Insurance Archives — Beating Broke

Reasons Not to Buy Long-Term Care Insurance

July 19, 2021 By MelissaB Leave a Comment

My uncle and aunt, who are in their 80s, recently moved to a long-term care facility. The cost for two people is expensive, but they’re paying a reasonable $3,000 a month thanks to a long-term care policy my uncle bought years ago. My husband and I aren’t yet at the age where we need to buy such a policy, but we did start to research them. However, there are several reasons why we’ve decided not to buy long-term care insurance.

Why We’re Not Going to Buy Long-Term Care Insurance

We’re not buying long-term care insurance because of these drawbacks:

Premium Prices Aren’t Fixed

Rising premium costs are one of the biggest issues for us. You may buy a long-term care policy with an affordable monthly payment when you’re in your 50s. However, that payment is not fixed; over time the monthly payment will continue to increase, eventually outpricing some people’s budgets. If you can no longer afford your monthly premium before you need the care, you have lost all of the money you previously invested into long-term care insurance.

Insurance Companies Sometimes Won’t Pay

Long-term care insurance policies often have many hoops you must jump through before they will pay. Others don’t pay for the first 90 days. Or they will only cover one to three years in a long-term care facility. If you need care for a longer duration, your policy won’t cover that time.

May Never Need the Policy

After paying decade after decade for a long-term care policy, you may never need it. You may remain in good health and able to take care of yourself, or you may die suddenly in a car accident or from a heart attack. Think of the many other ways that money could have been used.

I know, I know, not needing the policy is a risk for any insurance coverage, and we still purchase them. However, consider the tens of thousands of dollars that you’ll pay for a policy you may not need. Buying such a policy often doesn’t make financial sense.

What We’re Doing Instead

Reasons Not to Get Long-Term Care Insurance — Photo by Olga Kononenko on Unsplash

We used a calculator to determine how much long-term care insurance would cost for us to purchase in our early 50s. Instead of investing in long-term care insurance, we’re investing that money in our retirement accounts (in addition to what we’re already regularly investing for retirement) so it can grow thanks to compound interest. The plan is to make our retirement fund as large as possible so we won’t need long-term care insurance. We’ll also be able to sell our house and have it for equity.

In this sense, we’re planning to self-insure so we can get quality care if needed without paying for a long-term care insurance policy for years.

Final Thoughts

Some people swear by long-term care insurance. The policy is doing its job for my aunt and uncle. However, after my husband and I looked at the price and compared it with all of the potential policy exclusions, we’ve decided there are several reasons not to buy long-term care insurance. Instead, we will be working to save and invest enough money to self-insure.

Read More

How to Use Retroactive COBRA Insurance

The Five Most Common Retirement Planning Mistakes

There Is No Ideal Time to Contribute to Retirement

How to Use Retroactive COBRA Insurance

June 21, 2021 By MelissaB Leave a Comment

When my husband quit his job in Illinois to pursue a new job in Arizona, we were shocked that our coverage in Arizona wouldn’t start until a month after his official start date. Since we moved to Arizona a month before his job started, we were without employer-sponsored health insurance for two months. What I wish I would have known then is that you can apply for COBRA insurance retroactively.

What is COBRA Insurance

When you leave a job or lose a job or lose insurance because of a reduction in hours, you can apply for COBRA insurance. If you were enrolled in employer-sponsored insurance and your employer has 20 or more employees, you’re eligible for COBRA insurance. COBRA will give you the exact same insurance coverage you had with your employer. The difference is that you must pay the entire premium yourself.

When you get employer-sponsored insurance, you typically pay only 20 to 30 percent of the total cost of the premium. Your employer pays the rest. With COBRA, you assume the entire amount, which isn’t cheap. We did opt for COBRA insurance when my husband left his job, so we paid $1,200 a month for coverage for our family of five. What I didn’t know then is that I could have utilized retroactive COBRA insurance.

What Is Retroactive COBRA Insurance?

You can choose not to buy COBRA insurance. In our case, we had COBRA insurance for the two months we were between employer-sponsored insurance, but we never used it. We paid $2,400 total over the two months for insurance we didn’t even need.

Another option is to forego COBRA and go without insurance during this time. If you end up having a medical need, you can still sign up for COBRA because COBRA is retroactive from the time you left your job or lost your insurance. For instance, one woman and her husband opted not to get COBRA when they lost insurance benefits. Within a month, her husband had to have an emergency appendectomy. They were facing tens of thousands of dollars in medical bills. The couple completed the forms for COBRA, and the insurance paid the bills for the appendectomy. They ended up paying just $42 out of pocket for the surgery (plus the cost of COBRA).

An Important Caveat

You only have 60 days to decide whether to enroll in COBRA or not. If you opt out of COBRA coverage and need surgery on day 65, you won’t be covered if you try to retroactively apply.

Also, when you retroactively apply, the insurance benefits begin the day after you lose your benefits with your employer, but you also have to pay from that time, too. So, if you sign up for COBRA on day 58, you also have to retroactively pay for days one through 58 of coverage.

