Scams That Target The Affluent

Scams That Target The Affluent & How To Protect Against Them

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The Better Business Bureau has a unique tool called the Scam Tracker. It gives you a map view of identified scams in your area.

Searching the Chicagoland area, Scam Tracker identified 325 scams reported in 2016 alone (as of July 27th).

LexisNexis publishes a Ponzi Scheme Roundup MONTHLY.  In May of 2016, 8 new ponzi schemes were uncovered.

Scams impose exceptional risk to the affluent. With the most to lose, the affluent are targeted from a variety of people, in a variety of ways.

In this post, you’ll learn

  • 3 Groups Of Scammers That Target The Affluent
  • How to Protect Yourself, Family, & Net Worth from Common Scams

Related: Checklist: 7 Steps Increase Wealth Protection & Reduce the Cost of Your Personal Insurance Program

3 Groups Of Scammers That Target The Affluent

Russian hackers make for a great story. They’re mysterious. They install fear. There are dozens of movies with Russian hackers playing the protagonist.

There are no movies about a thief who acts as a gardener. A gardener who scams their client, isn’t front page news. The incident often doesn’t make the police reports, as it goes unreported out of embarrassment.

Ironically, it’s the gardener that should cause concern. Statistics show it’s the people you know, which are most likely to scam you.

When it comes to scammers trying to swindle the affluent out of their money, there are three common groups.

# 1 – Financial Advisers

Bernie Madoff famously stole over $20 billion for ultra high net worth clients through a Ponzi Scheme. The was just the tip of the iceberg into a dark industry, riddled with scams.

Locally, a Warrenville based securities firm was caught “cherry picking.” The  firm didn’t choose in advance whether they were trading personal funds or client funds. After the fact, they kept the winning trades for themselves and stuck the clients with the losing trades.

Ponzi Schemes and Cherry Picking are just one of the many financial scams the affluent are at risk of.

The term financial adviser encompasses a wide range of professions. Furthermore, the qualifications to call yourself a financial adviser are remarkably low.

Yet, it’s financial advisers that the affluent rely on to manage their assets. Often placing a lot of trust into someone they don’t know a lot about.

So what can you do?

A good first step of precaution is to check your broker’s or firms status with FINRA.

Second, consider “Maslow’s Hammer.” Famous psychologist Abraham Maslow brought us the phrase, “If all you have is a hammer, everything looks like a nail.”

Applying this to investing, if an adviser only sells one solution, make sure that solution is in your best interest, not the advisers.

# 2 – Contractors

The affluent are often targeted by contractors and other professions such as landscapers.

Contractors work in or around the home and are frequently unsupervised. A few days of work and the contractor and any other employees or subcontractors may know:

  • Your schedule
  • Alarm codes
  • The location of valuables inside the home such as artwork and collectibles
  • The type of jewelry you and your family wears and the likely location of that jewelry

While most contractors are good, they suffer from a few bad apples. From abandoning projects before completion to performing shoddy work that doesn’t pass an inspection.

It’s important the affluent have a system in place for hiring all types of contractors.

Here’s what you can do:

  • Check ratings on sites such as Yelp, Google, and Angie’s List of any contractor. It’s easy to put up a website. It’s difficult to replicate reviews.
  • Ask your contractor if they run background checks on their employees and subcontractors.
  • Your down payment should be as little as you can negotiate. Never pay the entire balance upfront. California permits a maximum down payment of 10%. In Illinois, there’s no law. If California contractors can accept 10%, don’t  offer much more wiggle room when negotiation. 
  • Get a second opinion of any work that is added during the process.
  • Have a written contract before work begins.

 

# 3 – Domestic Employees

The third group that often targets the affluent in scams are domestic employees.

Example of domestic employees are:

  • Nannies
  • Housekeepers
  • Home health care workers
  • Tutors
  • Personal assistants

Like contractors, domestic workers often have unsupervised access to the home. They may have access to personal records, credit card statements, vacation schedules, alarm codes and more.

This leaves the affluent individual and family open to:

  • Property and identity theft
  • Embezzlement
  • Extortion
  • Fraudulent sexual harassment, defamation, workers compensation and other lawsuits.

How to Protect Yourself, Family, & Net Worth from Common Scams

When it comes to guarding against scams, taking a proactive approach is difficult. You can do all the right things, yet still be blindsided by someone you trusted.

