ABCs of Auto Insurance

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Today, most states require car owners to purchase auto insurance coverage. Whether you already have auto insurance or are considering buying some, you may be wondering how much is enough and which types of coverage you need. Here are a few tips to get you started.

A is for auto policy

When you purchase auto insurance, you enter into a written contract with your insurance company. The contract states that you agree to pay a certain amount of money (the premium) and that the insurer agrees to provide a certain dollar amount of protection (coverage limits) for a specified amount of time. Read this policy carefully when you get it, and ask your insurance agent to clarify any terms and conditions that you don’t understand. And remember to review your policy periodically. Your life will change, and so will your coverage needs.

B is for bodily injury coverage

Bodily injury and property damage make up the portion of your policy known as liability coverage. This is mandatory in most states. If you cause an accident, you may be liable for some or all of the damages. Liability coverage protects you from potential lawsuits by providing coverage to individual(s) injured as a result of your negligence. The amount of protection (coverage) that you choose, beyond state requirements, is up to you. In many states, you can purchase as little as $20,000 per injured person and $40,000 per accident. However, this may not be enough to adequately protect you. For instance, if you own a home or have any other valuable assets, you’ll want to protect those assets by choosing higher limits. Frequently recommended limits are $100,000 per injured person and $300,000 per accident.

C is for collision and comprehensive

Collision, as the name implies, covers your auto when it strikes an object (e.g., a tree or a telephone pole). Comprehensive covers your auto against other physical damage that is not covered by collision (e.g., fire and theft). Although these coverages are optional under state insurance laws, that doesn’t mean you should forgo them. Collision and comprehensive can be valuable because they can limit your out-of-pocket expenses.

But if your car has a low resale value (e.g., under $1,000), having collision and comprehensive coverage may not make sense–the premium cost may not be worth it if you can afford to pay for repairs yourself. However, keep in mind that dropping these coverages is not always up to you. If you finance your car, your lender may require you to carry collision and comprehensive coverage.

D is for deductible

Think of your deductible as self-insurance. It’s the amount of money that you’re willing to pay out of your own pocket if there’s an accident. You can save money on your premiums by choosing a higher deductible, but watch out–if you get into an accident, you’ll need to come up with that amount before your insurance pays a dime.

For example, say you choose a $1,000 deductible. You get into a minor accident, and the damages total $950. You’ll end up footing the entire repair bill, because your insurer pays for damage only above and beyond your deductible amount. But if your deductible was lower, say $500, you would have to come up with only that amount–your insurer would pay the remaining part of the bill, in this case $450.

E is for exclusions

Exclusions are why it’s so important for you to read your auto policy. Most people purchase open peril or unnamed peril policies. These policies cover all risks, except those listed in the exclusions section of your policy. For example, insurers do not cover “willful and wanton misconduct.” This is conduct that is intentional and reckless or in disregard of the law. You don’t want to find yourself in an exclusionary situation, because you’ll be left to pay the bills–both yours and those of anyone you injure.

F is for filing a claim

You’ve been in an accident–now what? You need to notify your insurer. Your insurer will have you fill out an incident report in which you state what happened in the accident. You may also need to give a recorded statement to the adjuster. If you file a claim for property damage, you’ll need to get an appraisal. Some insurers will send an appraiser to you, while others require you to come to them. If you are injured, your insurer will require you to have a physical exam. In general, you can see your own doctor, but the insurer may also ask that you see a doctor of its choosing.


Most insurance policies contain a clause regarding late notice. If you fail to notify your insurer of the accident in a timely manner, the company can disclaim coverage. This means that the insurer will not pay. What is considered late notice? This question continues to be battled out in courtrooms across the United States, so if you are planning to file a claim, the best advice is to notify your insurer as soon as possible.

