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Are Return of Premium Polices the Premium Choice?
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Return of premium insurance policies have gotten a lot of attention because they guarantee that the insured will get the total amount spent on the insurance policy’s premium payment if he or she stays alive for the full term of the policy. On the surface, return of premium policies seem like a no-brainer. Instead of wasting your money on term life insurance policies that won’t give you any return on your premiums if you outlive the policy, you are certain to get the full amount of your payments back. By taking a closer look at return of premium policies, though, you can take a more critical look at these insurance policies to see if they are the premium choice for you. Paying for Return of Premium Policies Return of premium insurance policies give you a guarantee on the premiums that you invest, but there is a cost for this. When you decide to take a return of premium insurance policy, one of the first things that you should notice is how much higher the payments are than those for regular term life insurance. These higher payments don’t bother many people because they are fairly certain that they will get all of the money back. They think that instead of spending less money that they will never see again, they will spend more money that will be returned to them in the future. The Danger of Making High Payments for Many Years This is sound thinking if you have enough money to pay for the return of premium policy for the duration of the policy, but the future is always uncertain. You might be able to afford the higher payments now, but it is almost impossible to determine what your financial situation will be like in 15, 20, 25 or 30 years with any accuracy. Things happen that are completely out of a person’s control. You could lose a job or suffer medical problems that would make it impossible for you to make the high payments. The problem is that many policies will only give you a return of premium if you pay for the entire policy. Some return of premium policies are only 15 years long, but you do not get returns that are as good as those on longer policies. Since most people get the policies because they expect to be alive in 30 years, they decide to take the longer-term policies that pay off better. Returns on Death Benefits Making high premium payments with the expectation to get the money back makes sense, but you should also consider what kind of benefits your family will get if you do not outlive the policy. Unfortunately, if you don’t outlive the policy, your family might not get more from a return of premium policy than they would a term life insurance policy with lower payments. This means that you could throw away hundreds of dollars a year. When you take out a return of premium insurance policy, you are betting that you’ll outlive the policy, which is usually between 15 and 30 years. If you don’t outlive the policy, though, the extra money that you spent on the return of premium policy would have been better spent through other investments. Protection from Taxes Despite the possible negatives of a return of premium insurance policy, many people still decide that they are the best choice. Not only are they betting that they will outlive the policy and be able to get all of their money back, the money that they get back when they outlive the policy is protected from taxes. If you invest $1,000 a year on a 30-year policy, you will be saving taxes on $360,000. The amount that you save will depend on how much money you make and where you live, but regardless of these variables, the savings can be significant. Knowing the pros and cons of return of premium insurance policies can help you understand if they are a good bet for you. The bottom line is that if you can afford to make the payments throughout the duration of the policy and you outlive the policy, then return of premium insurance policies can be a good choice for you. If this seems a little too risky for you or you don’t think that you can afford the high payments, then a regular term life insurance policy is probably best for you. Leave Comment |
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Congress Takes Their Time In Discussing Mortgage Reform
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Amidst this troubled housing market, thousands of American homeowners are dealing with foreclosures or mortgage payment resets. Their situation seems to be getting worse, with no outlook of change or assistance. Unfortunately, congress is showing no signs of immediate action. The House Looking Out for the Consumer The house has become very much involved in attempting to fix the suffering mortgage market and appear to be passing some relief measures. One in particular is H.R. 3915, the Mortgage Reform and Anti-Predatory Lending Act of 2007. This bill is currently pending in congress. However, the outlook of it passing any time soon looks dismal. Mortgage Reform and Anti-Predatory Lending Act of 2007 This specific bill is designed to put structure and provisions in the mortgage lending market. Some have referred to this bill as the plan to help repair the current situation. This is simply not true. The bill focuses on changing the lending system to prevent future crisis. The main goal of this bill is to eliminate the negligent nature of the current mortgage lending market. It calls the licensing and registration of mortgage originators, a minimum standard