There is one strategy that has proven successful preventing scams, background screening. A professional background screening will reduce the chances of hiring or retaining someone with intent to scam.

Professional screening can include

  • Checking employment references
  • Educational and professional qualifications
  • Credit history
  • Driving record
  • Professional certification
  • Criminal record

Even so, background screening doesn’t end the risk of loss. Thus, it’s wise for the affluent to transfer these risks to a third party.

Yet, most insurance companies don’t offer coverage for these exposures.

But what’s at stake here is real. A fraudulent lawsuit from a domestic worker can cost mid six-figures. Resolving an identity theft can easily cost mid-five figures.

Fortunately, a handful of insurance carriers have policies and endorsements that can protect you. Insurers such as ACE, Chubb, and AIG, all three of which we represent at Weiss Insurance, offer extra coverage and optional endorsements to protect the affluent from these type of risks.

As an affluent individual, there’s no question you’re at greater risk of financial loss from scams. Similar to how you transferred the risk of your home to an insurance company, it’s transfer all risk that put you at risk. 

The cost in nominal but the threat is real.

Learn more about Weiss Insurance Agencies High Net Worth Insurance Services and inquire about a proposal.  

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How High Net Worth Individuals Overpay For Home & Auto Insurance

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Are you spending your hard-earned wealth wisely when it comes to home & auto insurance?

  • Why was it, that when wildfires hit an affluent area of Colorado,  64% of homeowners were under-insured by an average of $200,000?
  • Why did 81% of brokers agree that high net worth individuals make the same costly mistake?

ACE Private Risk Services®, a carrier who specializes in protecting the affluent, surveyed 600 of their agents.

Agents were asked about clients who were before insured with a standard insurance carrier. Asking if those clients were likely to be over-insured or under-insured in 21 different types of coverage.

For high net worth individuals, the results were not encouraging to their current way of buying insurance.

Not only are they under-insuring, they’re overpaying for that insurance.

But here’s what surprises most.

When switching to a high net worth carrier, 63% of agents were able to enhance coverage and keep premium increases to less than 5% for their clients.   In 50% of cases, the client actually saved money.

How?

There were 3 main coverage areas where high net worth individuals commonly overpaid.  Too, 7 other coverage areas stood out among the 600 agents as additional saving opportunities.

Here’s are the results from the study.

Interested in learning more about taking advantage of savings opportunities and strengthening your coverage? Weiss Insurance, Chicagoland’s trusted independent agent since 1905, recently released a downloadable checklist on 7 ways to increase wealth protection and reduce the cost of your personal insurance. Click here to download.

 

# 1 – Deductibles

The # 1 way affluent homeowners overpay for insurance is with their choice of deductible, which 81% of agents agreed on.

Ironically, I’ve seen many high net worth individuals carry deductibles of $250, $500, or even $1,000. Yet, when a small claim does occur they don’t file because they don’t want any claims impacting their  premium.

A philosophy we believe in at Weiss Insurance is insurance is for catastrophic events. If you can afford to self insure a risk, then do it.

The question to ask yourself is, “What amount could I pay for a loss, without significantly impacting my lifestyle and wealth?”

Once you have that number, ask your agent to estimate the premium savings with a range up deductibles up to your you maximum out-of-pocket amount.

 

# 2 – Package Discounts

62% Of agents agreed that package discounts were often missed among high value homeowners. It’s easy to see why. Auto insurance companies spend billions on advertising each year, promising one thing–savings. This leads to many high net worth families splitting their home and auto insurance among different insurers.

However, it’s important to keep an eye on overall insurance cost.

By combining your home and auto insurance, high value insurance companies offer discounts up to 10% or more.

Next, insuring your home with one company and cars with another increases the potential for gaps in coverage.

Additionally, by combining policies with one company who specializes in high net worth, a policy can be written as one package with common term dates and one consolidated bill, saving you time as well as money.

 

# 3 – Loss Prevention Credits

According to 50% of agents, high value homeowners with standard insurance companies often failed to apply basic credits to their home and auto policies.

When combined, the credits for various loss prevention systems, which often are the norm for high value homes and cars, can reduce homeowner premium by 30% or more.

