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CAR INSURANCE IN THE USA: WHICH COVERAGE SHOULD YOU CHOOSE?

August 21st, 2006

Today I would like to continue my previous post and tell you about different types of coverage; it means that we pass to the second question from the list:

Coverage: which of them and how much

We do not have the task to pass on all available coverings in the world of car insurance. There are a lot of sources in the network, books where you can find information, and, not in the last instance, your insurance agents. On the contrary, we shall try to see a problem as a whole, not dividing it into details.

Liability Coverage

We speak about this type of covering when somebody brings an action against us or somebody is going to do it, irrespective of validity of claims and irrespective of result of the court examination. 95 % cases do not reach the court, as the parties reach settlement. The insurance company in this case pays (instead of us) not only damage which we have brought to health or the property of other people, it also pays litigation cost. Sometimes it does it without any payment of indemnification to fight tooth and nail against completely absurd claims and spends thousands of dollars on good lawyers.

The person cannot be judged for the sum, bigger, than all his assets (bank accounts are included), equity in the real estate, shares, and, that is very important for beginners - garnishment of wages (deduction from wages during 10 years forward from all members of family at the rate of 25 %). That means that young family without good private means have not so many assets. But, the husband and the wife can earn together, for example, 160 thousand one year. Therefore it is possible to keep 400 thousand dollars within 10 years back.

The important question:

In what situation the court will take away everything from the initiator of traffic accident?

The answer:

The court will take away everything from the initiator of traffic accident in case of death(s), or in case of physical inability of another person.

The amount of damage also depends on the solvency of the victim. The moral damage\spiritual injury (pain and suffering) of a serious lawyer or a doctor costs much more than the same one of a worker.

It is obvious, that we as drivers cannot supervise how many car we shall damage in case of traffic accident, neither their price, nor quantity of drivers and passengers, neither gravity of traumas received by them, nor cost of their subsequent medical treatment. Therefore, we proceed from the worst for definition of the amount of our insurance responsibility.

We should calculate how much it is possible to take away from us if to take away everything, including 25 % from the salary during the next 10 years? So, it is necessary to insure our liability for this sum in the part which is responsible for damage to health of people (Bodily Injury - first two components of our fraction - for more information see the previous post CAR INSURANCE IN THE USA: WHY IT IS NECESSARY TO BE INSURED).

But soon $500,000 of the maximal coverage will be not enough. Then we need an additional coverage in form of Umbrella Insurance. The need for insurance coverage varies from time to time. This implies very simple and important …

The Conclusion:

Insurance coverage should be reconsidered periodically, in accordance with growth of the potential responsibility.

Uninsured Motorist Bodily Injury (UMBI) - covers our moral damage and physical injuries in a case, when we have suffered from the not insured (or insufficiently insured) driver. That is, if the initiator of traffic accident has no enough Liability Coverage. Usually we take this covering in the same size as in Liability Coverage and not less. A principle is the following - it is necessary to insure ourselves not worse, than we insure against other people.

Uninsured Motorist Property Damage (UMPD) - covers damage to our automobile in similar circumstances that is if we have suffered from the not insured (or insufficiently insured) driver.

If WE have damaged our car the damage will be covered as Collision (collision with machine, the house, a border etc.) or as Comprehensive (the rest cases - collision with an animal, theft, vandalism, hailstorm, flooding and so forth). You can buy such an insurance with different deductible (the sum paid to you before the insurance company starts to pay).

Choosing the large amount of deductible the person saves on cost of the insurance, but loses in case of accident. The person who drives without accidents for a long time (some years) it will be reasonable to think about high deductible on Collision, for example, $1,000. Comprehensive which costs ridiculously a little, and it is possible to take $250 as there is nothing to save.

Medical Coverage

Medical Coverage is rather curious covering . Some thousands of dollars, usually 2-5 thousand, that were bought in this coverage, are spent without examination (in other words you may be guilty or not). In the case of expensive medical treatment the necessary sum will be charged from the Liability of the guilty person.

To be continued…

<:3 )~~~~~~
Yours sincerely,
AlexSandra

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CRITICAL ILLNESS INSURANCE: TERMS OF PAYMENT

August 10th, 2006

CI benefits are paid in full on the 31st day after the onset of the illness. If the insured does not survive the illness and dies prior to this day, all payments made are reimbursed to the family (or designated heirs).

Similar to Life Insurance, there exist two types of CI contracts:
- TERM
- PERMANENT.

Term contracts provides coverage up to the age of 75, with growing monthly payments every 10 years.

Permanent contracts provide fixed payments up to a certain age, e.g. 100 (T-100), 75 (T-75), or 65 (T-65).