for mortgages and a limited liability to secondary securitizers who sell interest for mortgage loans beyond the standards. By providing certain restrictions and provisions, the consumer will receive some protection. It will lessen the foreclosure market and hopefully prevent recessions similar to the one we are currently experiencing. Why the Senate Is Stalling Legislation There are numerous reasons the senate has chosen a sluggish approach to any housing reform bills. Some republicans within the senate appear to be unsympathetic to the mortgage market's current situation. Others are allies with private mortgage insurance companies. Were they to go along with the Federal Housing Administration's (FHA) reform bills, their allies would have to contend with the proposed low-down payment market. Another excuse for the senate is that the FHA's reform proposal requires an extensive floor debate. The Negative Buzz Around the Mortgage Reform Bill The buzz about the Mortgage Reform and Anti-Predatory Lending Act of 2007 hasn't all been positive. Those within the mortgage industry have been gathering concerns and voicing them through blogs and lobbyists. Most people objecting to this bill believe it harms the "free market's ability to enforce responsibility on behalf of the borrowers." Others feel that these restrictions will also lock some potential borrowers out of the mortgage market. Another anti-bill supporter is the Blue Dog Coalition of moderate and conservative democrats. They have expressed the belief that this bill could get in the way of applying the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA). The BAPCPA passed in 2005. It promises that the borrower has the ability to pay back some of his or her debt, as well as maintain access to the bankruptcy system. With all these justifications coming to and from the senate, all seems to have come to a standstill, and the cries for help from struggling homeowners remain unheard and ignored. |
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How The Mortgage Rate Is Predicted To Look During The Holidays
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With the Holiday season upon us, people are wondering whether mortgage rates will increase or decrease. Homeowners or potential homeowners are constantly checking the mortgage rate forecast for the right time to lock in their rates. Since the jolly retail season is here, many speculate this will transfer to the housing market and cause a dip or rise in mortgage rates. Others predict the mortgage rate will stay the same or close to it. So, who do you listen to? The Skinny on Mortgage Rates If you are holding out for the lowest possible mortgage rate, it may be a gambling process. When it comes to mortgage rates, rates will lower at a smaller pace — for instance, it'll probably decrease around 1/8 percent. However, when a rate increases, it takes a major leap, blindsiding you and then you have missed your chance with a low mortgage rate. This happens to be the nature of the beast. Those involved with setting the mortgage rates are obsessively monitoring the rates. They are waiting for any minute decrease, no matter how small it is. In addition, when rates are making their way up, they wait until the last second to announce the rate, which ends up being an enormous jump from the previous rate. The Plateau Phase and Predicting Mortgage Rates During the Holidays The majority of experts and analysts have predicted that during the holiday season, mortgage rates will stay the same. The main projection is that rates will not go any lower. The holidays center around the retail market and the interest in the housing market will not gain extra demand during the season. The value of housing appears to be stuck in a secondary market. Buyers aren't looking for primary housing, they are investing property as a secondary home. Mortgage Rates and the Holidays — An Upward Battle A few analysts have expressed their concern that mortgage rates will rise during the holidays. Since the value of the U.S. dollar is falling and oil prices are at record highs, mortgage rates will soon reflect the struggling economy and try to balance out by increasing the rates. Mortgage Rates and the Holidays — A Downward Spiral A handful of experts predict that mortgage rates will continue to fall. They believe that the increasing oil prices are a sign of a future recession, which in turn will cause mortgage rates to follow the existent downward spiral. The housing market and rates will reflect the economy. The best prediction is that no one really knows what will be going on in the next few months. Currently, the rates are pleasingly low. Consider the rates during the past few years. These rates are comparable or even better. Check out the HSH Associates website. They provide historical data and rate information. It can help you with putting the mortgage rates into a different perspective. On the other hand, if you have the drive to wait for the mortgage rates to drop even further, then wait away. You must trust your own instincts and lock into a mortgage rate that you feel is the best for you. |
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The Holidays and How a Higher Body Mass Index May Affect a Term Life Insurance Policy