Furthermore, having these loss prevention devices in place can often allow homeowners to raise their deductible. Potentially, by combining the two strategies homeowners can save up to 50%.

Below is a list of the common credits high value homeowners often miss:

 

Home Insurance Credits

  • Burglar alarms
  • Fire alarms and sprinkler systems
  • Electrical backup, lightning protection
  • Temperature monitoring
  • Water leak detection with auto valve cut-off
  • Gas leak detection

 

Auto Insurance Credits

  • Theft alarms
  • Fuel cut-off switches
  • Hood locks
  • Steering locks
  • Ignition cut-off switches
  • Location transponders

 

7 Additional Saving Opportunities For High Net Worth Individuals

While raising deductibles, applying package discounts, and taking advantage of safety credits were the three main areas where high value homeowners overpaid, there were an additional 7 saving opportunities that were often missed.

  1. Paying low collector car rates for a collector car – 31%
  2. New or rehabilitated home credit – 22%
  3. Storing infrequently worn jewelry in a bank vault – 20%
  4. Good student discount – 11%
  5. Credit rating – 10%
  6. Accident-free credit – 9%
  7. Accident prevention course credit – 9%

 

Interested in learning more about taking advantage of savings opportunities and strengthening your coverage? Weiss Insurance, Chicagoland’s trusted independent agent since 1905, recently released a downloadable checklist on 7 ways to increase wealth protection and reduce the cost of your personal insurance. Click here to download.

3 Car Insurance Discounts (1)

Senior Car Insurance Discounts

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Between the ages of 60-75 is statistically one of the safest years of your driving life.

You’re a good driver. You take pride in what you own. You’re kids are typically off your policy.

While some insurance companies recognize this and offer discounts and great rates to seniors. There are some insurance companies that charge higher rates to the same age group.

Another reason why seniors pay too much for car insurance is their loyalty. Out of any demographic, seniors are most likely to stay with one carrier.

While remaining loyal to an insurance company can be beneficial, it also has its downside. Small 5-7% increases year after year on your auto insurance, an increase about twice that of inflation, compound over the years.

The irony is that even though seniors shop their auto insurance the least, they’re most likely to benefit from doing so. Potentially saving hundreds of dollars.

As with any shopping experience, be it a new car, a new couch, or new car insurance…it’s important to get educated on how to do it right.

It’s possible for two people, with the exact same profile (same vehicles, driving record, credit score, etc…) to pay different rates for car insurance from the same company.

Why?

Because one person knew how to maximize the discounts.

According to CBSNews, only 16 percent of Americans have asked about common discounts.

Knowing the senior car insurance discounts is the # 1 way to saving money on car insurance.  In this blog post, you’ll learn the top 4 senior car insurance discounts you may be missing out on.

(RELATED: A Checklist of 17 Insurance Discounts Available for Home & Auto Insurance Buyers Over 60 Years of Age)

 

4 Senior Car Insurance Discounts

 

# 1 – No Commute or Reduction of Commute

If you’re no longer making the daily commute to work or have reduced your commute notify your agent of this change.

Auto insurance companies charge more for those who are commuting daily, especially if that commute is long.

 

# 2 – Mileage

When you talk to your agent about the change in your commute, also let your agent know the total amount of miles you now plan on driving per year.

If you were driving 15,000 miles a year but now only drive 5,000, you’re eligible for a cheaper auto insurance rate.

 

# 3 – AARP

Hartford has an exclusive agreement with AARP allowing members to receive significant discounts.

As a longtime representative of The Hartford, we are proud to be one of the few agents who offer this discount.

 

# 4 – Credit Score Change

Insurance companies offer much lower rates for those with a high credit score. As a retiree, there’s a good chance your credit score has improved since you lasted quoted your insurance.

 

Senior Car Insurance Discounts

 

If you’re over 60 years of age and want to save money on insurance, download our free checklist: 17 Insurance Discounts for Home & Auto Insurance Buyers Over 60 Years of Age.

This checklist, prepared by the experts at Weiss Insurance, Chicagoland’s trusted independent agent since 1905, will show you how to save up to 37% overnight on your insurance premiums.

How much can you save?

Find out now

Download the checklist now.

How To Get The Best Deal On Auto Insurance

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Woman Doing CalculationsAuto insurance is boring. So it’s easy to put off dealing with it.

Until it’s time to file a claim. Then it becomes the center of your attention.