Clifford Cadle is a Registered Representative with and, Securities are offered through LPL Financial, Member FINRA/SIPC

Medicaid Liens and Estate Recoveries

What are Medicaid liens and estate recoveries?

medicaidFederal law encourages states to seek reimbursement from Medicaid recipients for Medicaid payments made on their behalf. There are two types of cost-recovery actions against the assets of Medicaid recipients: (1) real or personal property liens, and (2) recovery from decedent’s estate.

A Medicaid lien is a form of attachment against your property that signifies that someone else has certain rights or interests in your property. A lien makes it impossible for you to sell or refinance your property without the state’s knowledge and opportunity to collect. While federal law allows a lien to be placed on your home at the time you become a permanent resident of a nursing home, not all states have adopted such provisions.

Along with the use of lifetime liens, your state may be able to seek reimbursement from your estate after you die. For Medicaid purposes, the word “estate” has traditionally been construed as your probate estate; that is, property which passes under your will, not by beneficiary designation or operation of law. Therefore, assets held jointly with other people, assets held in trust, and assets held subject to a life estate, for example, would escape a Medicaid lien (because they were not part of your probate estate). Since 1993, however, states have had the option to expand the definition of estate to include all nonprobate assets as well (to the extent of your legal interest in such assets at the moment before your death). Thus, nonprobate assets may not be completely sheltered in certain states.

When may a lifetime lien be imposed?

If you’re a Medicaid recipient, your state can (at its option) attach a lien to your real or personal property (while you’re alive) in certain limited situations:

  • If a court judgment has proclaimed that Medicaid benefits were paid to you incorrectly; or
  • If, after notice and a hearing, the state has determined that you cannot reasonably be expected to be discharged from your nursing home (or other institution). In this case, however, the state may impose a lien on your real property only.

Despite the foregoing rules, no lien may be imposed on your real property while you’re alive if any of the following people is lawfully residing in your home:

  • Your spouse
  • Your child under age 21 (or your blind or permanently and totally disabled child of any age)
  • Your sibling who has resided in the home for a period of one year immediately preceding your date of institutionalization

If you’re a Medicaid recipient living in a nursing home and there is a sale of your house during your lifetime, the state can immediately recover its benefits out of the sale proceeds (assuming there’s a lien on the house). However, recovery is limited to that portion of the proceeds attributable to your ownership share. Therefore, if you hold title to the home jointly with your daughter, the state would be entitled to recover only one-half of the proceeds at the time of the sale.

In some states, the purchase of an older “qualified” long-term care insurance policy (i.e., purchased prior to OBRA ’93) will protect the house from the imposition of a Medicaid lien when you become eligible for Medicaid benefits. Thus, some people were able to purchase the minimum coverage necessary to qualify for this protection against the Medicaid lien.

When may an estate recovery occur?

After you die, the state is able to seek reimbursement from your estate, bearing in mind that estate could mean simply your probate estate or could have an expanded definition. Call your state Medicaid office if you are unclear about the treatment and standard practice in your state.

The state cannot enforce a lien or attempt estate recovery procedures until after the death of your surviving spouse (if any) and only if you have no surviving children under age 21 (or blind or permanently and totally disabled children). In addition, if a lien on your house already exists, no estate recovery may be made while any one of the following individuals is lawfully residing in your home:

  • Your sibling who was residing in the home for a period of one year immediately preceding the date of your institutionalization; or
  • Your son or daughter who was residing in the home for a period of at least two years before the date of institutionalization and who provided care to you during that period such that your institutionalization was prevented.

George was a Medicaid recipient who died at age 80 in a nursing home. The state had paid a total of $200,000 in Medicaid benefits on his behalf. George owned a house jointly with his wife, Martha, and Martha continues to reside there. However, George’s state has adopted an expanded definition of estate, which includes jointly owned property.

When George died, the state placed a lien on the family house. The state cannot force a sale of the house while Martha is alive, but when she dies, the state can force a sale of the home and apply one-half of the proceeds toward its recovery of the $200,000 Medicaid benefits it paid to George. Also, the state can collect immediately if Martha decides to sell or refinance the house at any time.

