Evolution of Wealth

Yakezie Challenge Link Rodeo – Special Midweek Edition

Evolution Of Wealth — Thu, 15 Jul 2010 03:12:34 +0000

If you’re not familiar with the Yakezie Challenge by now you’ve really missed the boat. This is a great group of personal finance bloggers that are doing a ton for each other. Trust me I know first hand.

Financial Samurai who started the challenge just posted an inside look at Yakezie – stage one, which gives a great recap of the his progression throughout the first stage of the Yakezie challenge.

The Saved Quarter just recently posted the Best of The Yakezie Challenge, featuring all the members and their favorite posts of the past year.

Without further ado, I present to you the Yakezie…

Am I Living In A Parellel Universe? from @financialsamura
Payday Loan Fees and Interest Rates: Fair Comparison? from @flexo
Truth in Savings Act from @cc_chaser
A modest prediction for the next 20 years from @extremejacob
Types of Mortgage Loans from @freefrombroke
A Clever Consumer Trick for Ensuring Smart Spending Decisions from @LenPenzo
Calculating Fuel Economy from @canadianfinance
Multitasking Doesn’t Work from @plantingdollars
How An Immediate Annuity Payout Really Works from @Neal Frankle
5S In Action Organize and Simply from @leanlifecoach
The risks of buying mark to market investments on margin from @monevator
Free Consumer Report from ChexSystems from @danielpacker
Keeping Your Pet Safe With Spot-on Flea and Tick Control from @moneyfunk
Why Teachers Anger Me from @mjtm
Cheap Cheesy Chicken Enchilada Recipe Easy and Delicious!!! from @bitfs
Having a Baby- Is it Cheaper When Youre Younger, or Older from @ultmoneyblog
My Paycheck is Smaller: Health Insurance Saga from @bucksome
Social Security Benefits May Be Delayed Until Age 70 from @smtblog
Girl Ninja finally guest posted here from @punchdebt
Settling an Insurance Claim After an Accident Struggling with Guilt, Doubt and Greed from @pfbythebook
Do You Really Want To Get Out of Debt from @onemoneydesign
4 Compelling Reasons To Use Online Bill Pay from @notmadeofmoney
Let Financial Not Fashion Sense Run Your Back-to-School Shopping from @arohan
Get Better Auto Insurance, Better Service and Better Savings by Following These Steps from @rainydaysaver
A Bastille Day Roundup from @joetaxpayerblog
Going to Sweden on Vacation and Worried About Spending! from Frugal Zeitgeist
Losing Control To Lifestyle Inflation from @money_reasons
The Debt Destroyer Financial Reality Check from @deliverawaydebt
Gold! from @kevinduffey
SpotLight Investing & Portfolio Optimization from @finengr
What stuff and leeway will you give your kids from @consumerboomer
Student Loan Debt Forgiveness | For Ministers & Non-Profit Workers from @mh4christians
Why I Want a New Washing Machine from @outofdebtagain
Tuesday Tips, Week 18 from Little House in the Valley
The Purple Haze Condom Company Goes Public! from @drdeanburke
Coupon Cactus: Coupons and Cashback Yes, please. from @centsiblelife
Buy New Car vs. Keep Old Car from @wellheeledblog
Why I am Obsessed with Change from @eventualmillion
Another Reason to Eat Organic Produce from @cooltobefrugal
The Importance of Extreme and Specific Focus from @pffirewall
Balancing Freelancing with an Office Job from @Elle_CM
Blogging Sabbatical Update: Month 1 from @fiscalfizzle
Adios, Sayonara, and Arrivederci Pet Insurance! from @youngandthrifty
REDUCE STRESS; Get Rid of Dysfunctional Money Behaviors Part 1 from @bfinance
Important Changes to Tax Cuts, Credits and Deductions in 2011 from @beatingbroke
Belief from @zachyounkin
Fourth of July Lessons from The Amateur Financier
Will You Have Enough Retirement Savings from @redeemingriches
Deadline To Close On Your Home And Receive Your Homebuyer Tax Credit Extended To September 30th from @smartonmoney
Trials and Tribulations of Car Buying from @cjbowker
Hall Closet and Master Closet, Organized from The Saved Quarter
The cycle of living paycheck to paycheck from @grlredballoon
People today: ruder than ever? from Simple Life in France
Everything Happens for a Reason from @myfinobjectives
My Bday Giveaway, Yakezie Round up, and Uncommon Money News (Vol. 102) from @roshawnwatson
The Path To Financial Freedom: Get Your Mind In The Game from @financiallypoor
Save More: Looking for Places to Cut Back from Peak Personal Finance
Cosmopolitan Blog Awards from @miss_thrifty
Staying Motivated During The Personal Finance Blahs from @moneybeagle
Interested in where interest rates are going from Invest It Wisely
Money Saving Tips: 8 Cheap Tools You Want to Own from Frugal Confessions
Day 33: Annual Goals Update: Personal Goals from @151daysoff
Family Camping…and A Lesson Learned from @fambalancesheet
Why I Spent $2,000 on an Airplane Ticket from @foreignersfinan
Tax Credit and Deduction Adjustments to Be Aware Of from @clarky07
Does Name Brand Life Insurance Matter from @clarifinancial
How Can I Pay Less For This from @singleguymoney
In Defense of Teachers from @everydayfinance
Stop Being Cheap, Start Being Frugal from @pfninja
Faithfully Rich from @bibledebt
Check Your Credit Report from @narrowbridge
5 Key rules of the Roth IRA in 2010 from @mymoneyminute
A curious thing…. from Digging Out From Our Mess
SmarterSpend Wins Award for Being a TOP Business Blog in Living Smart Category from @smarterspend
Away Working On A Project from @endingratrace
How to make tent camping comfortable from @winformatics
Is That Cell Phone Necessary from @wealthartisan
Gold Priced in US Dollars (USD) July 2010 Update from Retirement Investing Today
On Vacation from @morestyletcash
Emerson Electric Company (EMR) Dividend Stock Analysis 2010 from @dividendmonk
Bought a Lawnmower in the past 16 YEARS Get up to $75 from @sahmcfo
Guess who’s back from Chasing Prosperity