After the time when insured person reaches specified age (100, or 75, 65) this contract expires.
With a more expensive CI program, all the payments made by the insured will be reimbursed when the person reaches the specified age without developing an illness.

Some programs allow the insured to terminate the contract and withdraw the money invested after 10 years or every 15 years. Naturally, more expensive programs offer greater flexibility.

You can easily obtain an estimate of your temporary Critical Illness insurance. There are a lot of different on-line calculators, some of them allows you to determine the monthly payment amount for an insurance contract with limited coverage (cancer, heart attack, stroke), other shows monthly payments for full coverage contracts.

Now some companies can also offer the insurance, called Guaranteed Issue Critical Illness Insurance, for people, who already developed some critical illness. The pre-existent illness is excluded from the list, but all the rest illnesses are covered. An insurance contract has fixed monthly payments, which do not depend on the age of insured. Maximum coverage is 30,000. Contract expires, when insured becomes 65 years old (in Canada).

<:3 )~~~~~~
Yours sincerely,
AlexSandra

—
According to www.totrov.com

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CRITICAL ILLNESS INSURANCE: REASONS

August 8th, 2006

I think that it is very important for you to know whys and wherefores of CI.
So, we all know that illnesses are still the leading cause of death. Also I would like to present you some sad statistics: 30% of men and 27% of women, who did not have any health problem in their youth, develop a critical illness by the age of 65.

As a case in point you can see some data from Canada:
- 1 out of 4 Canadians has some form of heart disease.
- 1 out of 3 Canadians develop cancer during his/her lifetime.
- More than 50,000 Canadians suffer a stroke every year.

Unfortunately, on average, people are diagnosed with a critical illness at the age of 41.

We can say that CI is our Living Benefit, since it’s designed to protect us if we becomes ill. That is especially important given the growing rate of survival of critical illness patients, as supported by the following data:

- survival rate for cancer patients doubled since 1970.
- mortality rate for patients with cardiovascular diseases has dropped during the last 10 years.
- 75% of people survive their first stroke, but 60% become disabled.

It’ s always easier to explain everything using different situations in real live. That is why I’d like to demonstrate with a good example, taken from Mr. Totrov personal site (www.totrov.com):

“…Traditional insurance may not always provide protection. For example, John is earning 40,000 and has employer-provided benefits which include Long Term Illness Insurance. He also has Life Insurance with 400,000 coverage to protect his wife and children. Unfortunately, John suffers a heart attack: stressful job and financial instability take their toll, but he survives (in one of Toronto’s leading cardio hospitals, as many as 91% of patients live more 30 days after the attack). Usually in the period following a heart attack, family income falls, since the patient is not capable of working (and so is the spouse, who may have to stay at home to provide care), but expenses accumulate (medications, visits of a nurse, an operation in the US, where it can be performed immediately as opposed to waiting for a free operation in Canada). Three months later, the situation is more or less stable. John’s wife could return to work, and John himself is feeling much better. He, however, is no longer able to handle his former job and would like to find something less demanding. Acquiring new skills and getting experience in a new field requires time, and John will need means subsistence during his transition. Unfortunately, neither his life insurance nor the employer’s disability insurance will provide any assistance, since John survived the attack (so life insurance cannot be claimed) and is able to work but is simply seeking a different position (and, thus, can no longer be considered disabled).
CI, on the other hand, would provide protection in this situation: John would receive the entire amount of his coverage, tax-free, on the 31st day after the attack, with no restrictions on how this money could be spent. He could pay off his medical expenses, go to a warmer climate for faster recovery, or simply enjoy piece of mind knowing he does not have to search for a job immediately…”

In that way, CI can be accepted as true Life Insurance, since it’s the insured who gets the benefits of the program. And Life Insurance for one’s turn is more properly called Death Insurance: the benefits are paid only in case of death to the relatives of the insured.

<:3 )~~~~~~
Yours sincerely,
AlexSandra

—
According to www.totrov.com

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PROSPECTS FOR NATIONAL HEALTH INSURANCE IN THE UNITED STATES

June 26th, 2006

http://www.quickregister.net

In my view, the prospects for national health insurance, in the short run, are poor. The forces actively opposed to it are strong, are well organized, and have a clear sense of what they do not want. The forces actively in favor are relatively weak, disorganized, and frequently at odds regarding the reasons for wanting national health insurance or the best way to obtain it.
National health insurance is far from dead, however; the need to curb costs while extending coverage will continue in the long run to push the country in that direction. The process will accelerate as nonprofit health-care institutions lose their ability to provide some social insurance as an alternative to national health insurance.
Moreover, the current trend of basing insurance premiums on expected utilization will strike more people as unjust because most diseases will be found to have a significant genetic component. Also, as employers’ hiring decisions and employees’ job choices become increasingly constrained by health insurance considerations, people will be more inclined to appreciate the efficiency advantages of making health insurance independent of the labor market.