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For many people, the time of year between Thanksgiving and New Year’s Day is a mixed blessing. During this time of year, families and friends get together to celebrate. One of the best aspects about it is the great holiday food — and lots of it! Many people struggle this time of year, for they know they will put on “holiday weight.” Of course, the plan is to take it off as part of a New Year’s resolution. Not a big deal right? It happens to all of us. However, if you are planning to purchase a term life insurance plan after the start of the New Year, you may want to change your tune. What is Term Life Insurance? In general, there are two types of life insurance available: whole life insurance and term life insurance. Simply stated, whole life insurance covers a person for a longer period, whereas a term life insurance policy is for shorter durations. Typically, a person may take out a term life insurance policy to protect the financial needs of a loved one in the event of an unforeseen death. For example, a parent may take out a term life insurance policy while the child is in high school for say $250,000. How Does Holiday Weight Affect Term Life Insurance? Since term life insurance covers only a short duration, a company will only renew your policy after evaluating questions about your general health. The insurance provider takes into account your smoking status, prior history of illness and present health. Life insurance companies are also concerned about your weight. As a major problem in the U.S., obesity results in many major illnesses, including heart disease and diabetes. Your life insurance company will often use your Body Mass Index (BMI) to determine the risk for obesity. The more a person weighs the higher the BMI number. Adding a few pounds over the holidays gives you a higher BMI, which leads to more perceived risk and causes the insurance company to offer a policy at a slightly higher weight. The point here is that if you are considering the purchase of a term life insurance policy, it would be a good idea to make that purchase before the holiday season begins. A Tip for the Holidays — Exercise! People should exercise for their overall health. Studies have shown that exercising during the holiday season at least a few days per week will help decrease your appetite, as well as burn off that holiday ham and eggnog. In addition, be sure to drink plenty of water to keep your body operating and peak condition. If you still plan to apply for term life insurance after the holiday season, begin a New Year’s resolution immediately! It will save you money right away when you apply for a policy. |
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Using Weekly Mortgage Rates to Your Advantage
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Weekly mortgage rate analysis can help you determine many things about the types of loans that you can get on real estate. Perhaps most importantly, a good analysis can tell you what kind of rate you can expect to get on a mortgage. A good analysis might also tell you the difference between the average mortgage rates from this week, the week before and one year ago to the week. When you look at the weekly rates over a length of time, you can see the shifts in the mortgage rates during this time. This can often point toward what these rates will be like in the near future. Changes in Housing Rates When you’re buying real estate, you want to take out a mortgage when the rates are low. The lower the mortgage rates, the less money you will spend buying your property. When you look at the changes in the mortgage rates from week to week, you can predict the direction the market is heading. It’s impossible to be accurate 100 percent of the time, but many people can get a good idea of where the market is heading by looking at a weekly mortgage rate analysis. This is similar to making projections with the stock market. While it’s often easy to recognize the direction that mortgage rates are heading, knowing how long they will continue to head in that direction is not so easy to predict. Small Changes Make Big Differences Small differences in mortgage rates can make a big difference when you look at how much money you will spend in interest on a loan that lasts several years. Real estate is probably the most expensive purchase that you will ever make, which means that the interest on the mortgage can add up quickly. Let’s say that you have a 30-year mortgage with 6.5 percent interest rate on a $200,000 home. Your monthly payment for this mortgage will be $1,254.14. If you can use the weekly mortgage rate analysis to determine when the mortgage rate will be just .5 percent lower, your monthly payments will be $1,199.10. That’s a saving of over $50 every month, which comes to $660.48 per year. Over the course of this loan, you will save almost $20,000 just by finding an interest rate that is half a point lower. Analyzing Weekly Mortgage Rates When analyzing weekly mortgage rates, the rates of the top mortgage dealers are used. The amount of mortgage firms that are considered in the analysis depends on the company that is conducting the analysis. The more firms that the analyzer includes, the more accurate the average rates are. However, most mortgage brokers follow those that are at the top, so it doesn’t always make a large difference. By using a weekly mortgage rate analysis, many people can determine when the best time for them to purchase real estate is. If you already have a mortgage and are thinking about refinancing, then you can also use the weekly rates to determine how much money, if any, you can save by refinancing at a certain time. |
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Foreclosure Forecast: What Direction Are They Going? Up Or Down?