When shopping for auto insurance, your goal is to find the best coverage, for the lowest price. Saving $10 a month now but being held liable for $100K+ in damages later isn’t wise.

How can you navigate the hundreds of options and fine print to find the best deal. Start by following these tips.

5 Tips To Get The Best Deal On Auto Insurance

# 1 – Understand Your Insurance Score

When shopping for the best deal, it’s important to understand your insurance score.

Your insurance score combines factors such as your credit score and driving record. The higher your score, the lower your rates.

You can estimate how your insurance score has fared since the last time you shopped insurance.

  • If your credit score has increased and driving record is clean, you’re likely to save.
  • If your credit score has declined and you have an accident on your record, it’s likely declined.

Why is this important?

You may be able to save yourself a lot of time. If your insurance score has increased, let your current insurance company know.

If you’re going to compare rates, make sure your current carrier is offering its best price.

# 2 – Is Your Rate Final?

It’s common for agents or websites to give you a teaser rate.

This is a rate based on simple criteria such as your:

  • Make
  • Model
  • Zip Code

Based on this information, you’re given a  low monthly rate. e.g. only $29 a month!

In fine print, you’ll see something like:

“All estimates are subject to change based on each carrier’s underwriting criteria.”

There’s a lot more that goes into a quote. Including your insurance score, which is heavily weighted.

# 3 – Bundle to Save

By combining your home/renters with auto, you’ll be eligible for a discount. This discount is often the largest available discount among insurers.

If your policies aren’t bundled, that’s the first place to start.

# 4 – Compare Deductible Options

It’s important to look at deductible options among many companies. The company with the lowest rate at one deductible, many not have the best rate at another deductible.

# 5 – Compare Payment Options

You want to find out exactly how much the policy will cost you over the next 6 to 12 months.

The payment plans and fees from one carrier to the next vary.

The best ways to pay are in full or by EFT. Carriers will often give a discount for these options.

If you choose to be billed each month, there’s likely a fee.

Know ahead of time how you will pay and what that payment plan will cost you.

2 Tips To Getting The Coverage

To get the best deal on auto insurance, you want the right coverage, at the lowest price.

The rates you see for $29 a month, they may lack coverage.

There’s a lot of fine print in your policy. While you will learn a lot by reading the entire contract, there’s two areas your must look at:

# 1 – Liability Insurance

If you’re at fault for an accident, would your liability limits protect you from paying out of pocket?

There are two kinds of liability coverage:

  • Bodily injury – Coverage for the people in the accident. Including medical costs, lost income, and pain and suffering.
  • Property Damage – Provides coverage for cars and property involved in accident.

There’s only so many $80,000+ cars on the road today. The chances of you hitting one are rare.

The real risk to your net worth is bodily injury. If you were to hurt someone in an accident, you’re liable for lost wages and medical bills of that person.

Those types of claims can climb past six figures fast. The thing is, they’re not that uncommon.

Your goal is to protect your assets. This includes your savings, home, and future earnings. You need to carry enough liability insurance to do just that.

This is often best done with higher limits, i.e. $500,000, plus an umbrella policy.

# 2 – Uninsured/UnderInsured Motorists Coverage

If hit by an uninsured driver, you’re left paying for the damage. With uninsured coverage, you’ll insurance will kick in. This includes coverage for damage and liability.

UnderInsured acts the same but instead protects from those who carry low limits.

The Insurance Research Council did a study that found 12.6% of drivers were uninsured. Then, you add in the drivers who carry low limits and this is a major risk drivers face.

You want this limit to match your liability limits. Often policies will have $100,000/$300,000 liability coverage but only $20,000 for Uninsured/UnderInsured Motorists.

How To Get The Best Deal On Auto Insurance

Now that you have a good idea of what to look for, you can start shopping.

To find the best deal on auto insurance, it’s important to compare at least 3 quotes.

This means comparing final rates, coverages,  and deductibles. A task that’s a bit more time consuming, than most advertising leads you to believe.

But after all, a lot is at stake, so it’s time well spent.

If you’re an Illinois resident, I invite you to contact us at Weiss Insurance Agencies for a free comparison.

As an independent agent, we have access over a dozen different top auto insurers. Our auto insurance experts will do the shopping and comparing for you. Learn more about how we make it easy to find the best deal on car insurance.