Enjoy The Yakezie!

The Corporation

Evolution Of Wealth — Thu, 01 Jul 2010 15:06:50 +0000

A business can be operated in an unincorporated form, such as a sole proprietorship or a partnership, or the business can be operated in an incorporated form, such as a corporation. This business structure is the most complex of the three, and is defined as “an artificial being, invisible, intangible, and existing only in contemplation of the law.” A corporation is considered a distinct legal entity, that is, separate and apart from the individuals who own it.

Corporation Characteristics

A unique feature of this type of business structure is its ability to exist for an indefinite time. This is a distinct advantage over the sole proprietorship and partnership business forms. A corporation also cannot be terminated by any change, removal, or death of an owner and/or stockholder. It is usually formed by the authority of the state government. Doing business in more than one state means that you must comply with each of the individual state laws, and these can vary considerably.

Additionally, corporations can be divided into two broad categories:

public—A public corporation is a governmental body, for example, a state or political subdivision of a state.
private—A private corporation is one that is created for commerce; it can have various characteristics of distinction with regard to stock or non-stock entities, religious, charitable, etc.

Corporations can elect how they want to be treated tax-wise. For example, a business that is incorporated can elect to be a non-profit; a “C” corporation; or a “Subsection S” corporation, all of which dictate their own tax status.

Advantages of the Corporation

limited liability—Unless otherwise noted, the liability of the owner-stockholder is limited to his or her amount of investment.
transfer of ownership—Ownership can be transferred without affecting the ongoing operation of the business.
separate entity—A corporation has status and is recognized as a separate entity, separate from the stockholder owners.
stability—It is relatively permanent in the sense that it continues to exist and to conduct business in the event of disability, illness, death, or any other condition that could impact an owner/stockholder. This is not true of a sole proprietorship or a partnership form of business.
ease of securing capital—A corporation can secure large amounts of capital by issuing stock and long-term bonds. Long-term financing can also be secured by taking advantage of corporate assets.
centralization of management—Owner/stockholders have supervised control of centralized management when they hire officers and managers.
the availability of expertise and skills—The business can rely upon the expertise and the skills of many people.

Disadvantages of the Corporation

limitations—Some activities are limited by the corporation’s charter and by various state laws.
management—A corporation has a more complex management structure than that of a sole proprietorship or partnership. Management decisions must go through a structured process.
manipulation—Minority stockholders can sometimes be exploited.
regulation—Corporations are extensively regulated at the state and federal levels.
expense—Forming and maintaining this business structure can have greater expenses when compared with a sole proprietorship or a partnership.
taxation—The business has more taxation oversight, in which corporate income or profit are income taxed, as well as individual salaries and dividends.

The Limited Liability Company (LLC)

The limited liability company was first established in 1977 in the State of Wyoming and is now adopted by statute in all 50 states and the District of Columbia. This form of business offers owners the limited liability advantage that the C corporation also offers. LLCs also offer tax and management advantages as offered with a partnership. Because the state statutes are not uniform, this business form is best suited for business activity that can be confined to one or two states.