according to the article «National Health insurance» by Victor R. Fuchs (the journal «THE SENIOR ECONOMIST») Read the rest of this entry »

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NATIONAL HEALTH INSURANCE AND HEALTH

June 26th, 2006

Does national health insurance improve the health of the population by increasing access to care, or does it worsen health by constraining the introduction of new technology and destroying incentives for physicians and hospitals? There is no conclusive answer to this question; in my judgment, such a system has little effect on health one way or the other.
The evidence regarding life expectancy differentials, however, is more compelling. Universal coverage does not eliminate or even substantially reduce differentials across socioeconomic groups. In England, for instance, infant mortality in the lowest socioeconomic class is double the rate found in the highest class, just as it was prior to the introduction of national health insurance.
The relatively homogeneous populations of Scandinavia not only enjoy universal coverage for health care but also have many other egalitarian social programs. Nevertheless, life expectancy varies considerably across occupations; the age-standardized mortality ratio for male hotel, restaurant, and food service workers is double that for teachers and technical workers. A study of age-standardized death rates in Sweden among employed men ages 45 to 64 found substantial differentials across occupations.
The failure of national health insurance to eliminate or reduce mortality differentials is not necessarily a decisive argument against its adoption. Bruce Vladeck argues that curing disease and improving functional outcomes are not the only benefits of medical care. He writes, «We expect the health system to take care of sick people whether or not they are going to get better, as much for our benefit as theirs.» The caring services provided by health professionals have value even when they do not change health outcomes.

according to the article «National Health insurance» by Victor R. Fuchs (the journal «THE SENIOR ECONOMIST» ) Read the rest of this entry »

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NATIONAL HEALTH INSURANCE AND HEALTH CARE COSTS

June 25th, 2006

Opponents of national health insurance frequently assert that it would result in a substantial increase in total health care costs. Both theoretical and empirical research support the view that the lower the price of care to the patient, the more care he or she will want. The logic of this argument suggests that those countries with universal coverage spend more on medical care than does the United States. In fact, the reverse is true. Adjusting for differences in real income, the United States spends much more per person on medical care than does any other country. For instance, the average American spends about 40 percent more than the average Canadian, even though the difference in real income per capita is less than 10 percent. And Canada spends more per capita than does any European country. How can this be? Countries with universal coverage find other methods to contain health care spending-methods that apparently are more effective than financial constraints on patients.
The most obvious source of savings under a national health insurance system is in reduced administrative costs. Approximately 6 percent of U.S. health expenditures are in «program administration and net cost of private health insurance.» Several additional percentage points must be added to account for costs incurred by providers for billing and other administrative activities directly attributable to the U.S. system of financing care. By contrast, the Canadian system of provincial health insurance imposes minimal administrative and billing costs on providers and payers; the insurance plans themselves are inexpensive to run because everyone must join, and premiums are collected through the tax system.
But savings in administrative costs are only pan of the answer. Nearly all countries with national health insurance rely heavily on what I call «upstream resource allocation.» The key to this is control over capital investment in facilities and equipment, the specialty mix of physicians, and the development and diffusion of high-cost new technologies. Such control usually results in less excess capacity, in both physical and human capital. In Canada, for example, relatively scarce high tech equipment, such as magnetic resonance imaging (MRI) or computerized axial tomography (CT) scanners, is used intensively, while the proliferation of such equipment in the United States results in considerable idle time. There are more physicians per capita in Canada than in the United States, but fewer physicians there specialize in complex surgical and diagnostic procedures. As a result, the average Canadian specialist has a full workload, while his or her American counterpart does not.
The price that Canadians and Europeans pay for such controls is delay or inconvenience in receiving high-tech services, or sometimes not receiving such services at all. Whether such delays or denials have a significant effect on the health of the population is not known with certainty; the limited evidence now available suggests that they do not.