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Amongst the dropping prices of homes and mortgages, foreclosures joined the downward spiraling market. During these times of decreasing housing demand, it's unfortunate to think that people are locked in a financial predicament, left to foreclosure. Unfortunately, this trend does not appear to be changing course in the near future. Foreclosure Forecast — What's Happening? Nationwide foreclosures in 2007 have increased a monumental 42 percent since 2005. There have been 1.2 million foreclosure filings this year. Amazingly, this is not a record high but this does raise speculations that the future holds a worse fate for foreclosures. No one anticipated this trend of foreclosures. Some experts did not predict the foreclosures, since national economic conditions offered no signs. The stock market is doing fine and employment numbers are steady. However, David Lereah, chief economist for the National Association of Realtors, said that economists calculated that foreclosures would occur in response to the decreasing housing market. He further pointed to markets that contain unsustainable price appreciations. Characteristics of Recent Foreclosures In 2003, 30-year fixed rate loans were at their lowest, but the trend was on adjustable rate mortgages (ARMs). The buyers immediately went for the lower rates from the adjustable rate mortgages. Now that the introductory period is over, the interest rate immediately goes to the market rate, continuing to adjust every year. Those buyers are stuck making ends meet to afford the new mortgage. Along with the teaser interest rates, buyers also chose to purchase enormously expensive homes. Many believed that buying a more expensive home would offer a greater appreciation. Once the ARM would reset, they would have the ability to refinance for a lower fixed rate with a longer period. Now these home owners have new interest rates for homes they originally could not afford. Many jumped to sell their properties and others tried to refinance. However, since the housing prices have gone down, current value does not match original value. The buyer loses money instead of making money and selling the home will no longer answer the financial problem. This leads many of homeowners to unfortunate foreclosure. Foreclosures and the Future Experts predict that 2008 will be one of the worst years for foreclosures. They are mainly referring to sub-prime mortgage loans. During the next two years, a projected amount of 1 million homes will be lost due to foreclosures. John Robbins, chief executive officer of American Mortgage Network, explains that most of the foreclosures will occur in Michigan, Nevada, Arizona and Ohio because of the unemployment numbers and appreciating home prices. If housing prices continue to fall to 20 percent, states like Florida, New York, California and Texas, may lose 2 million homes to foreclosure through 2009. Along with sub-prime and ARM mortgages, interest-only and negative amortization mortgages may lead the buyer into potential financial problems. There is no way to correctly predict if a property will appreciate, so buying within your means is the best way to approach the housing market. |
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Detroit, Michigan Leads the Country for the Highest Number of Foreclosures
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In the U.S., we are seeing an unprecedented event unfold — mass home foreclosures. The hardest hit area of the country is Wayne County, Michigan and the greater Detroit metropolitan area. People are struggling just to get by every month. With a combination of the declining automobile industry, the burst of the housing bubble and the lending of sub-prime mortgages, the challenge these days is to stay afloat. Detroit Automobile Industry and Highest Number of Foreclosures One factor in the declining economy in Detroit is the decline in business as consumers purchase more foreign cars. This switch in consumerism comes from a variety of factors. Gas mileage offered by current American vehicles barely rivals European and Japanese automakers. Price is another factor. Did you know that over $1,000 of the final sale price for each American car goes to paying pensions and another $1,000 goes toward the health costs of current and past employees? Neither Japanese nor European automakers have overhead this high. As a result, the final cost is ultimately less. Finally, Japanese automakers introduced hybrid electric/gasoline cars, which have been very successful. This again results in less American car purchases. Detroit Housing Market and Highest Number of Foreclosures From the early 2000s until about early 2006, America experienced a huge housing bubble that drove up the perceived value of homes. In Phoenix, Arizona for instance, homes built and sold in 2001 were selling for $110,000. In 2005 and 2006, they were valued in the low to mid $200,000’s. While value increases were not as dramatic in Detroit, it did still occur. Therefore, home owners were selling to make a profit. Those