The Partnership

Evolution Of Wealth — Thu, 24 Jun 2010 14:44:11 +0000

A partnership is “an association of two or more persons to carry on as co-owners of a business for profit.” It is a contractual relationship between the persons who have combined their property, talents, labor, and skills in an enterprise for the purpose of joint profit. The concept of this type of business structure is very broad—it can be a syndicate, pool, joint venture, or other unincorporated organization through which any business is conducted, as long as it is not a corporation, a trust, or a sole proprietorship.

5 Characteristics of a Partnership

It’s formation requires the participation of two or more competent parties.
The business is established on a voluntary basis of the parties involved, as distinguished from a corporation, which is created by law.
It’s capital is established by contributions from each person’s property, capital, talents, labor, or skill.
The business is transacted by the parties as principals, each of whom is a co-owner.
The business can have general partners, limited partners, or family partners.

Advantages of the Partnership

additional human resources—The success or failure of the business is not solely dependent on one single individual. The skill, talent, and labor of each partner contribute to the benefit of the business.
ease of formation—The process of forming a partnership is slightly more extensive than that of forming a sole proprietorship, establishing the business is less formal and expensive than creating a corporation.
additional sources of capital—The partnership depends on the resources of two or more individuals.
flexibility—It can be more flexible in the decision making process than a corporation.
freedom—The partnership has relative freedom from government regulation and special taxation when compared to a corporation.
sharing of losses—The individuals in the partnership can share losses incurred in the operation of the business.

Disadvantages of the Partnership

unlimited liability of at least one partner—A partner is responsible for the full amount of business debts, even though he or she may exceed that individual’s total investment. This liability extends to all of the partner’s assets, including home, auto, bank accounts, property, etc.
instability—Eliminating a partner for any reason, voluntary or involuntary, including by death, automatically dissolves the business structure.
funding—It is relatively difficult to obtain large sums of capital, including long-term financing.
binding—All of the partners are bound by the acts of the other partners.
disposal—Disposing of the partnership interests can be difficult, especially if a specific arrangement for this, such as a buy-sell agreement, does not exist.

How is Life Insurance Underwritten?

Evolution Of Wealth — Mon, 21 Jun 2010 15:01:35 +0000

People always wonder how underwriting works for life insurance. It is a personal thing to go through. I don’t think anyone is truly comfortable with a life insurance company digging through their personal medical history. We all know that they are looking for the bad things not the good. The question is do you know how they go about underwriting a life insurance policy?

Develop a baseline

The first thing they want to do is fit you into the model. The underwriters at the life insurance company will take the information passed on to them through your application and your paramed exam. Much like auto insurance companies reviewing your driving record, life insurance companies are looking for red flags in order to get a baseline of where you fit. What this means is if everything looks normal you start at a standard baseline which is the best place to start.

If something is questionable from the information the applicant provided then they begin to fit you in a table. If the applicant’s build (height/weight) is not in normal ranges, there is a medical concern in your history, etc, you begin to get put in a table rating baseline. What this means is your starting point would be below standard. Don’t get worried yet, stay with me.

There are seven main areas the life insurance company looks at to establish a starting point through underwriting (not necessarily in order of relevance):

Aviation: Any private aviation?
Cancer: Any previous history with cancer?
Driving History: Number of moving violations and/or DUI/DWI?
Drug/Alcohol: Any history of drug or alcohol treatment or abuse?
Ratings: Any medical impairments?
Residency: Meets residency guidelines (citizenship, country of residence, etc)
Tobacco/Nicotine: Do you currently or have you ever used? Urinalysis results to support this.

At this point you’re not really a person to the life insurance company. You are information on a piece of paper. It is just a matter of matching the information with the underwriting charts to establish the starting point for your life insurance. Keep in mind that most of the areas listed above will go back either 5 or 10 years. Before that time and depending on the application you might not be required to disclose information. It is important to read the application closely. The questions asked will usually mention a time frame. If it doesn’t then do your best to remember back. You should always be as honest as you can.

Medical Records

Now that the underwriting has established a baseline, if it is below standard the first thing the life insurance company will probably do is review the information that was provided to them. Their main purpose in doing this is to determine follow through on whatever red flag they noticed. They might reach out to the applicant and/or the insurance person that took the application to get some clarification but ultimately they are most likely going to order the medical records from your doctor.

This seems to be the longest process through all of life insurance underwriting. The life insurance company sends out a written request to the applicant’s doctor. The doctor has 30 days to respond. Now not all doctor’s offices are the same. Some might respond right away but most likely the request will be put in a pile. It will be processed when they get to it. If the doctor is affiliated with a larger practice or a hospital they most likely have a separate department that handles all the medical records. I haven’t figured out if this is better or worse.