<:3 )~~~
to be continued…
according to the article «National Health insurance» by Victor R. Fuchs (the journal «THE SENIOR ECONOMIST» ) Read the rest of this entry »

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TWO MODELS OF HEALTH INSURANCE

June 24th, 2006

Part of the current debate over national health insurance is rooted in two conflicting visions of how the cost of health care should be shared. We can designate one as the casualty insurance model and the other as the social insurance model.
Casualty insurance, which usually refers to automobile collision, residential fire, and similar risks, is premised on the idea that premiums should (to the extent feasible) be set according to expected loss. Other things being equal, policyholders with better driving records or with smoke detectors in their homes pay lower premiums; poorer risks pay higher premiums.
Social insurance, which is the basis for national health insurance, provides for extensive cross-subsidization among different risk groups; it ignores expected loss in allocating costs.
Advocates of the casualty approach argue that, as applied to health insurance, it is more efficient and more equitable than the social insurance model. They assert that use of care depends, to some extent, on personal behavior and choice. If premiums vary with expected use, individuals have an incentive to choose healthier behavior and to make more cost-conscious decisions about their use of care for any given health condition. A clear example is charging cigarette smokers higher premiums than those charged to nonsmokers. This may decrease the number of smokers, and even if it does not, advocates of the casualty model argue, it is fair for smokers to bear the extra cost of their unhealthy habit.
Even when there is no possibility of altering behavior, and even if use of care is unrelated to insurance coverage, the casualty model still offers an efficiency advantage in any system of voluntary health insurance. The alternative - a uniform premium for all individuals, including those with major health problems -will discourage purchase of insurance by those without such problems because the premium would be unreasonably high.
Advocates of the social insurance model rely heavily on arguments that appeal to one’s sense of justice or collective responsibility. In earlier times, these feelings of mutual responsibility were often evident within families and within religious communities. In modern times, many countries have extended the concept to encompass the entire nation. The philosophical foundations for such arguments can be discerned in John Rawls’s discussion of making choices behind a veil of ignorance.
For example, suppose that before you were born you did not know if you were going to be rich or poor, sick or healthy; you might (assuming some risk aversion) prefer to be born into a society that would provide health care on the same basis for, say, persons born with a genetic disease as for those born without such a problem. Advocates of the social insurance model also point to efficiency arguments. Because everyone must participate, there can be savings in sales and administrative costs that offset other efficiencies achieved through the casualty approach.
Whether one model or the other is more conducive to an efficient health care system is primarily an empirical question (interwoven with value judgments) that cannot be answered a priori. Which approach is more just is primarily a value question (individual versus collective responsibility), but empirical information concerning the reasons for variation in use of care is relevant.
In my experience, the same audiences that overwhelmingly approve charging smokers a higher premium because they use more care strongly oppose a premium surcharge for individuals whose high use is attributable to genetic factors. If cigarette smoking should turn out to have a significant genetic component, opinions concerning the smoker surcharge would presumably change. One consequence of the genetics revolution may be to shift public sentiment toward the social insurance model.

according to the article «National Health insurance» by Victor R. Fuchs (the journal «THE SENIOR ECONOMIST») Read the rest of this entry »

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NATIONAL HEALTH INSURANCE: THE UNINSURED

June 23rd, 2006

With some exceptions, such as Medicare, health insurance in the United States is a private, voluntary matter. The demand for insurance, like the demand for any product or service, depends on consumers’ ability and willingness to pay for it. Some of the uninsured cannot afford health insurance: others are unwilling to acquire it. In all, the uninsured can be grouped into six categories.
The poor
The largest group of uninsured consists of individuals and families whose low income makes it infeasible for them to acquire insurance, either on their own or as a condition of employment. About 20 percent of these have no connection with the work force, but nearly 80 percent are employed or are dependents of employed persons. In different researches of the Health Insurance Association of America (HIAA) we can see that about one third of the working uninsured earned less than $ I 0.000, another estimate puts the figure at 63 percent. In any case, it is clear that the great majority of uninsured workers cannot afford to give up a substantial fraction of their wages to obtain health insurance.
Most uninsured workers are employed in small firms, but the frequently heard explanation, «Small employers can’t afford health insurance,» is as misleading as the phrase «employer-provided health insurance.» Employers do not bear the cost of health insurance; workers do, in the form of lower wages or forgone nonhealth benefits. A more accurate description of the problem would be, «Many workers in small firms can’t afford health insurance.» Note that lawyers, accountants, computer consultants, and other highly paid professionals organized in small firms usually have health insurance, although they often face extra costs, as discussed below.
The sick and disabled
Many men and women who aкe not poor are still unable to afford health insurance because they have special health problems and therefore face very high premiums or are excluded from coverage entirely.
The «difficult»
Some individuals are neither poor nor sick but have difficulty obtaining insurance at average premiums. They may be self-employed, work in small firms, or be out of the labor force entirely. To insure such individuals, insurance companies incur abnormally high sales and administrative costs. They also encounter the problem of adverse selection:
ü if an insurance company offers a policy to individuals or small groups at an average premium, those who expect to use a great deal of medical care are likely to buy, and those who do not will refrain from buying.
The low users
Some people do not expect to use much medical care. They may be in particularly good health; they may dislike going to physicians; or, like Christian Scientists, they may not believe in the efficacy of medical care. For them, health insurance is a «bad buy» unless they can acquire it at a below-average premium.
The gamblers
Most people buy health insurance in part because they are risk-averse. They would rather pay a fixed, known premium (even above the actuarial level) than risk a huge expense in the event of serious illness. But not everyone is risk-averse about health expenditures, or risk-averse to the same degree. People in this category prefer to take their chances with continued good health and save the premium payment.
The free riders
The final category consists of individuals who remain uninsured because they believe that in the event of serious illness they will get care anyway, and others will pick up the bill. They save the cost of insurance and «ride free» on the coattails of those who pay into the health-care system. There may be elements of free riding in the behavior of the low users and the gamblers as well; it is often difficult to distinguish among the three categories of individuals who are able to pay for insurance but are unwilling to do so.
From an analytical perspective, it is not difficult to achieve a national health insurance system; all it requires is subsidizing those who are unable to afford insurance and requiring purchase by those who are unwilling to acquire it voluntarily. No nation achieves universal coverage without subsidization and compulsion. Thus far, Americans have resisted both.