Liked this post? We published a similar post on comparing home insurance

Experts Agree: You Need This Type Of Home Insurance Coverage

By | Home Insurance | No Comments

Personal InsuranceBuying home insurance can be a daunting task.

Your home is likely your largest asset. Home insurance is the contract that protects that asset.

Until you need it, you may view home insurance just as another bill to pay or a contract to file.

But what’s in that contract is important.

The aftermath of homeowners whose homes were destroyed in a natural disaster are not pretty. In United Policyholders’ ‘2012 Colorado Wildfire One-Year Survey,  54 percent of survey respondents reported being underinsured on their dwelling by an average of $101,000.

There’s a reason why the top personal finance experts in the U.S. agree on one thing—you need to buy the right insurance to make sure your home can be fully rebuilt.

Here’s what the experts have to say:

  • Dave Ramsey – Check your homeowner’s policy to make sure you have guaranteed replacement cost insurance. Several years ago, a lot of the major insurance companies quit offering guaranteed replacement cost insurance—a policy in which your home is replaced no matter what it costs.
  • Suze Orman – However, the reality is that the majority of insurance policies sold by homeowner’s insurers today are “extended replacement” policies. These policies will only pay a specific percent above the dwelling limit shown on your policy. This percentage is often times just 20 percent. What this means to you is that your insurance company might not pay to fully rebuild your home, if you are underinsured and the home is destroyed.”
  • Clark Howard – Talk with agent or insurance company. See if you’re adequately insured. Insurers used to rebuild even if you didn’t have enough stated coverage, but that’s no longer the case. It’s up to you to stay on top of this.
  • Kiplinger’s – It’s a good idea to purchase guaranteed replacement coverage, meaning the insurer will pay whatever it costs to rebuild your home with materials of like kind and quality, without deducting for wear and tear. Avoid actual cash value coverage, which pays the depreciated value of your home’s components and could leave you short of the funds necessary to fully repair or rebuild your home.”

My Take

​In principle, I agree with the experts. The goal is to make sure your home will be fully rebuilt. This can be easily done with a guaranteed replacement cost policy.

Although, much has changed in a few short years from which some of the comments were made. As Dave Ramsey hinted upon in an article in 2011, less insurers are offering guaranteed replacement cost.

5 Years later guaranteed replacement cost is even more rare. Few companies offer it, and if they do, they charge a premium.

So how can you still make sure your home will be fully rebuilt, without overpaying for insurance?

The first step is to get an accurate replacement cost analysis on your home. A replacement cost analysis analyzes how much your home  cost to rebuilt.

Many home insurance agents quit offering new clients this service to their clients. This has left the majority of homeowners frighteningly underinsured.

As reported by Nationwide,

“About two out of every three homes in America are underinsured. The average underinsurance amount is about 22%, though some homes are underinsured by 60% or more.”

First things first, you need to get a replacement cost analysis done on your home. This is best done by a local home insurance agent.

Note: It’s easy to confuse market value for replacement cost. The market value of your home is how much someone is willing to pay. The replacement cost is how much it costs to rebuild. This amount can vary drastically, especially for new homeowners since lenders only require insurance for the market value. This protects them, not necessarily you.

Once you have an accurate replacement cost, get a policy that offers extended replacement cost.  Extended replacement cost offers extra protection over and above your policy amount.

Why do you need extended replacement cost?

  • Replacement cost estimators are not perfect. If off by just a few %, it could mean money out of your pocket.
  • When a natural disaster hits an area, building costs tend to skyrocket as cost of materials and cost of labor increase.

Say you have an accurate replacement cost done on your home, which comes out to $500,000. The $500,000 is the amount you insure your home for.

Then, buy a policy with at least 150% extended replacement cost. In the example, this gives you  $750,000 in total protection.

The key here is you have to first have an accurate replacement cost analysis done on your home. If you’re one of the 2/3 of homes are underinsured, you’re starting from a negative position and are likely at risk.

If you’re a Chicagoland resident, interested in getting a free replacement cost analysis performed on your home, contact the home insurance experts at Weiss Insurance today

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A New Way To Pay For Auto Insurance, Is Saving Chicagoland Drivers Up To 30% On Their Premiums

By | Auto Insurance | No Comments

Good Driver Discount If you’re looking to save money on auto insurance, there’s news you’ll be happy to hear.

