Changes to Flood Insurance

Flood Insurance Rates Increase

Flood Insurance Rates Increase

In the United States, hurricane season is about to begin and many homeowners in South Florida are about to see the impact of changes to the National Flood Insurance program.

The National Flood Insurance Program (NFIP) was first created by congress in 1968 and enables communities to purchase flood insurance from the government. The insurance program was designed o provide an alternative source of insurance for communities who have difficulty obtaining insurance from other sources. The program insures over 5.5 million homes in the United States against flood damage.

After Hurricane Sandy caused so much damage in 2012, congress was forced to lend FEMA $30 billion dollars so they could keep the flood insurance program afloat. It is estimated that Hurricane Sandy was the 2nd most expensive hurricane to hit the USA, causing over $70 billion in damage, second only to Hurricane Katrina which created $108 billion in total damage.

The FEMA boss, Craig Fugate commented on the loan recently: “They gave FEMA borrowing authority, not only for Sandy but also to make sure we had funds available to pay claims for future events,”. Which should insure that the program continues in the forseeable future.

Congress approved the Flood Insurance Reform Act of 2012 which increases flood insurance rates for some areas, but also provides some discounts. Most of those affected by changes in the legislation are those in Florida, where the hurricanes frequently create a great deal of damage.

Some of the changes tha are going to occur include the removal of a discount for 2nd homes, which will raise those rates by 25%, and the average rate will increase by 10%. Homes that have had numerous flood insurance claims will also be paying more and flood prone commercially zoned buildings will also pay about 25% more. Politicians claim that these increases are required so the program can be sustainable and with climate change increasing extreme weather events like Hurricanes Sandy and Katrina, rate increase were the only way to keep the program alive.

Not all home owners are required to have flood insurance, so it is worth talking with an insurance agent to discover if it is compulsory in your area. However if you live in a flood prone area in Florida it is a significant risk. Some home owners have observed from past hurricanes that it is not flood damage that damages their properties, but the hurricane itself. If you did not flood from past hurricanes, you might be able to remove the payment from your insurance expenses.

Auto Club to Cut Automobile Insurance Costs

Cheaper Car Insurance

Cheaper Car Insurance

The Californian State Insurance Department has announced that the Automobile Club of Southern California will be making an average $65 reduction in the cost of Auto Insurance.

On average that is a cut of about 4%, which will cost the insurer approximately $70 million dollars. The price cut affects policies that start or renew after July 1.

Auto Club CEO Robert Bouttier said that it is the 4th reduction within the last decade that the Auto Club has offered to it’s customers. Bouttier claims that in total that is $380 million worth of reductions.

The Californian Insurance Commissioner, Dave Jones, approved the latest cuts and include special discounts for home owners and various special rates for some group buys of insurance.

According to Auto Club, auto insurance rates have been coming down for the last decade and they want to be at the forefront of that push.

Insurance analysts suggest that rates have been coming down because cars are now much safer, people are driving less and there are less severe claims. California has some very tightly regulated Auto Insurance rates and changes in their price must be approved by the insurance commissioner. That has led to some of the most competitive Auto Insurance prices in the country.

Common Life Insurance Beneficiary Naming Mistakes

Common Beneficiary Naming Mistakes

Common Beneficiary Naming Mistakes

Naming a beneficiary for your life insurance policy and your last will and testament is one of the most important decisions in your life. For many people it is straightforward, for others with complex family situations in can be very difficult. Even for those with a close knit family, naming the wrong beneficiary can lead to hurt feelings and family squabbles after you pass away.

The last thing you want to do is create a mess for your family to clean up after you depart, which can potentially ruin their relationship with each other. So let’s take a look at the most common mistakes people make when naming their beneficiary.

Pushing people into a tax trap

Life insurance is tax free except when different people are playing the role of policy owner, the insured and the beneficiary. So for example if your uncle takes out a life insurance policy on your grandfather and you are named as the beneficiary, then the money could be declared a taxable gift. You could land the person with a substantial tax bill and run into financial problems at a later date if that is not fully understood.

The best way to avoid this is to make sure that the insured party also owns the policy and you will avoid paying any tax on the sum.