Keep in mind that if you have a somewhat complicated medical history this could involve a few different doctors. If the applicant had a cancer history, even if they have been cancer free for years, it is not unusual for requests to go out all of their doctors. They might have seen an oncologist, a radiologist and then specialists depending on the location of the cancer. Then that is just one red flag that the life insurance company is looking for more information on, there could be other things as well.

Tip: If time is of the essence the applicant has every right to contact their doctor’s office and request a copy of their medical records. Most doctor’s offices will be able to produce these in a matter of days at the patient’s request versus weeks at the insurance company’s request.

Credit System

Most life insurance companies use a credit program or a point system during underwriting. Once the baseline is established applicants earn credit, or points to reach a better underwriting class. One thing to keep in mind is, if your baseline is below standard then you are most likely not eligible to earn a better rating than standard. In other words, a starting point of below standard probably makes standard the best rating you are eligible to receive.

The point systems will vary from company to company. Some of the most common areas are:

No rating for aviation
Blood pressure averages
Body mass index (height/weight charts)
Cholesterol/HDL ratio
Family history
Lab results
Nicotine/Tobacco use
EKG (age specific criteria, usually 60+)

The areas listed above are all areas in which the life insurance applicant can earn points. Some areas may only offer a point while others might offer points at different levels. For example, the applicant might get one point for having blood pressure below 136/86 and another point for below 130/72 (don’t hold me to these numbers). These requirements can vary from life insurance company to life insurance company.

Use of Credits/Points

Points are used under two different circumstances during underwriting. First, if the applicant’s starting point is below standard then they can earn credits to climb the table ladder. Otherwise if the applicant’s starting point is standard then they can earn points to be in either the preferred or better underwriting class. How many points you need and how far you climb is the hardest part to determine because of variations from company to company.

The good news is that the credit system allows applicants to improve their underwriting class by showing patterns of good behavior. What I mean by this is even if you might have been unfortunate enough to go through a bout with cancer, you might still be able to earn a standard rating by showing healthy habits. If your health history is good, good blood pressure and cholesterol and you’re in good shape then you very well might earn enough credits to bump you up t0 standard life insurance rates.

The Sole Proprietorship

Evolution Of Wealth — Thu, 17 Jun 2010 14:58:00 +0000

The sole proprietorship is the simplest, most efficient, and flexible form of business enterprise. Most business will start out as a sole proprietor ship and the later develop into a partnership or a corporation. A sole proprietorship is owned by one individual, usually the business owner, who makes all of the business decisions. The biggest draw is that setting up this type of business structure does not require much formal organizational or legal procedures.

Advantages of the Sole Proprietorship

simplicity—Establishing a sole proprietorship requires less formality and fewer legal requirements. It needs little government approval or formal organizational procedures. A sole proprietorship is not required to get a separate tax identification number or to file separate taxes.
sole ownership of profits—The sole proprietor is not required to share profits with anyone.
flexibility—A sole proprietor and single owner is able to make decisions quickly and to respond swiftly to business needs. New opportunities and new areas of business can be quickly acted upon, never needing to get approval or even talk with anyone else.
freedom—The simplicity of the sole proprietorship allows relative freedom from bureaucracy, government control, and special taxation issues. You have the ability to schedule hours of business operations as well as personal time that best suits his or her needs and objectives.

Disadvantages of the Sole Proprietorship

liability—The sole proprietor has full responsibility and complete liability for all of the obligations of the business, including debt, payables, and judgments.
losses—While the sole proprietor is entitled to all of the profits, you must also bear all of the losses. Profits and losses are usually cyclical, and you must prepare in years of profit for those years of losses.
less available capital—As a rule, the sole proprietor has less available capital and options in which capital can be obtained. It becomes harder to establish long term financing, which may be needed to expand your business. Your personal credit history and personal assets are always at risk with capital needs.
instability—Business succession planning for the continuation of the sole proprietorship at the death of the owner is severely limited. In fact, it will usually terminated at the death of the owner.
tax benefits—The sole proprietor does not enjoy some of the tax benefits that a corporation form of enterprise does, especially in the area of employee benefit planning and advanced planning strategies.

Understanding Long-Term Care

Evolution Of Wealth — Tue, 15 Jun 2010 14:50:47 +0000

What is Long-Term Care (LTC)?

