help is a must here.

4. Divorce
•    Assert your financial independence.  Even if you’re married, you should have a degree of financial independence – that means your own checking account, your own credit cards, your own knowledge of your credit history, your own retirement accounts (a spousal IRA if you don’t have a work-based retirement plan).  Why?  Because even if you believe that your marriage will last forever, divorce is not the only thing that can take it away from you.  Women outlive their partners by an average 7 years and as a result 95 percent of us will have to manage the money at some point in our lives.  Too many don’t know how.
•    If it happens: Do a reckoning.  How much are you working with in terms of income and assets.  What are your monthly expenses?  Could you pay them based on your income alone.  As you go through the process of a divorce, it’s really important to approach it as the dissolution of a business.  Don’t accept an asset (like the house) without considering whether you have the income to support it.  Be careful of joint debts.  Even if your former spouse says he or she will pay them, they are considered joint debts if accrued during a marriage.  You will be on the hook for them if that ex-spouse defaults.

5. Death of a spouse
•    Again, just like with divorce – the fact that death generally hits one spouse before it hits another is THE reason to maintain financial independence through a marriage.  You BOTH need to know where the money is.  All of the bullet points above about your own credit, bank account, retirement accounts applies.
•    Know where the important papers are.  At the very least, know where the will, living will and durable powers of attorney are kept – keep a copy at home not just in the safe deposit box – so you can access them quickly.
•    When it happens – there are people you’ll need to call.  Your spouse’s employer, banks and brokerage firms, insurance providers and your own lawyer and tax advisor.   That’s just the first step, but these people will get you on the road.

Watch the video to see my answer, then follow the jump to see the full details of this plan, which is going to help a lot of people.

People who are laid off between September 1, 2008 and December 31, 2009 will qualify for the COBRA subsidy, which pays for 65% of your COBRA premiums (you pay 35%). If you lost  your job during that time period and you turned down COBRA because you didn’t think you could afford it, it’s not too late: You now have an extra 60 days to elect to receive COBRA and get the subsidy. The premium subsidy applies, however, only to coverage on or after February 17, 2009.

The 65% will be paid directly to your employer, insurer or health plan.