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Topics

Additional Course Information

Insurance Planning

Insurance is the transfer of risk for a loss you can’t afford to a third party in exchange for your payment of premiums to the company. There are four types of insurance.

• Renters/Homeowners
• Automobile
• Life
• Health

Renters/Homeowners

The Renters insurance is relatively inexpensive and it covers your belongings, wherever they may be located. It also provides liability coverage. You have to protect your guests and that’s why you need liability insurance. The monthly premium is determined by the amount of liability insurance and what your belongings are valued at. You can get replacement coverage, but it will cost you a little more money. Two out of every three people who rent will not buy renters insurance. They take a chance on losing everything if there is some kind of major catastrophe affecting the rental property. You need to protect your assets. One of the problems you could have with rental insurance is your roommate. If there is a problem with your roommate it could impact your ability to get rental insurance. Remember, rental insurance does not cover the dwelling where you live.

Homeowners insurance is more expensive. It covers everything renters insurance does, but also protects the structure. You can get replacement coverage with homeowners insurance, but it will cost you more money. It depends on what you think the value of your property is. Most people will grossly underestimate the value of their belongings and home. When they go buy insurance they’re guessing at what it would cost to replace everything if something happens. When you lose everything in that situation you’ll never recover the money you spent or the value of your home.

The advantages of renters and homeowners insurance are:

• It protects your assets
• Is relatively inexpensive – when compared to other things
• Gives you liability protection – liability protection is for somebody else getting hurt on your property

Automobile

Automobile insurance simply covers you and your car if there is any kind of accident. It will also cover anyone riding in your car. The younger you are the more expensive the insurance will be. You’ll normally see a big drop in your monthly premiums when you turn 25 years of age. Some insurance companies will give you a break on premiums if you have taken driver’s education in school. One thing you must remember about insurance is determined by whether you have an outstanding loan on the vehicle. If you owe on a loan you must have what’s called full coverage. Full coverage runs the whole gambit from collision, to bodily injury, to comprehensive, to medical, uninsured and underinsured, and liability.

Automobile insurance covers several things.

• Collision – damage from a crash and it can be expensive
• Comprehensive – damage from other means like paint or hail
• Liability – damage to the other guy – mandatory in most every state and the limits will vary from state to state. The Navy requires a minimum of liability insurance to get on base and those limits will also change from base to base
• Medical expenses – covers driver and passengers
• Uninsured/Underinsured Motorists – covers being hit by an uninsured or hit-and-run driver and an at-fault driver who doesn’t have enough insurance
• Deductibles – the higher your deductible in the lower your premium will be

Auto Insurance Tips

• Don’t get tickets
• Shop Several Companies – check around
• Driver’s training lowers cost – not very much
• Anti-theft systems lower cost – they are options on a car
• Higher deductibles lower cost - $100 deductible vs. $500 deductible
• Carry enough liability insurance – it varies state by state and base by base

Life Insurance

Life insurance is a form of insurance that pays out when someone dies. Life insurance is a funny thing for three reasons:

• You are never going to use a life insurance policy that you buy on your own life. After all, you will be dead when the policy pays out. Life insurance is therefore a gift that you give to someone else.
• The chances of you dying "before your time" (say, before age 70) are pretty slim in this day and age. Therefore, the chances of a life insurance policy ever paying out at a time when it is really needed (for example, at age forty when you have a spouse and two teenage daughters depending on your income) are slim as well.
• However, it is guaranteed that you will die at some point, and there is a fair amount of emotion around this particular fact of life.

These three facts make life insurance work like no other insurance policy ever will. The emotional component attached to death is enough to alter the entire sales process and the types of conversation that happen during the sale.

Types of Life Insurance

There are two types of life insurance: 1) Term life insurance, and 2) Permanent. Term life insurance is pure, unadulterated life insurance. Permanent is term life insurance attached to some sort of savings component. It is called various things by various companies like "whole life", "universal life", and so on.

Let's say that you would like to buy $100,000 worth of life insurance. If you bought that as a term policy you might pay $15 per month. If you bought it as whole life, you might pay over $100 per month depending on the company selling the policy. The difference ($85 per month) will act as an investment that will "pay off the life insurance" and/or pay you a cash value at a particular age.

The problem with everything besides term insurance is that the savings part is inefficient. Also, it is only as secure as the company issuing the policy.

Advantages of Term Life Insurance

• Provides protection for a specific period of time
• Initial premiums are low
• Good for covering mortgages, car loans, etc

Disadvantages of Term Life Insurance

• Premiums go up as you age – and they will every time you renew the policy at the end of term
• No cash value to draw on

Advantages of Permanent Life Insurance

• Protection guaranteed – as long as premiums are paid
• Premiums can be fixed or flexible
• Policy accumulates a cash value – this is cash you can borrow against

Disadvantages of Permanent Life Insurance

• Can be more costly than term – maybe as much as three times higher
• The longer you wait to get it the higher the premium is because of your age

Serviceman’s Group Life Insurance (SGLI)

Every member of the service can get SGLI. One of the benefits is that it will protect you against loss of income. You can get insurance up to $400,000 on yourself, but lesser amounts are available. It is a great deal and it comes out of your pay check automatically. This coverage can be converted, for yourself, to Veterans Group Life Insurance (VGLI) when you get out of the service. Every five years you will renew your VGLI and the premium will go up as your age does.