Personal care or supervision needed by persons of all ages for an extended period of time
Associated with the effects of aging, but may be needed at any time, due to an accident or illness
Some conditions that may require long-term care:
- Head injury
- Heart disease
- Stroke
- Multiple sclerosis
- Cancer
- Alzheimer’s disease
- Parkinson’s disease

The Need for Long-Term Care is Growing

Accidents and illness can occur at any age and may require LTC
Life expectancy is increasing, and the possible need for LTC increases with age
78 million baby boomers begin to turn 65 in 2011¹
69% of those turning 65 will need LTC at some point of their lives:²
- 17% within 1 year or less
- 12% within 1-2 years
- 20% within 2-5 years
- 20% within more than 5 years

Every 71 seconds, someone develops Alzheimer’s disease³

1.American Medical News, American Medical Association [amednews.com], January 5, 2009.
2.Based on projections for people who turned 65 in 2005. Georgetown University Long-Term Care Financing Project.
Long-Term Care Financing: Policy Options for The Future. Judith Feder, Harriett L. Komisar. June 2007.
3.“2008 Alzheimer’s Disease Facts and Figures,” www.alz.org.

The Cost of Long-Term Care Continues to Rise

Current costs (National averages for care)

Nursing home: $74,460 (private room – $204/day) ¹
Assisted living facility: $35,544 ($97/day) ¹
Home health care: $55,480 ($152/day) ¹

Future costs

The projected annual cost of nursing home care in 30 years is $250,000²
The projected cost for a 3–5 year care event in 30 years is $750,000–$1,250,000²

1. Based on the John Hancock 2008 Cost of Care Survey, conducted by CareScout, 2008.
2. Projected at the average rate of inflation of 4.1% between 1978 to 2008.

The Value of Long-Term Care Insurance

Provides a choice of care settings: home, adult day care center, assisted living facility, nursing home
Provides a support system, including resources and advice on care selection
Offers discounts on care providers and services to maximize benefits and extend the life of a claim
Helps free family from caregiving burden
Helps to provide asset protection: 401(k), pension, real-estate
Benefits are flexible and can evolve over the life of the claim

Response to Term vs Whole Life Insurance

Evolution Of Wealth — Sat, 01 May 2010 20:53:45 +0000

First to understand this post you’ll have to go read Term vs Whole Life Insurance – What Do The Numbers Show? from @freefrombroke. To make sure I give proper credit, the post was actually written by Evan (@mjtm) from My Journey To Millions. Definitely a great read and an interesting post. Then the comments start flying. I just can’t help but respond to the comment by “citishark”. Keep in mind that I am cutting and pasting citishark’s comments word for word (I am not responsible for typos or misunderstandings in the questions posed).

1) what is the interest rate earned you used to calculate the Whole Life Policy?

A participating whole life insurance policy does not have an interest rate, it participates in the earnings of the company and thus pays a dividend. The dividend interest rate in 2010, for the policy illustrated, is 7%. Interest rates are used in Universal Life insurance policies.

2) amazing what you can “create” when you compare plain policies avoiding to talk about the “whizzles and bells” in the Whole life insurance contract to make an “honest and plain ” comparison with PLAIN term insurance. No better way to deceive financially-uninformed people, uh?

I’m not really sure what the question is here. I do think he means whistles when he says “whizzles”. I do agree with him here when he makes the “plain” comment. Except that I don’t know what he means by “plain term insurance”. What other kind is there? There is return of premium term insurance and permanent term insurance but I haven’t seen either of those types beat a properly designed whole life insurance policy.

That being said my agreement to the plain comment is with the whole life insurance policy that is used. It is a plain whole life insurance policy and I don’t believe it is properly designed. If you’re looking to beat buy term and invest the difference, using the same information from the original post, my set up would look more like this…

Year	Cash Value	Death Benefit
1	$3,431	$495,764
5	$23,393	$547,637
10	$57,054	$610,716
15	$99,382	$673,937
20	$155,783	$738,978

3) Why cash value does NOT start growing from day 1? (err…if I am paying the same premium and YOU say it goes simultaneously to pay x insurance and the rest to “my” investment account)

The reason cash value doesn’t start growing in day is because a lot of initial expenses come out including, what no one wants to talk about, commissions. I’m here to tell you the secret of whole life insurance…it doesn’t have to be this way. I showed that above with my numbers which does have cash value from the start.

4) among the “perks of ownership” in Hole Life policy are that “you can take money out, right? if you ever want to take it out to use it since its yours, its considered a loan against the policy. Why do loans come with – interest – at 6-8%? See..you earn 1-4% and when you want to use whats yours, they charge u 6-8% to use it…again this is a great policy. Flock to it!

Interesting question. The biggest thing this makes me think of is direct vs non-direct recognition. With direct recognition any money that is taken as a loan is taken out of the cash value. With non-direct recognition, when a loan is taken the money stays in the cash value and continues to participate in dividends. Essentially what they are doing is collateralizing the loan with a portion of the cash value.