Believing your will determines who gets the life insurance money

The life insurance policy operates separately to any will you might have drawn. So that means any declaration in your will saying that the life insurance money should be split a certain way is irrelevant. The life insurance policy only uses the beneficiary list to determine who will get the money. So if that is out of date, the money may go to someone unexpected, regardless of your wishes in your will.

Not keeping the beneficiary up to date

Many people don’t keep their beneficiary list up to date. You might get divorced and have your first wife listed as a beneficiary, or your beneficiary might die, or you might have a falling out with your beneficiary. If you do not update the policy, your relatives might get a nasty shock when they realize they won’t see any of the money.

Skimping on details

If you wish to have a somewhat complex arrangement with your life insurance beneficiary list, make sure it is detailed very closely.

Say for example if you want 5 grandchildren and 3 children to take an equal share in the policy, how do you stipulate that without any doubt?

The two methods are per stirpes and per capita. Per stirpes means that the proceeds are divided by branch of the family and per capita means that it is done on a per head basis.

So in the example above of 5 grandchildren and 3 adult children, one of your adult children may be responsible for 3 grandchildren and the other 2 adults may be responsible for 1 grandchild each.

Now if you did it on a Per stirpes basis, the three children would receive an equal amount each because it is following the branch of the family. So the adult with 3 children gets the same as the adult with 1 child. You may see that as fair.

If you did it on a per capita basis, the adult with 3 children is getting 4 shares, while the adults with 1 child get 2 shares of the policy dividend. Is that more equitable or less equitable? You have to also consider other circumstances of the children involved, are they all well off, or are some struggling more.

Also, what happens should one of the children or grandchildren pass away? Sometimes complex and precise documents should be lodged when dealing with beneficiaries and an estate lawyer might be required.

Forgetting to tell people you have a life insurance policy!

It happens quite a bit – the family doesn’t realise the relative doesn’t have a life insurance policy, where it is and who the beneficiary is. Sometimes a benefit is never claimed and hundreds of thousands of dollars are lost to the family because the deceased never told them about the policy. Make sure your family knows about the policy and the beneficiary.

Giving money to young people without stipulations

When you name a young person as a beneficiary, often they aren’t equipped with the skills and life experience required to spend wisely. If an 18 year old suddenly inherits $1 million dollars, their first thought may not be about investing it intelligently, it might be about getting a sportscar.

You could even send them on a destructive path of partying and binging on drugs and alcohol or set them up to be fleeced by someone unscrupulous. Some people set up trusts so that the young person can obtain some spending money to make their life more comfortable, to help them with a home deposit but they don’t receive unfettered access until they are older. Sometimes trusts have requirements, so if the young person finishes college they get a set amount early as a reward.

Naming only 1 beneficiary

You may think that a certain member of your family is smart enough to handle all of the funds from the life insurance policy and hand out money to the other relatives. But after you are gone, their attitude may change, they might have a falling out with another relative or other relatives may resent them being named as sole beneficiary.

It is often a mistake to place a great deal of trust in the hands of a sole beneficiary, and it’s better to make your intentions for the money known by having multiple beneficiaries.

Additionally if you have a single beneficiary, if something happens to them, then the policy may be in chaos. If you pass away in a car accident and your sole beneficiary is in the car with you and passes away, you could be leaving your family in chaos. If you do not make up more complex arrangements for beneficiaries, at the very least you should have a secondary and final beneficiary listed.

Naming a minor as a beneficiary

Some people have a favorite grandchild who they want to see succeed in life, so think it may be a great idea to name them as a beneficiary. The problem here is that life insurance companies will not pay a minor when you pass away. A guardian will need to be appointed and that may be someone you don’t trust with the money, or someone you don’t like. Instead, you should find an adult who you know is trustworthy and is able to safeguard the money until the minor reaches adulthood and can claim it (at 18 or 21 depending on the location).

Making a beneficiary lose their welfare entitlements

If you have a beneficiary who is receiving government entitlements like some with a disability, they may lose that when they receive the money from the life insurance policy. The amount they can receive is shockingly low, with anyone who receives more than $2000 inheritance disqualified for medicaid and supplemental security income. In this situation you need to setup a trust which will manage the money in a way that helps the person in the long term and doesn’t dramatically affect their welfare entitlements if possible.