You can now get SGLI- Family coverage. The SGLI is available to dependents that are listed on your page two. You can purchase up to $100,000 in coverage and there is free coverage of $10,000 for children. The coverage is automatic unless it is waived in writing by the service member.

Survivor Benefits

These benefits are received while you are on active duty.

• Death gratuity – paid 24 hours after death – amounts can be $100,000 for combat and $12,420 for non-combat
• Free burial – if in a military site – up to $6,900 for private arrangements
• Round trip travel and free household goods move
• Three months BAH or three months quarters free
• Arrears in pay and accumulated leave
• Social Security - $225 for burial and more for other survivor benefits
• Dependent’s Indemnity Compensation (DIC) – approximately $993 for spouse, but it’s adjusted annually - $217/month/child under 18 and up to age 23 if a full time student
• VA Education Benefits - $404/month for 44 academic months (full time) for spouse and children

How much life insurance do you need?

To calculate how much life insurance you need you can use the calculator below or you can estimate what you will make during the rest of your life. To estimate simply take your yearly salary and multiply it by the number of years you have left before retirement. Not very easy is it. You’ll probably estimate too little or too much.

The easy way is to examine all of the expenses that your family will have should you die, and account for them. The calculator below will help you determine the correct amount of life insurance that you need.

From Whom Should I Buy My Insurance?

There is certainly no lack of life insurance companies in the world, so your choices are many. You should buy your insurance from a good reputable source that has a competitive price. One of the places you can go to check on insurance is the Navy Legal Services. The following links will help you to find a company:

www.iii.org (Insurance Information Institute

www.tricare.osd.mil

www.insurance.va.gov

www.naic.org (National Association of Insurance Commissioners)

Health Insurance

The active duty member is covered automatically with health coverage. They can go to any military hospital or clinics and seek medical care. You can also get coverage from TRICARE for the medical needs of your dependents. There is an annual fee of $460/year for family coverage and you must go through an authorized Primary Care Manager. There is a small co-payment of $12 on some medical care. Your family members must be enrolled in DEERS and listed on your page two. Dental care is offered through TRICARE for a small premium as long as the family members are on your page two. As long as you’re on active duty you get this medical and dental coverage for the best price anywhere.

Retired members and their dependents can also use TRICARE medical and dental benefits. They must meet the same criteria that an active duty member must meet.

There are several types of frivolous insurance policies floating around that you don’t need and shouldn’t buy. Student accident insurance is one of these. You don’t need separate student accident insurance. If a student participates in sports in school the school will provide this type of insurance. Another type is the Credit Card Loss Insurance. This type of insurance come comes automatically with the credit card itself. Most cards limit your liability to $50 if you lose your card and notify the company right away. One of the biggest types of frivolous insurance is the rental car collision accidental death or dismemberment. If you have full auto insurance you’re already covered on your own policy. We have already talked about extended warranties as insurance you don’t need.

High Pressure Sales Tactics

You are being targeted by insurance salespersons that may not always have your best interests at heart. Their goal is to sell you as much insurance as they can regardless of how it impacts your income. Some of the tactics uses are:

• Improper sales practices – misleading presentations, presentation by unauthorized personnel, selling during duty hours, and selling in the barracks
• Unwise/Unethical advice – drop your SGLI – claim non-existent dependents
• Before you buy – sleep on your decision and have the contract reviewed by legal services

Insurance salespersons must have permission to come on base or enter a barracks to sell insurance. They can only talk to the person they have an appointment with, but some of them will hang around and try to sell to more people without appointments. If this occurs it should be reported to the command. Always consider your military benefits first, don’t buy under pressure, and shop wisely. The DOD gives you a 10 day cooling off period before any insurance you buy becomes binding.

Sources of Assistance

• Navy Mutual Aid
• Navy Legal Services
• Internet Insurance Sites (links mentioned above)
• State Insurance Commissions

Assistance

Counseling

• Army - E-mail
  
  Anthony Powell – Ft. Bliss, TX
  Wk Ph:  915-568-4453,
  DSN:  978-4453
  Email:  anthony.powell1@us.army.mil

---

• Navy - E-mail
  
  Mike Kempf – Pensacola, FL
  Wk Ph:  850-452-6817,
  DSN:  922-3228
  Email:  mikekempf@bellsouth.net

More information

• Important changes to credit reports for 2008
• Links to more information
• mysdcc.sdccd.edu

New Links 10-21-2008

• Boston.com
• The News Service
• mymoney.gov
• http://www.financialstability.gov/

Calculators

• Savings
• Monthly Cash Flow
• 401(k) Value
• Hidden Expense
• Life Insurance
• Loan Amortization
• Net Worth
• Retirement Planning
• Taxed and Non-Taxed Compounding

Glossary

• Common terms in financial planning

News

• HOME REFINANCE AND MODIFICATION OPTIONS

General Information

• SDCC has articulated the Navy PFM course for one college credit. Navy personnel who have graduated from the Navy PFM course qualify. Typically, it can be difficult to apply one credit and meet the requirements of a three credit semester long course at most colleges and universities. With that in mind, we have taken the initiative of developing a two credit online course that will be available upon completion of the Navy PFM course. Sailors who have completed the requirements of both the Navy PFM course and the online PFM course will be given credit for completing the three credit Consumer Studies 110 course offered by San Diego City College and Mesa College and transferable to any Servicemembers Opportunity College (SOC).

• For additional information or to see if you qualify contact a PFM counselor.