Advanced Personal Finance

I freely admit that I am not in tune with the cost of health insurance in the U.S. That’s because I’m one of the fortunate individuals who has always had subsidized health care. First it was the parents, then the U.S. Army (that sort of counts as health care), and then a series of employers.

That’s why it was completely stunning to me to learn the total cost of my family’s health insurance. I just started a new job and as part of orientation, HR went over benefits. For my family of four, we’ll pay in the neighborhood of $150 every two weeks for what I would consider excellent coverage. What the HR person said during orientation, though, just blew me out of the water. My company picks up 75% of the cost of coverage.

That means that for my healthy family of four, the total cost of health insurance is about $1,200 per month!

For those of you without a calculator, that’s $14,400 per year. I couldn’t believe my ears. I actually asked the woman to repeat herself to make sure I heard correctly. I did.

Apparently that number isn’t too far out of line. According to this report by the Kaiser Family Foundation, the average cost of health insurance for a family is $10,880 per year (2006 numbers).

I just didn’t know how high the total cost of health insurance was. I’m ashamed of that. I mean, I’m a pretty well informed individual. I know that millions of U.S. citizens don’t have health insurance of any kind. In fact, according to the federal government’s own data, at least 47 million people (16% of the population) were without health insurance as of 2005 (the latest data available). What I didn’t know was just how high the cost is for those who do have insurance.

Sadly, none of this is going to change anytime soon, in my opinion. The three main contenders for the Democratic presidential nomination all talk about their (strikingly similar) plans for national health insurance. (It’s completely off the radar of the Republican candidates.) But the fact is this country has a disturbing tendency to wait until a policy is completely, obviously off the rails before doing anything about it. We’re not yet at that pain point as a nation. Don’t look for anything to change. Not yet.

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Natural disasters can occur anywhere.  Just ask the people in California running from the fires raging there.  The pain is just beginning for some of them, though.

After all is said and done, people who lost their homes might be in for a big shock.  It’s very likely some of them won’t be able to rebuild their homes, not because they don’t have insurance, but because they don’t have enough insurance.  And it can happen to any of us.

When you buy your home, you obviously insure it.  Thing is, the policy is based on your home’s value right then.  After the recent run-up in home prices, especially in places like California, your insurance may not have kept pace.

Adjusting your homeowners insurance according to the cost of rebuilding your house is a critical step.  It’s easy to do - I did it recently.  Just call up your insurer and ask what your coverage is.  If it’s inadequate based on the selling price of comparable homes in your area, just have them adjust it upward.  (Make sure your not insuring your land, though.) Sure it will cost a little bit more, but you’ll know that your house can actually be replaced after a total loss.

As some people in California are about to find out, after a disaster is a really bad time to find out your under insured.

[Image courtesy Meyer Media]

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My wife and I were talking about some relatives at dinner last night.  It seems one of them has recently lost his job in the home construction business.  That didn’t come as a complete shock given the housing slow-down.  What did come as a surprise, though, is that this person refuses to sign up for unemployment.

A little back story is in order.  The relative in question was fairly recently hired by the now former employer.  I think it was within the last two years or so.  So he probably got little, if any, severance.  He himself just bought a house with accompanying rather large mortgage.  Throw in that he and his wife just had a baby and you’ve got serious financial  responsibilities.

The idea that you would voluntarily decline unemployment benefits is mind-blowing to me.  You pay the premiums for unemployment insurance.  Why wouldn’t you use it when you’re unemployed?

I looked up the process for applying for unemployment benefits in our state and it couldn’t be easier.  Fill out some online forms.  Checks begin to arrive.  Each couple of weeks, you go to the site and confirm you’re still unemployed.

So if you (God forbid) lose your job, please file for unemployment.  That’s what it’s for - newly unemployed people.

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One of the great things about writing this blog is that I’m constantly learning new things about personal finance. That’s why I started writing it. I wanted to continue learning and share what I’ve learned about personal finance with others. So it’s always interesting when I learn something about a topic I knew all about, like FDIC insurance.

FDIC stands for Federal Deposit Insurance Corporation. It’s a government agency that insures money that’s deposited by people into banks, S&Ls, and the like. The credit union equivalent, by the way, is the National Credit Union Administration (NCUA), which is basically a mirror of the FDIC.

It’s pretty common knowledge that the FDIC insurers $100,000 in deposits. But here are a couple of additional facts you may not know.

• The $100,000 limit is based on account ownership. In other words, if you and your spouse have a joint savings account, the insurance on that account is $200,000.

• The $100,000 maximum is per owner per institution. So if you have more than $100,000 to deposit as an individual, you have to open accounts at different institutions. Different accounts at the same bank won’t do it.

• IRAs are covered up to $250,000. As of 2006, IRAs have a different and separate maximum. That’s in addition to any other deposits at that institution. So you could actually have $350,000 in insurance as an individual at one bank.

Just a couple of quick clarifications and facts about FDIC insurance.

Here are a couple of posts from others about FDIC:

FDIC and NCUA Deposit Insurance at Blueprint for Financial Prosperity

FDIC Insurance Higher on Retirement Accounts at Five Cent Nickel

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You can definitely break down personal finance concerns by age. Things that are important when you’re 22 become trivial at 55. Your key concern at 65 isn’t the same one you had at 45.

As another birthday passed, I started thinking about how those things break down. Obviously, not everyone will have all of these things happen during the time-frame I show (or at all, for that matter).

20 to 30

• Graduate from college and start repaying loans

• Get first ‘real’ job

• Buy first car and insurance

• Rent an apartment

• Get first credit cards and learn how to deal with them (or not)

• Marry? Have a baby? Buy a house? Maybe you even manage to save something

31 to 45

• Have kids and watch them grow up too fast

• Get a will

• Learn about and buy life insurance

• Buy a house

• Start saving for college

• Try to fund an IRA and 401(k) in between orthodontist bills and piano lessons

46 to 55

• Holy crap! College tuition is just around the corner (or here already)

• The thought of retirement gains in importance and you try to ramp up saving

56-65

• The kids are out of the house

• The mortgage is paid off

• These are prime earning years, and you’re able to save serious money for retirement

• Look into long term care insurance

65+

• Come up with a retirement fund withdrawal strategy

• Settle in to retirement

• Begin to think about estate planning

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