folks who purchased homes during this time only have experienced a decrease in the value of their homes. Sub-Prime Mortgages in Detroit, Michigan During the housing boom, there were so many properties to be bought and sold, such that larger lenders like the mortgage giant Countrywide, began offering sub-prime mortgages. Sub-prime mortgages are essentially mortgage programs offered to people with below average credit and shaky incomes. In fact, most companies would not even offer them lending packages because of the risks involved. Once lenders discovered a market in sub-prime mortgages, these people qualified for adjustable rate mortgages. While an ARM has an inflated payment in the future, most of these mortgages sold on what the current payment had to offer. Some programs offered buyers and those looking to refinance with an interest only payment. To many people, this type of mortgage sounds a little risky and they are right. Unfortunately, almost eighty percent of loan originations that have occurred over the past few years have been this type of mortgage. Home values have now decreased, ARM payments have increased and jobs have been lost. People virtually have no option aside from home foreclose. Not only is the current Detroit housing market in distress, but this scenario has also played out all over the U.S. In the larger picture, many mortgage companies have gone out of business and investors have lost large amounts of money. In fact, Countrywide recently had to borrow twelve billion dollars just to stay afloat and work through this challenge. |
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How Your Pets May Affect Your Homeowners Insurance Policy
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Roughly one-third of all households are home to cats and dogs. If your home is among them, then you likely consider your pet to be a full-fledged member of the family. As it turns out, so does your homeowners insurance provider. You've probably never thought about it, but owning pets — especially dogs — may affect your homeowners insurance policy. In fact, depending on the type and number of pets you have, you might even have trouble finding approval for insurance coverage. Why Are Homeowners Insurance Providers Interested in Your Pets? Unfortunately, the answer isn't just because insurance providers are dog and cat lovers. While this may be the case, they are actually interested in your pets because they can increase your probability of filing a claim and collecting on your policy. This may ultimately require your insurance provider to pay you money, and despite what they may tell you — they hate doing that. More specifically, pets can affect the liability portion of your homeowners insurance policy. Liability coverage protects you in the event that someone sues you because of injury or damage that occurred due to your negligence. In other words, an accident caused by you, your family or your pet will be covered by your homeowners insurance provider. This includes both accidents that occur on the premises and elsewhere. If found liable, your insurance policy will help cover legal defense fees, as well as any resulting settlement fees. Assessing the Insurance Risk of Your Pet In general, the larger the dog the more you are likely to pay in higher insurance premiums. Breeds that will cost you the most include Rottweilers, Pit Bulls, Doberman Pinschers, German Shepards, Malamutes, Great Danes, Chow Chows and Saint Bernards. Provide Full Disclosure of Your Pets to the Insurance Provider You may be tempted to simply neglect to tell your insurance provider about your four-legged friend when applying for your policy. While this may save you money in monthly premium fees, it could end up costing you thousands of dollars in the end. Any claim you file because of injury or damage caused by a pet that is undisclosed to the insurance provider will be denied. This means that you are stuck paying the entire bill for your legal and settlement fees. Don't think your dog could ever be the cause of an accident? No matter how docile your pet, there's always a possibility. According to the Centers for Disease Control and Prevention, there were approximately 4.7 million dog bites reported in 2005. That's almost 13,000 dog bites a day. With the injuries of these dog bites resulting in $317.2 million in insurance claims, it's no wonder insurance companies are interested in knowing if pets will be living on the premises. Protect yourself, your home and your pet and provide full disclosure to your homeowners insurance provider. |
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Saving Money When Adding a New Driver to Your Auto Insurance Policy