Your assets and funds that are exempt for purposes of determining Medicaid eligibility are not exempt from recovery proceedings. Exempt assets are those that do not affect your eligibility for Medicaid. Each state composes a list of exempt assets, which may include such items as one automobile and household furnishings. Therefore, the state can require the sale of any personal property of the estate to satisfy the Medicaid claim.

Assume George is a Medicaid recipient who dies while living in a nursing home. George owns one automobile (which his family used to visit him), a gold necklace and an expensive watch. After his death, the state is entitled to force a sale of the car and personal effects in order to recover part of the Medicaid benefits paid on George’s behalf over the years.

In states that have long-term care partnership programs, full estate recovery will not apply to individuals who purchase long-term care policies under the program, then qualify for Medicaid once their long-term care benefits run out.

A significant limit on the state’s power to go after assets is that it can only go after assets in your name at death, not assets in your spouse’s name. Also, as mentioned before, the state can only go after nonprobate assets to the extent of your legal interest in such assets at the time of your death. Therefore, if you transfer assets into an irrevocable income-only trust, retaining only the right to receive income from the trust, then the state would be entitled to collect only the present value of your income interest at the moment of your death. If you own a piece of property jointly with someone else, the state (if it adopts the expanded definition of estate) will be able to reach one-half the value of the property.

How can I avoid liens and estate recoveries?

First of all, it’s useful to summarize the rules:

  • The state cannot place a lifetime lien on your property while certain people reside there, such as your spouse
  • Any property in your probate estate can be reachable by the state to recover Medicaid benefits
  • If you have probate assets and you leave a surviving spouse (or the applicable categories of children), the state may file a lien against the property in your probate estate but cannot recover any money immediately
  • Property that passes outside of probate, on the other hand, will not be reachable by the state unless the state has adopted the expanded definition of estate
  • If the state has adopted the expanded definition of estate, then the state may recover against your nonprobate assets, but only to the extent of your legal share of that property

Since there is clearly an advantage to avoiding probate, you should plan accordingly before you need to enter a nursing home. You can avoid probate by using such tools as joint tenancy (i.e., joint ownership with rights of survivorship), irrevocable trusts, and gifts of property with a reserved life estate. A life estate is a planning tool that enables you to transfer ownership of your house while still giving you the right to live there during your lifetime.

Ronald transfers his home to his two children, Nancy and Pattie, reserving a life estate for himself. At the time of the transfer, Ronald’s life estate is worth 48 percent of the value of the home. Ten years later, after Ronald dies in a nursing home as a Medicaid recipient, the state seeks to recover from his estate. At his death, however, Ronald’s life estate is worth only 30 percent of the value of the home. Consequently, that’s all the state can collect.

Of course, if you anticipate entering a nursing home soon and don’t have time to engage in sophisticated planning, you should consider transferring your home to your healthy spouse’s name alone. The healthy spouse can then create a will, naming the children (or anyone other than the institutionalized spouse) as beneficiaries.

The Deficit Reduction Act of 2005 placed a restriction the use of life estates as a Medicaid planning tool. Life estates are still allowed, but the individual transferring a home using a life estate must live in the home for at least one year after the transfer to avoid a transfer penalty.

There are hardship exceptions to the estate recovery rules. Undue hardship might exist, for example, when the estate subject to recovery is the sole income-producing asset of the survivors and the income is limited (e.g., a family farm or other business). States must develop hardship exception criteria but may conclude that undue hardship does not exist if a Medicaid applicant created the hardship by resorting to estate planning methods to divest assets in order to avoid estate recovery. It is important, therefore, to know your state’s policy regarding hardship exceptions.

Insurance Needs in Retirement



 Your goals and priorities will probably change as you plan to retire. Along with them, your insurance needs may change as well. Retirement is typically a good time to review the different parts of your insurance program and make any changes that might be needed.