according to the article «National Health insurance» by Victor R. Fuchs (the journal «THE SENIOR ECONOMIST») Read the rest of this entry »

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CAREERS IN INSURANCE

June 20th, 2006

The insurance industry has a large range of jobs that service various parts of the business. In addition to underwriters, who decide whether or not a risk should be insured, and agents, who sell the coverage, the industry employs many kinds of engineers, who inspect property and offer advice on making property safer. When a loss occurs, claim adjusters investigate its cause as, for example, in a fire and decide how much the insurance company owes its policyholder.

The industry has developed specialists called actuaries, who, through mathematical and statistical analysis, help underwriters determine the rates applied to life insurance premiums. The industry also employs a wide range of physicians, lawyers, computer experts, mathematicians, and others to support all the major players in the game of risk.

In the latter part of the 20th century, general industry has developed its own insurance specialists who specialize in purchasing insurance for their corporations. These risk managers must be acquainted with all forms of insurance and are generally in charge of deciding what insurance a corporation should buy and how much it should pay.

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TYPES OF INSURANCE

June 20th, 2006

Insurance comes in many varieties. Categories include property, liability, homeowners’, automobile, medical, life, workers’ compensation, and marine.

Property Insurance

Property insurance is the modern form of the fire insurance that was sold by early insurance companies. The name has changed because the coverage has changed. No longer are just the losses resulting from fire protected by property insurance. Such losses as those from windstorm, theft, vandalism, and water damage are also covered.

Liability Insurance

Liability insurance is the most important kind of business insurance. A liability is a duty one person owes another, or is liable for, for some special reason. Liability insurance pays an individual or a business for liabilities that result from unforeseen situations.

Homeowners’ Insurance

Homeowners’ insurance is a combination offering both property and liability coverage. Usually it includes protection for a person’s home, any other buildings on the property, and for the buildings’ contents and personal belongings except automobiles and pets. The policy can be written to include the property of guests. If disaster strikes, homeowners’ insurance usually pays a family’s living expenses until they get settled at home once again.

Automobile Insurance

Automobile insurance is the most complicated kind of insurance purchased by individuals. It combines several kinds of property and liability coverage. The standard automobile policy includes collision insurance, covering property damage to a car when it is struck by another vehicle, and comprehensive insurance, covering general property damage that occurs when an automobile is damaged by something other than another vehicle.

Medical Insurance

Medical insurance pays the costs of hospitalization and physicians’ fees for insured individuals who are injured or become ill.

Life Insurance

Life insurance is designed to insure lives, though it frequently includes coverage for major disabilities such as the loss of limbs or organs. There are basically three kinds of life insurance that may be purchased by individuals for themselves or others or by employers for their employees.

Workers’ Compensation

Workers’ compensation is a special state-controlled insurance purchased by employers for the benefit of their employees. Like general liability and medical payment liability insurance, it pays for medical treatment required by employees of a company according to a state-regulated schedule of benefits. The object is to prevent employees from the need to sue their employers if they are injured and to compensate workers for losses from accidents on the job.

Marine Insurance

The oldest form of insurance that scholars have been able to document, marine insurance now includes much more than the shared risk of ships’ cargo. It might best be called transportation insurance because variations of the coverage include protection for ships, trucks, railroads, and aircraft. Underwriters generally divide it into two types: ocean marine, which deals with every kind of water conveyance, and inland marine for truck and rail cargo.

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