Using direct recognition most policies will charge an interest rate and then credit a portion of that interest rate back to the policy. Non-direct recognition works differently. The interest rate is variable at current market rates (varying from company to company) while the money stays in the cash value and continues to participate in the dividends.

On another note, you don’t have to take out a loan. You can also surrender a portion of the policy. In this case you would take a reduction of death benefit and receive monies directly from the cash value that never have to be paid back. As long as the amount you receive is less than the amount you paid in there is no taxable consequences.

It is important to note that if you do take out a loan it may or may not have to be paid back. If it is not paid back it will be deducted from the death benefit payout. Planning is required to do this properly and this is just one of the many areas that most insurance people will let you down.

5) most people do not read the life insurance contract. Whole life contracts (ALL of them!!)If you would ever need to use this cash value, the insurance companies have a right to hold that money and not release it to you for up to 6 months. Say the market is booming and they are making great returns, they will hold your money as long as they can to yeild THEM the best profits. Sweet! (but …for whom?)

I’ve read life insurance contracts cover to cover. I can’t think of anything specific that I remember in regards to this. You could very well be right. I would guess that some companies would have this language in their contracts and iw oudl guess that some won’t. What I can say is that I have experience in helping people get access to their cash values immediately. A top quality life insurance company can wire monies from the cash value of the policy to you, in some cases, in the same day. Truth be told, life insurance companies don’t want to do this but in emergencies I’ve seen and had to lobby for this to happen. Hopefully you never need it this quickly.

Life insurance companies have reserve requirements that mean there is liquid monies available and in my experience I’ve never seen or heard of a life insurance company saying no to someone trying to access their cash value. This might speak to the important of only dealing with financially strong, top-rated life insurance companies.

In contrast, this question reminds me of 401ks. I’ve definitely heard more and have more experience with them holding on to monies for longer periods of time. But that’s a whole other story.

6) Why isn’t it deceiving the consumer to call the return of overcharged premiums “dividends” as if they were new money earned and created by a real investment of the policyholder money? FTC and IRS refer to them in clear terms, as what they really are: “…mere return of premiums the insurance companies overcharge to the unsuspecting policyholder”…

Dividends actually come from a companies divisible surplus. The divisible surplus is monies available after a company meets contractual obligations, operating expenses, contingencies and other general business expenses. The divisible surplus in a whole life insurance policy from a mutual insurance company comes primarily from 3 areas: 1. death claims (or mortality) savings, 2. investment results and 3. expense savings.

It is also important to note that with a true mutual insurance companies all areas of the company can have a surplus that contributes to the dividends. This means that not just the life insurance branch contributes to the dividends but also other areas of the company including but not limited to an investment company that is owned by the mutual insurance company. Whereas a non-mutual whole life insurance policy will only receive divisible surplus from the life insurance section of the insurance company.

7) How all this compare con Level and Plain TERM now?

Okay, I don’t really know what he means by this…is this English? What I will say is truthfully, this whole comparison so far has left out the biggest cost and expense of term insurance, opportunity cost.

I’m not the writer of the post nor am I the one who posted it. My guess is neither of them is willing to say that one type of insurance works in all scenarios. What they are instead trying to do is have people keep an open mind and educate themselves more on the current state of life insurance. Things are changing. The most prominent changes in recent years are the cost of insurance for all types of life insurance and the increased flexibility of whole life insurance.

I’m with Evan and Craig when I say that I’m not willing to admit that term insurance is the answer for everyone and all situations. In fact, I see a lot of places where a whole life policy will perform far better than term insurance. That being said, for the average person out there, I will admit term insurance is probably better. If you are above average (even if your not) you should have an open mind and educate yourself about what is out there and what your options are to determine what is best for your personal situation. This probably means seeking helping from a qualified professional and/or asking questions.

Understanding Long-Term Care Insurance

Evolution Of Wealth — Fri, 30 Apr 2010 22:54:47 +0000

A long-term care insurance policy is one way to pay for future long-term care costs. There are 5 types of long-term care. Without the proper planning you may not be able to decide which type of care you want. Instead you could be forced to spend down your assets and where you go could be dictated by the state. The fast growing alternative to this is to put a long-term care insurance policy in place so that you can decide when, where and what type of long-term care you receive.

The hardest part of any insurance policy is understanding the ins and outs of the policy itself.

Facility Only vs Comprehensive Coverage

The first decision you need to make is in regards to why type of long-term care services you would like covered. Most people want to stay in their home as long as possible so this isn’t much of a decision. Depending on your family and personal lives your situation may be different. A facility only policy will cover services in a nursing facility, assisted living facility and hospice. Any other type of care is not covered by a facility only policy. A comprehensive policy will cover facility coverage as well as home health care and adult day care.