Stay well with good health insurance


After you retire, you’ll probably focus more on your health than ever before. Staying healthy is your goal, and that may require more visits to the doctor for preventive tests and routine checkups. There’s also a chance that your health will decline as you grow older, increasing your need for costly prescription drugs and medical treatments. All of this can add up to substantial medical bills after you’ve left the workforce (and probably lost your employer’s health benefits). You need health insurance that meets both your needs and your budget.


Fortunately, you’ll get some help from Uncle Sam. You typically become eligible for Medicare coverage at the same time you become eligible for Social Security retirement benefits. Premium-free Medicare Part A covers inpatient hospital care, while Medicare Part B (for which you’ll pay a premium) covers physician care, laboratory tests, physical therapy, and other medical expenses. But don’t expect Medicare to cover everything after you retire. For instance, you’ll have to pay a large deductible and make co-payments for certain types of care. Medicare prescription drug coverage is only available through a managed care plan (a Medicare Advantage plan), or through a Medicare prescription drug plan offered by a private company or insurer (premiums apply).


To supplement Medicare, you may want to purchase a Medigap policy. These policies are specifically designed to fill the holes in Medicare’s coverage. Though Medigap policies are sold by private insurance companies, they’re regulated by the federal government. There are 12 standard Medigap plans, but not all of them are offered in every state. All of these plans provide certain core benefits, and all but one offer combinations of additional benefits. Be sure to look at both cost and benefits when choosing a plan.


What if you’re retiring early and won’t be eligible for Medicare for a number of years? If you’re lucky, your employer may give you a retirement package that includes health benefits at least until Medicare kicks in. If not, you may be able to continue your employer’s coverage at your own expense through COBRA. But this is only a short-term solution, because COBRA coverage typically lasts only 18 months. Another option is to buy an individual policy, though you may not be insurable if you’re in poor health. Even if you are insurable, the coverage may be very expensive.



Don’t overlook long-term care insurance


If you’re able to stay healthy and active throughout your life, you may never need to enter a nursing home or receive at-home care. But the fact is, many people aged 65 and older will require some type of long-term care during their lives. And that number is likely to go up in future years because people are increasingly living longer. On top of that, long-term care is expensive. You should be prepared in case you do need long-term care at some point.


Unfortunately, Medicare provides very limited coverage for long-term care. You may be covered for a short-term nursing home stay immediately following hospitalization, but that’s about it. Other government and military-sponsored programs may help foot the bill, but generally only if you meet strict eligibility requirements. For example, Medicaid requires that you exhaust most of your assets before you can qualify for long-term care benefits. Even a good private health insurance policy will not offer much coverage for long-term care. But most long-term care insurance (LTCI) policies will.


LTCI is sold by private insurance companies and typically covers skilled, intermediate, and custodial care in a nursing home. Most policies also cover home care services and care in a community-based setting (e.g., an assisted-living facility). This type of insurance can be a cost-effective way to protect yourself against long-term care costs–the key is to buy a policy when you’re still relatively young (most companies won’t sell you a policy if you’re under age 40). If you wait until you’re older or ill, LTCI may be unavailable or much more expensive.



Weigh your need for life insurance


If you’re married, you want to make sure that your spouse will have enough money when you die. You may also have children and other heirs you want to take care of. Life insurance can be one way to accomplish these goals, but several questions arise as you near retirement. Should you keep that existing policy in place? If so, should you change the coverage amount? What if you don’t have any life insurance because you lost your group coverage at work (though some employers let you keep the coverage at your own expense)? Should you go out and buy some? The answers depend largely on your particular circumstances.


Your life insurance needs may not be as great during retirement because your financial picture may have improved. When you’re working and raising a family, the loss of your job income could be devastating. You often need life insurance to replace that income, meet your outstanding debts (e.g., your mortgage, car loans, credit cards), and fund your kids’ college education in case something happens to you. But after you retire, there’s usually no significant job income to protect. Plus, your kids may be grown and most of your debts paid off. You may even be financially secure enough to provide for your loved ones without insurance.