A new mobile app can save Chicagoland drivers up to 30%. The app, launched by one of the nation’s largest auto insurers, was released exclusively to Illinois residents.

The mobile app monitors your driving habits and gives a score based on performance. The better you drive, the higher your score, and the more you’ll save with the good driver discount.

Here’s a breakdown of the potential savings, which starts the first day you enroll.

  • Save 10% – Save 10% today just by enrolling in the program.
  • Save 15% – Save an automatic 15% today by enrolling all drivers in your household to the policy.
  • Save up to 30% – Based on you and your family’s driving habits, you can qualify for a discount up to 30% at renewal.

Here’s how the savings would play out based on three common scenarios:

  • Young, Single Adult – Age 23: A 10% discount would be applied upfront and a potential 30% at renewal based on driving behavior.
  • Married Couple – Age 48 – Two Young Adults On Policy (Ages 17 and 22): A 15% discount would be applied upfront. Then, a potential 30% discount at renewal based on driving behavior.
  • Retired Husband & Wife – Age 62 – No Kids On Policy: A 15% discount would be applied upfront. Then, a potential 30% discount at renewal based on driving behavior.

How The App Works

Unlike other monitoring devices, there’s no connecting a device to your car. It’s all done through your mobile phone (apps are available for both iPhone and Android phones).

After binding your policy, you download an app on your smartphone, which you then turn on while driving.

You then get a score based on driving behavior. Your score is based on 6 factors:

  1. Heavy braking
  2. Smooth Driving
  3. Speed
  4. Mobile Distraction
  5. Time of Day
  6. Fatigue

The app allows you to turn on whether you’re a passenger or a driver, so your score isn’t harmed when a member of your family isn’t driving.

How Do You Apply?

Weiss Insurance Agencies, Chicagoland’s trusted independent agent since 1905, is one of the few agents with access to this new program.

We’ve set up a special page on our website, for Chicagoland drivers to apply at no cost. As always, there’s no obligation to purchase once we’ve sent you the quote.

In addition, as an independent agent, we have access to over 12 top Illinois auto insurance carriers. Beyond applying for the mobile app discount, we will also shop your auto insurance to our other companies to discover potential  saving opportunities.

It takes only a few minutes and the service is 100% free.

Act Now

Simply visit this link.

After you enter some basic information, one of our Chicagoland personal insurance advisers will reach out to you to gather the necessary information. (This program isn’t available via our online quote engine).

It’s so easy and quick to put money back into your pocket!

Click here to get started today.

How To Compare Home Insurance Policies in Illinois

By | Home Insurance | No Comments

How To Compare Home Insurance Policies in IllinoisIf you’re in the market for home insurance, odds are you’d like to “compare quotes.”

But what exactly should you compare?

Price is of course important. But there’s a lot more to home insurance than price.

You want insurance to make you whole again after a loss.  As you’ll discover, insurance policies are not always designed to do this.

The “fine print” in your policy can mean the difference between becoming whole or severe financial catastrophe.

There are 3 critical areas:

# 1 – Replacement Cost Estimate

Whenever there’s a natural disaster, it’s followed by stories of shocked homeowners wondering why their insurance company didn’t pay.

When wildfires destroyed Colorado homes, nearly 2/3 of homeowners were underinsured an average of $200,000. This according to a survey of United Policyholder, a consumer advocacy group.

There are two reasons homeowners often find themselves underinsured:

  1. It’s easy to confuse what you paid for your house, with what it costs to insure. Your mortgage company requires you to buy enough insurance to cover the mortgage. That’s it. But insurance is meant to insure the actual cost to rebuild your home–not it’s market value.
  2. The second reason homeowners find themselves underinsured is their agent didn’t perform a replacement cost analysis. A replacement cost analysis, will provide you an accurate estimate of how much it would take to rebuild your home.

The amount of money your home is insured for is listed under Coverage A of your policy.

If you want to properly protect your home, the first thing you must have is an accurate replacement cost. A good agent will run the numbers for you.

# 2 – Replacement Cost vs. Actual Cash Value

The first critical factor when comparing home insurance is to make sure you have the right Coverage A.

Once this number accurate, you next need to look at the type of coverage.

There are two types of coverage.