Things to look for:

With a facility only policy look for a bed reservation benefit that will help cover the costs of reserving a bed in one of these facilities. This is important due to sometimes long waiting lists at the better facilities. Also, look for a waiver of premium so that premiums will no longer be due while you are receiving benefits.
With a comprehensive policy look for emergency response/ambulance benefits to help cover the costs of medical personal needing to come to your home and/or transport you to a medical facility. Also, look for an alternate care benefit which would help cover costs associated with medical equipment and home modifications as a result of receiving care in your home. Finally, don’t forget the waiver of premium which means no more premiums are due while you are receiving benefits.

Elimination Period

This works similar to disability insurance, where you need to be under a doctor’s care for a certain period of time before you are eligible to receive benefits from your long-term care insurance policy. Common elimination periods are 30, 60, 90 or 180 days. The difference with long-term care insurance is that it is common to not need care every day, at least initially. This means that only the days you need care would count towards your elimination period. However, there are variations between policies where some will only count the specific day that you receive care while others will count 7 days towards an elimination period if you use a minimum of one day of care within those 7 days.

Things to look for:

With home based care, you will usually have the option of adding a waiver of elimination to the policy so that you can begin receiving home based care as soon as you qualify. The elimination period would then only apply to facility coverage.

Pool of Money

Unlike disability insurance, long-term care insurance has a pool of money available. What this means is that you’re policy will cover a certain dollar amount determined by two factor: your daily benefit amount and your benefit period. This will determine your total pool of money that is available. If you use less than your daily benefit amount on any given day then it could extent your benefit period.

For example, if you have a $300 per day daily benefit and a 5 year benefit period you would pool of money would be $547,500 (300 x 365 x 5). If you only used $200, the other $100 of your daily benefit would stay in your pool of money so you could technically collect benefits beyond your 5 year benefit period because you’d still have money left over at the end of 5 years.

Things to look for:

Daily benefit amount is the maximum dollar amount you can collect/receive on a given day. It is usually in increments of $10 from $50 to $500 per day
Benefit period is the amount of time benefits are estimated to last. It is usually available for 2, 3, 4, 5, 6, 8, 10 and lifetime periods.
Keep in mind that costs of long-term care vary greatly from location to location. It is important to understand what the costs in your geographic location are for the services you are looking to receive.

Inflation Protection

Due to the quickly rising costs of long-term care, inflation protection is vital to having your policy provide the benefits that you are looking for and expect. Most long-term care insurance policies will offer the choice between no inflation protection, simple inflation protection and compound inflation protection. For most people the compound inflation protection is a must. As you get older (70+), it is not uncommon to go with a simple inflation and maybe a higher daily benefit. 5% is usually used as the inflation amount but it can vary from policy to policy and company to company.

For an example, let’s say you have a $300 per month daily benefit. With 5% simple inflation your daily benefit would be $300 in year 1, $315 in year 2, $330 in year 3, $345 in year 4 … $435 in year 10. Whereas with 5% compound inflation your daily benefit would be $300 in year 1, $315 in year 2, $330.75 in year 3, $347.29 in year 4 … $465.40 in year 10. If it’s a benefit you might not use for 15, 20 or 25 years down the road the compound inflation protection will really pay off. The extra $30 per day in benefit after 10 years would mean an extra $10,950 for each year of your benefit period.

Partner Discounts

The best way to save on long-term care insurance is partner discounts. Most insurance companies will offer discounts of up to 40% on each policy if both you and your partner have a policy with that company. A lot of companies will do a shared pool of money in these types of policies. What this means is that if you each had a 5 year benefit period, the pool of money available to you would be equivalent to a 10 year benefit. Then one of you could use more than 5 years of benefits but it would reduce the money available to the other partner.

The downside to this is that one partner could essentially use up the whole pool of money. In the last year or two a few companies have started to offer a different version so that if you purchase a 5 year benefit period, not only would each partner have their own 5 years worth of benefits but there would also be a separate 5 year benefit pool put aside that either of the partners could use.

It is important to look at the financial strength of the insurance company with which you choose to place your coverage to make sure the coverage will be there when you need it.

Long-term care insurance is not cheap but neither are long-term care services. Would you rather have your hard earned money go to a medical facility and then let the state decide your fate or would you rather have the choice in the type of care your receive and leave a legacy to your kids and grandkids?

5 Types of Long-Term Care & Costs

Evolution Of Wealth — Wed, 28 Apr 2010 21:30:01 +0000

Most people think of long-term care as a form of institutionalization. The truth is that there are varying degrees of long-term care depending on the situation of the person involved. The venue of choice for most people is their home. A majority of the time people will stay in their home as long as possible either out of choice or out of necessity. The main purpose of long-term care insurance is to not only make it a choice but a choice that has as little affect on the friends and family as possible.