It may make sense to go without life insurance in these cases, especially if you have term life insurance and your premium has increased dramatically. But what if you still have financial obligations and few assets of your own? Or what if you’re looking for a way to pay your estate tax bill? Then you may want to keep your coverage in force (or buy coverage, if you have none). If you need life insurance but not as much as you have now, you can always lower your coverage amount. It’s best to talk to a professional before making any decisions. He or she can help you weigh your needs against the cost of coverage.



Take a look at your auto and homeowners policies


If you stay in your home after you retire, your homeowners insurance needs may not change much. But you should still review your liability coverage to make sure it’s sufficient to protect your assets. If you’re liable for an accident on or off your premises, claims against you for medical bills and other expenses can be substantial. For additional protection, you might consider buying an umbrella liability policy. It’s also a good idea to review the coverage you have on your home itself and the property inside it. Finally, if you plan to buy a second home, find out if your insurer will cover both homes and give you a discount on your premium.


Auto insurance raises some similar issues. Review your policy to make sure your coverage limits are high enough in each area. Again, having the right amount of liability coverage is especially important–you don’t want your assets to be put at risk if you cause an auto accident that injures other people or damages property. Weigh your need for any coverages that are optional in your state. Finally, look into ways to save on your premium now that you’re retired (e.g., discounts for low annual mileage or senior driving courses).

Why Women Need Life Insurance

While there are many reasons why women need life insurance, often women have little or no life insurance protection. One of the reasons for their lack of coverage may be the fact that most life insurance advertisements are aimed at men.

A major benefit of cash value insurance is that the policyowner can borrow from the insurance company against the accumulated cash value, often at a relatively low interest rate. Those funds can be used to supplement retirement income, pay for college tuition, assist a child with a mortgage, or for many other purposes. However, if you take a loan against your cash value, the death benefit and cash value will be reduced by the outstanding loan balance. A reduction of your cash value could cause your policy to lapse.

Why Women Need Life Insurance

Today, women have more financial responsibilities than ever before. How will your family or loved ones manage financially if you die? Whether you are single, married, employed, or a stay-at-home mom, you probably need life insurance. At the very least, life insurance can help pay for the costs of funeral and burial services, estate administration, outstanding debts, estate taxes, and the uninsured expenses of a final illness.

Who needs life insurance?

Working women

Increasingly, families depend on the income of two working parents. If you’re a working mother, your income can have a significant impact on the quality of your family’s lifestyle. Your income helps cover the cost of ordinary living expenses such as food, clothing, and utilities, and it provides savings for your children’s college education, and for your retirement. Life insurance protects your family by providing proceeds that can be used to replace your lost income if you die prematurely.

Single women

Often, women, like men, think that it’s not necessary to buy life insurance because they have no dependents. What’s often overlooked is that life insurance can provide necessary funds to pay off car loans, education loans, debts, a mortgage, taxes, and funeral expenses that might otherwise be the responsibility of family members. Also, the cash value of permanent life insurance may be used to supplement retirement income.

Single moms

Whether you’re divorced, widowed, or simply a single mom, you’re most likely primarily responsible for your child’s support. If you die prematurely, life insurance can provide ongoing income to cover child-care costs, medical expenses, debts, and future college costs.

Stay-at-home moms

Maintaining a household is a full-time job, and you have many important roles and duties. The cost of the services performed by a stay-at-home mom could be quite significant if someone had to be hired to do them. If you die, your surviving spouse may have to pay for services such as child care, transportation for your children, and housekeeping. Taking over these added responsibilities could cause your spouse to shorten work hours, resulting in a reduction in income. Proceeds from your life insurance can help your spouse pay for services that keep the household running and allow your spouse to keep working.