  1. Replacement Cost
  2. Actual Cash Value

Replacement cost coverage reimburses you for the cost to replace with like-kind and quality. There is no deduction for depreciation.

So, if you have $10,000 in damage to your roof, your insurance company will reimburse you $10,000 minus your deductible.

Next, there’s actual cash value. Actual cash value takes into account depreciation. So, if you have $10,000 in damage to your roof and your roof is 10 years old, you may only get a check for $5,000–minus your deductible.

That’s a big difference!

Stay with me here because this is where insurance companies tend to make things complicated.

Some insurance companies “carve out” different elements of your home and offer replacement cost on one and actual cash value on the other.

The two most popular “carve outs” are roofing and siding.

Next, understand your home insurance not only covers you home but what’s inside your home–your possessions.

So, if you want to be made whole again, you want replacement cost on not only your home but your contents as well.

There are two questions you must ask yourself:

  1. Does my home, which includes roof and siding, have replacement cost coverage?
  2. Are my contents covered for replacement cost or actual cash value?

# 3 – Water Back Up

Say water were to seep into your house via a backup of a sewer or drain.

Guess what?

This type of claim is excluded on a standard insurance policy. 

Most insurance policies add this coverage, known as sewer or water backup,  back to your policy. But it will have a separate limit. 

This limit is typically frighteningly low for most homeowners.

Typical limits average between $5,000 and $10,000.

If you have a finished basement, $5,000 may not even be enough to cover the fee for the removal of the dry wall. Let alone, reimburse you for damaged contents.

Keep in mind, sewer back up isn’t limited to homes with basements. Backup of drains can occur on any floor. Causing damage to areas in your home with the highest value per square foot.

So, when comparing home insurance quotes, it’s vital to review the fact that you have water back-up and the limit.

So, What’s Next? | How To Compare Home Insurance Policies

The goal when comparing home insurance quotes it to get properly insured, for the best possible price.

This is a lot easier said than done because as you now know, insurance policies are not all the same.

With so many variables in play, it helps to have an expert on your side. Someone to know what home insurance companies will protect you.

At Weiss Insurance Agencies, we’ve been protecting homeowners in the Chicagoland area since 1905.

Here’s what you’ll get by contacting our team of Chicagoland home insurance experts:

  • Get quotes from up to 14 top home insurance companies. Our independent status allows us to shop the market on your behalf. We do this at no cost or obligation.
  • Make sure you have the right coverage. We will review your policy for you and answer any questions you may have. This includes a comprehensive replacement cosy analysis.
  • Maximize your discounts. We will ask you the right questions, so you get the discounts most people miss out on.

To get started, visit our home insurance quote page. You’ll learn more about what Weiss Insurance can do for you, as well as 3 easy ways to contact one of our personal risk advisers to get started.

Last, I do want to thank you for your time for reading. You now know more than most about protecting your largest asset.

Best Illinois High Value Home Insurance Companies

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Best Illinois high value home insurance companies

If you drive a BMW, Mercedes, or Audi would you buy “Chevy” insurance?

Of course not.

If you live in a custom built home high value home, would you buy “manufactured” home insurance?

Again, of course not.

If you own a high value home (which we will define as any home worth over $750,000), you want to find a company that specializes in high value home insurance.

The goal of insurance is to protect yourself against financial catastrophe. In order to have this protection, you’ll need to find a company that can truly protect you. Furthermore, you’ll need to know how to compare for yourself two different insurance companies to determine the best fit for you.

As you’ll learn, there is no single best insurance company for every high value homeowner.  Instead, there’s one insurance company that’s best for you.

This is the third and final post in a series on high net worth home insurance. If you haven’t read posts # 1 and # 2 of this guide, they lay the framework for allowing you to choose the best insurance company for you.

To wrap up this series, we will review the top high value home insurance companies in Illinois and their coverage differences.

Here’s an overview:

  1. Part # 1: 6 Common home insurance mistakes high value homeowners make
  2. Part # 2: 3 Ways high value homeowners overpay for insurance
  3. Part # 3: Best Illinois high value home insurance companies

I wrote this guide to help high net worth homeowners like yourself make the best possible choice when it comes to personal insurance.

So next time you review your insurance, no matter who it’s with, you can make an informed intelligent decision. More importantly, you won’t be surprised when you go to file a claim and there’s no coverage.