Final Thoughts

COBRA coverage can be an important insurance bridge when you’re between jobs. If you want to initially forego COBRA insurance, you can. If a medical need comes up, you can always apply retroactively. But remember, this only applies for the first 60 days you’re without insurance.

Are Insurance Companies Just Big Ponzi Schemes?

When Do You Need Umbrella Insurance?

4 Insurance Policies That Will Save You Money in the Long Run

Guaranteed Ways to Go Broke

February 1, 2021 By MelissaB 1 Comment

If you look, you can find plenty of material about how to create a budget, save for retirement, and live within your means. What you don’t find are many examples of people doing just that and living a financially solvent life. On the other hand, you don’t find much material about guaranteed ways to go broke, but you can likely find people from all walks of life who flaunt the steps to going broke. Ironically, those are often the people of whom we are most envious.

How to Go Broke

There are many, many ways to go broke. To most effectively go broke, utilize as many of these steps as possible.

Buy a House You Can’t Afford

One of the best ways to go broke is to buy a house you can’t afford.

When you qualify for a mortgage, you’re given a price range that you can buy in. If possible, buy a house at the very top of your price range. This will ensure that you will likely struggle with house payments, and that your monthly payment will be more than the recommended 28 to 36% of your take home income. (Remember those percentages include not only the house payment but also taxes, insurance, and HOA fees.)

Also ideal is to pick a home with the highest HOA fees. Then, even after you pay off the house, you’ll be paying hundreds a month in HOA fees.

Buy a New Car and Trade in Frequently

How to Go Broke — Photo by Jakob Owens on Unsplash

After buying a house you can’t afford, the next best way to go broke is to buy new cars frequently.

Buy a brand-new car and only drive it for two to three years. Sure, you save yourself the headache of costly repairs as the car gets older. However, you also ensure that you’re absorbing the depreciation that happens in the first year or two of brand-new car ownership.

Ideally, when you sell your car, try to be upside down on your loan so that you owe more than the vehicle is worth. Go ahead and roll that difference into your next new car loan, and you’re well on your way to going broke.

Give Your Kids Everything They Want

If you have children, make sure to give them everything they want. After all, kids are only kids once.

Make sure to pay for all the lessons that they want. Buy them all the clothes that they want. At Christmas, buy them as many presents as possible. When they come to you for money, give it to them freely without making them work for it.

Stay Active on Social Media

Stay active on social media and follow as many people as possible.

This is the best way to see what the Jones’ are doing. Try to do the things that they’re doing. Book more travel than you can afford. Get your hair and nails done. Go out to eat as much as possible at the trendiest, most expensive restaurants. Buy as much as possible.

After all, the point isn’t a happy, contented life, but one in which you look as impressive as possible. Who cares that you’re actually broke? No one can see that.

Don’t Save for Recurring Expenses

Of course, you have your regular bills that come due every month, which you try to pay regularly. But then you have your irregular expenses like your car insurance and home owner’s insurance, which are due twice a year. Property taxes also fall into those categories. But don’t bother saving a little each month so when the bills come due you have money to pay them. No, that’s no fun.

Instead, pretend like those bills don’t exist, and when they come due, panic. For several weeks, worry how you will pay these large bills. Try to cut your spending for a few weeks so you can gather enough money to pay them. If you can’t manage gathering enough money, ask friends or relatives for a loan. Six months later, when the same bills are due, repeat the process.

Don’t Have an Emergency Fund

Who needs an emergency fund? How could you possibly set aside thousands of dollars for an emergency? That’s too boring for you. You could never stand seeing that money sitting there and not spend it. No, enjoy the money that you have, and when an emergency comes, which hopefully it won’t, you will deal with it.

Have as Many Credit Cards as Possible

Fill your wallet with as many credit cards as possible. After all, how can you finance your lifestyle without credit cards?

Make sure to charge all of your expenses each month. Ideally, only pay the minimum payment due. When one card reaches its credit limit, just move on to spending on the next card.

Don’t worry about the 12 to 20% you’re paying in interest monthly. Don’t worry that by paying the minimum due you,re only putting a few dollars on principal, so you’ll never get out of the financial hole you’re digging yourself.

Remind yourself that all Americans have credit card debt. It’s just the way our economy functions. Plus, you’re actually helping the economy by spending, right?

Don’t Invest

Investing is so boring. Don’t bother saving for retirement. After all, you only live once, and who knows how long you’ll live, anyway? What if you save all that money, and then you don’t even live until retirement? What a waste! Take any money you have and spend it now. Live in the moment!

Final Thoughts

Clearly this is a tongue-in-cheek post about how to go broke. However, many Americans do try to live this way. The path to going broke is clear; we’ve seen many Americans do it—from everyday people to professional athletes, singers, and actors.

What doesn’t get highlighted as much is how to be smart with your money and build a sound future. Don’t worry about what other people are doing; focus on your own life and your own financial future. You’ll be much happier that way.

Does Your Credit Score Actually Matter If You’re Broke?

Cheap Foods to Eat When Broke

The Five Most Common Retirement Planning Mistakes