Family caregiver

Many women find themselves providing care for both children and elderly family members. Caring for an aging parent or family member can include paying for the costs of adult day care, uninsured medical expenses, and extra transportation. Adding these expenses to the costs of maintaining a household, child care, and college tuition can be financially overwhelming. Unfortunately, these added financial responsibilities often continue after your death. Life insurance provides a source of funds that can be used to help pay for these expenses.

Business owner

You may be one of the increasing number of women business owners. If you die while owning your business, life insurance can be used to provide cash for company expenses such as payroll or operating costs while your estate is being settled. Also, life insurance can be a useful tool for business owners structuring buy-sell arrangements or providing benefits to key employees.

Life insurance types and options

Life insurance comes in many different sizes and shapes, and determining the policy that meets your needs may depend on a number of factors. Understanding the basic types of life insurance can help you find the policy that’s best for you.

Term life insurance

Term life insurance provides a simple death benefit for a specified period of time. If you die during the coverage period, the beneficiary you name in the policy receives the death benefit. If you live past the term period, your coverage ends, and you get nothing back. The cost, or premium, for the coverage can be fixed for the duration of the policy term (usually 1 to 30 years) or it can be “annually renewable” meaning that the premium can increase each year as you get older. However, the premium for term insurance usually costs less than the premium for permanent insurance when all factors are the same, including the death benefit.

Whole life insurance

Whole life is permanent or cash value insurance that provides insurance coverage for your entire life. With most whole life policies, part of your premium is added to the cash value account, which earns interest. Some whole life policies also pay a dividend, which represents a portion of the company’s profits made during the prior year.

The cash value grows tax deferred and can either be used as collateral to borrow from the insurance company or be directly accessed through a partial or complete surrender of the policy. It is important to note, however, that a policy loan or partial surrender will reduce the policy’s death benefit, and a complete surrender will terminate coverage altogether.

Note: Guarantees are subject to the claims-paying ability of the issuing insurance company.

Universal life insurance

Universal life is another type of permanent life insurance with a death benefit and a cash value account. A universal life insurance policy will generally provide very broad premium guidelines (i.e., minimum and maximum premium payments), but within these guidelines you can choose how much and when you pay premiums. You are also free to change the policy’s death benefit directly (again, within the limits set out by the policy) as your financial circumstances change. But if you want to raise the amount of coverage, you’ll need to go through the insurability process again, probably including a new medical exam, and your premiums will increase.

Variable life insurance

Variable life insurance is a type of cash value coverage that allows you to choose how your cash value account is invested. A variable life policy generally contains several investment options, or subaccounts, that are professionally managed to pursue a stated investment objective. Choices can range from a fixed interest subaccount to an international growth subaccount. Variable life insurance policies require a fixed annual premium for the life of the policy and may provide a minimum guaranteed death benefit. If the cash value exceeds a certain amount, the death benefit will increase.

Variable universal life insurance

Variable universal life combines all of the options and flexibility of universal life with the investment choices of a variable policy. You decide how often and how much your premium payments are to be, within policy guidelines. With most variable universal life policies, you get no guaranteed minimum cash value or death benefit, but you can direct how your premium payments are invested among policy subaccounts.

Note: Variable life and variable universal life insurance policies are offered by prospectus, which you can obtain from your financial professional or the insurance company. The prospectus contains detailed information about investment objectives, risks, charges, and expenses. You should read the prospectus and consider this information carefully before purchasing a variable life or variable universal life insurance policy.

Joint and survivor life insurance

You and your spouse may choose to buy a single policy of permanent insurance that covers both of your lives. With first-to-die, the death benefit is paid at the death of the spouse who dies first. With second-to-die, no death benefit is paid until both spouses are deceased. Second-to-die policies are commonly used in estate planning to pay estate taxes and other expenses due at the death of the second spouse. Other than the fact that two people are insured by one policy, the policy characteristics remain the same.

Bottom line

Life insurance protection for women is equally as important as it is for men. However, women’s life insurance coverage is often inadequate. It may be time to consult an insurance professional who can help you assess your life insurance needs, and offer information about the various types of policies available.