Let’s take a look at the different types of long-term care and costs…

Nursing home

Nursing homes are institutional settings for long-term care in which care may be provided in skilled care facilities, intermediate care facilities, or custodial care facilities.

A skilled care facility provides a professional type of nursing assistance performed by trained medical personnel under the supervision of a physician or other qualified medical personnel. Skilled nursing care is the only type of nursing home care eligible for reimbursement under Medicare.
An intermediate care facility provides occasional nursing and rehabilitative care that can be performed by, or under the supervision of, skilled medical personnel only. This care must be based on a doctor’s orders.
A custodial care facility provides care that is primarily for the purpose of meeting personal needs and assistance with the activities of daily living. Custodial care generally involves help with bathing, walking, dressing, eating, or taking medication. It may be provided by someone without medical skills or training, but the care must be according to doctor’s orders.

According to the 2008 MetLife Market Survey of Nursing Home and Assisted Living Costs, the average annual cost for a private room in a nursing home is $77,380. The national average annual cost for a semiprivate room in a nursing home is only slightly lower at $69,715.

Home Health Care

Home health care is a long-term care program of professional, paraprofessional, and skilled care that is normally provided through a home health care agency to an individual at home. The care can include nursing services and physical, speech, respiratory, and occupational therapy.

The average hourly cost for home health care aides is just as location-dependent and varies from $14 per hour to about double that. The current average cost per hour for a home health aide visit is about $20.

Assisted Living Facility

An assisted living facility (ALF) is a residence for individuals requiring some long-term care services but not as many services as individuals who would normally qualify for a nursing home. It provides a generally less expensive alternative to custodial care.

Assisted living facility average annual rates generally range from $23,000 to $56,000 per year, depending on the region of the country, with an average of $36,372.

Adult Day Care Facility

An adult day care facility is a long-term care institution designated to provide custodial or minimum health-care assistance to individuals unable to remain alone. Typically, adult day care is provided during working hours when the primary caregiver is employed.

Average adult day care costs range from about $40 per day to $140 per day, depending on location, and currently average about $64.

Hospice Care

Hospice care is long-term care designed principally to control the pain and symptoms of the terminally ill but may also provide support services to family members.

The Future of Long-Term Care

Projections for the future costs of long-term care services are staggering. The current costs are quite significant. This could easily mean exhausting all other assets and family help. Then relying on state and federal programs for the indigent. With proper planning and/or the use of long-term care insurance, there is no reason to be forced to rely on welfare but instead have choices and flexibility with your options.

Sunday Link Rodeo 24

Evolution Of Wealth — Mon, 26 Apr 2010 03:19:48 +0000

A tough Sunday in the Boston area with both the Celtics and the Red Sox taking losses. With the Red Sox there is a long, long way to go. I’m thinking the Celtics just wanted to close out the series at home. The Bruins will look to close out their first round playoff series on Monday night. You have to love playoff time.

Make sure to enter my book giveaway!

Advantages Of A Living Trust vs. A Will from @christianpf This is an interesting topic as consumers are getting more and more educated it seems that people are favoring trusts over wills. I have heard a lot about this topic lately.

Can You Make Money Doing Anything from @plantingdollars Money shouldn’t be your reason but this post does a great job of saying that you can follow your passion. Whatever you might love doing there is probably a way to monetize it. Don’t let money stop your from following your dreams either.

5 Financial Items We Tend to Procrastinate from @fiscalfizzle Take a look at the ‘big 5′ as Wojo calls them. Order in terms of impact would be 1. income planning, 2. insurance, 3. budgeting, 4. investment management and 5. home inventory.

Gambling life without insurance from @grlredballoon An interesting viewpoint on a the decision to go without health insurance. I have to ask, is it really worth it? To me the risks far outweigh the reward.

My Beef With Rich Dad Poor Dad Author Robert Kiyosaki from @enemyofdebt This post has some must read comments as well. People have incentives. For Robert Kiyosaki he makes more and more money the more and more he gets you to his seminars. His books are bait he puts out for his seminars. Tread carefully.

Don’t Have Children If You Can’t Take Care Of Yourself from @financialsamura I love the controversy here, what can I say. Definitely a great read. Definitely some interesting points. Definitely over the top.

Appearances to check out:

The Yakezie Challenge Carnival #8 – Tax Day Edition from @mymoneyminute
Weekend Readings from @cjbowker
Thesis 1.7 And Links 4-25-10 from @freefrombroke
Economy and your finances carnival April 25 2010 from OneMint