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It's that dreaded moment in every parent's life — the day your child gets his or her driver's license. Yes, your child is growing up and becoming independent, and part of that process means navigating the hectic streets and highways without supervision. It's a great time for junior, but for parents it means increased insurance premiums. Of course, you could attempt to teach your child further responsibility by requiring him or her to pay a portion of the insurance bill, but either way you're going to want to save as much money as possible. Here are some tips for saving money when adding a new driver to your insurance policy: Take Advantage of Student Driver Discounts Prepare yourself for sticker shock — auto insurance premiums for new drivers are substantially higher than what you're likely paying for yourself. Obviously, this is because young drivers are inexperienced and therefore more likely to get in a car accident. To help ease the sting a bit, many auto insurance providers offer "good student" discounts. Typically, to qualify for the discount your child must be enrolled in school full-time and maintain at least a B average. Both high school and college students are eligible. If your young scholar meets these criteria, then you can expect to save up to 10 percent on your child's auto insurance premium. In most cases, a copy of your teenager's latest report card will be requested by the insurance provider in order to be eligible to receive the student discount. Choose Your Child's First Car Wisely Despite the protests of your child, a safe, sensible car is likely a smart choice for a first car. While teenagers may play the "social outcast" card, a less flashy car can save you plenty of money on your insurance policy. Sports cars, expensive cars and SUVs are usually considered higher risk vehicles, and therefore come with higher insurance premiums. For the most savings, help your child select a sedan or compact car that includes a multitude of safety features (and still matches his or her unique style). A car with airbags, anti-lock brakes, stability control and excellent crash test ratings will not only save you money, but it may even save your child's life. Take Measures to Deter Theft of the New Vehicle Vehicles that are less likely to get stolen are more likely to save you money on your auto insurance premiums. Adding a security system or a tracking system (such as lo-jack) to your teenager's vehicle will help to put your insurance company at ease. Also, if you have a garage, you might be able to take advantage of additional savings. Vehicles that are parked in a home garage are less likely to get stolen, and insurance providers often will reward you with a discount for doing so. Shop Around for a New Auto Insurance Provider It is recommended that you re-evaluate your insurance options every year or two. With a new driver coming onto your policy, now is the perfect time to shop around for better rates. Not only might you be able to save a decent chunk of change on your teenager's portion of the policy, but you may find extra savings on your own coverage as well. Call several different well-known companies and ask them for price quotes. You might also want to consider asking friends and family for suggestions on insurance providers that offer good rates to teenagers. |
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Winter-Proofing Your Home
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As cooler temperatures begin to creep across the U.S., now is the perfect time to start winter-proofing your home. Water damage and freezing conditions are to blame for roughly 17 percent of all homeowners insurance claims. Prevent a future headache by preparing now. There are simple steps you can take to protect your property. Here are a few of the more important measures you should consider: Winter-Proof Your Rain Gutters Rain gutters are a great place to start winter-proofing. With all the freshly falling autumn leaves and debris, unclogging your gutters can help prevent ice damming. Trapped water in gutters can turn to ice during the winter. Over time, this ice builds up (or dams). As the ice melts, it has the potential of seeping through the walls and causing water damage in your home. To assist with the flow of water, consider installing gutter guards. These relatively inexpensive doohickeys help prevent future debris from winding up in your gutters and potentially blocking water. Winter-Proof the Rest of Your Yard Reinforcing outdoor steps and handrails is another method for winter-proofing your home. Broken stairs are especially hazardous when covered in ice or snow. Additionally, ice can expand within the cracks of steps or handrails, further compromising the safety of the structure. Seal Holes and Cracks Outside and Inside Your Home Properly Insulate Your Attic from Winter Weather Simultaneously reduce your heating bill and protect your roof from damage by properly insulating your attic. Excessive heat escaping through the top of your house can cause ice to melt and refreeze on the roof. This can cause ice damming, or might even cause your roof to collapse. Experts typically suggest that your attic should be five to ten degrees warmer than the temperature outside. Properly insulating your home will also reduce the possibility of a pipe to freeze and burst. Be Prepared in Case Winter Damage Occurs |
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