Flordia Insurance Fraudsters Caught!

Insurance Fraudsters Busted!

Insurance Fraudsters Busted!

Investigators in Florida have uncovered a complex insurance scam involving as many as 50 people on Thursday and have laid charges against 33. The highly complex scam involved a number medical professionals, clinic owners, massage therapists, chiropractors and recruiters who sought out people to play a role in the scams.

They staged car accidents and faked related injuries, with willing participants visiting medical professionals who had been paid off for a diagnosis of their injuries.

After a 3 year investigation, police moved in and arrested many of the individuals involved in staging the accidents and perpetrating the insurance fraud. Investigators estimate that the scam fleeced upward of $20 million from insurance companies.

William J. Maddalena, one of the FBI agents involved declared: “If you get upset about your car insurance premiums going up, this crime is one of the reasons why,” He continued: “Every time an insurance payout is made for a staged accident in Florida, we all feel the pain in the pocketbook.”

The arrests are part of a larger operation called “Operation Sledgehammer” which has seen the FBI and local authorities target insurance scammers in the Palm Beach, Broward and Miami areas. The scammers convicted have been ordered to repay $5 million so far and more convictions will undoubtedly be on their way.

The name for the operation comes from the fact that some of the scammers used sledgehammers to damage vehicles and make them look like they had been in an accident. The scam was highly complex because it involved people at every level including medical professionals who were prescribing fake treatment for fake patients. The recruiters found willing participants, paid them off and staged crashes around South Florida. Some of the charges include money laundering, staging financial transactions and accident fraud.

The scam has been running since as far back as 2006, netting a very large amount of cash in that time, and it used as many as 21 chiropractors to provide false injury statements. Some of the defendants have fled to Cuba to escaped prosecution.

The participants were trained by the recruiters and told which chiropractors to go to, how to file the police reports and how to file the insurance claims. The recruiters would then pay the participants, often using the funds in a separate money laundering scheme.

So if you are looking for one of the reasons why insurance premiums continue to claim, you can blame insurance scammers like the ones busted in Florida. Luckily for us the FBI and other authorities are on their trail!

Dangerous Dogs Liability Insurance Requirement

Dangerous Dogs Liability Insurance

Dangerous Dogs Liability Insurance

More cities are moving to enforce restrictions on dangerous dogs and in recent moves, some are making new insurance requirements for the owners of “dangerous dogs”.

In the suburb of Royal Oak in Detroit, officials have had enough with recent vicious dog attacks and have decided to enforce new rules on those animals. As reported by the Detroit Free Press, in October a Doberman pinscher left outside a grocery store attacked a man and severely injured him. Police have also been forced to shoot some pit bulls that mauled a small dog.

The city commission, Patricia Capello was behind the push for new dangerous dog laws which include secure yard requirements, obedience training, a microchip implanted on the animal and a $1 million liability insurance policy.

Capello suggests that despite the $1 million policy requirement seeming to be a bit high, it is required so that people don’t lose their homes, saying “It’s worth it to have the peace of mind that you won’t lose your home”.

With a dangerous dog there is potential for serious injuries or death to other people or animals, so that level of policy probably is the right amount. A liability insurance policy of that level is expected to cost around $110 per year.

Other suburbs like Farmington Hills already have a requirement for $1 million in liability insurance for owners of dogs with a history of bites or attacks, so Royal Oak is not going it alone in instigating this policy. In fact it is expected that many other suburbs with dangerous dogs will follow this policy. Waterford and Westland also require insurance policies, but not to the same extent.

There is also a chance for dog owners to have their pet reclassifed so it is no longer considered “dangerous” if it has a good track record with no instances of escaping their yard without the owner or biting any people (or other animals).

It is another thing to consider when selecting your pet – could there be additional expenses coming from insurance policy requirements if you choose a breed that is more likely to be dangerous. More suburbs and cities are likely to move to similar kinds of requirements as deaths and injuries to dog attacks continue to rise in the United States. Some pet insurance policies do contain an allowance for dog bites, so it is worth checking your policy to determine exactly how much you may be protected. Usually any liability insurance in a pet insurance plan will not reach the required $1 million in liability insurance so you may be required to have 2 insurance policies.