Best Illinois High Value Home Insurance Companies

To make the best decision possible for the protection of one of your largest assets, it’s important you understand the coverage differences between two different insurance companies.

There are insurance companies that specialize in insuring main street America. Then, there are insurance companies that specialize in the affluent.

What is the difference?

There are many.

Below, you’ll see how typical, Standard “Main Street America” Insurance Companies compare to a high end High Value Home Insurance company.

# 1 – Risk Covered

  • Standard Insurance – You are only covered for loss or damage by specific causes, e.g. theft, fire, storm or water damage. If a cause is not explicitly listed – it’s not covered.
  • High Value Home Insurance – You are covered for loss or damage by any cause. Unless your policy specifically excludes something – you are covered.
  • Why does it matter? – When a loss does occur, you don’t have to go about “proving” the cause to the insurance company

# 2 – Extended Replacement Cost

  • Standard Insurance – Not offered
  • High Value Home Insurance – Guaranteed to repair building, no matter the final cost.
  • Why does it matter? – You won’t be left with $820,000 to rebuild a $1,000,000 home, as 67% of homeowners are underinsured by an average of 18%.

# 3  – Water/Sewer Back Up

  • Standard Insurance – Excluded or a limit of $5,000 additional added
  • High Value Home Insurance – Unlimited coverage
  • Why does it matter? – You’ll have appropriate for this common exclusion coverage at the time of claim.

# 4 – Claims Service

  • Standard Insurance – Little experience in protecting custom built homes
  • High Value Home Insurance – Expert claim service staff who deals exclusively with high value homeowners
  • Why does it matter? – You deal with someone who understands the process of replacing the valuable assets you own

# 5 – Contents Replacement Cost

  • Standard Insurance – Not offered
  • High Value Home Insurance – Offered
  • Why does it matter? – You’re reimbursed for what the contents cost to replace, not their depreciated value.

# 6 – Replacement Cost Cash Out Option

  • Standard Insurance – Not offered
  • High Value Home Insurance – Offered
  • Why does it matter? – If you suffer a total loss, you have the option to rebuild or take a cash payment up to the policy limit.

# 7 – Agreed Value

  • Standard Insurance – Regardless of any sums in your policy schedule, your payment for valuables will be based on the ‘trade price’ at the time of loss, less the deduction of an ‘excess’.
  • High Value Home Insurance – We agree with you at the outset the exact sum and in turn, the insurance company pays for all specified valuables.
  • Why does it matter? – There are no surprises or disagreements as to what something is worth

It’s easy to see the value between a a standard insurance company and a specialty high value home insurance company.

The next step is to know the difference between two high value home insurance companies, which are more subtle. Just because an insurance company can insure your high value home, doesn’t mean it can protect you from financial catastrophe.

Best Illinois High Value Home Insurance Companies

When looking at the entire sector of insurance companies who write multi-million dollar homes, it’s best to categorize them into three different categories.

  • Class A+
  • Class A 
  • Class A-

One of the key themes of this article is there’s not one best high value home insurance company, instead there’s a company that’s best for you.

An affluent homeowner with a million dollar home and a $250,000 art collection, will need different coverage than an affluent homeowner with a million dollar home and no collection.

Another key theme of this series is the purpose of insurance–to protect you against financial catastrophe.

By knowing the goal, you can then determine your risks, which will allow you to determine the company that best protects those risks.

After reviewing the coverage options, you may find that a company like Hanover can properly protect you. While another high value homeowner may find only a company like Chubb or AIG can truly protect them.

Again, it all comes down to what’s unique about you and your situation.

Let’s first look at the best high value home insurance companies. Then we will review what’s different about them.

Class A+ | 

  • AIG Private Client Group
  • Chubb Insurance (Now owned by ACE. Will keep the Chubb name)

Class A  |

  • AIG Premier – AIG’s branch focused on mass affluent.
  • Crestbrook – Rebranding to Nationwide Private Client
  • Encompass Insurance  – Owned by Allstate

Class A- | 

  • Hanover Platinum Protect
  • MetLife Grand Protect

Comparing The Best Illinois High Value Home Insurance Companies

The 7 companies listed above all offer superior coverage than standard insurance companies. They all insure high value homes in Illinois.

But there is still quite a difference.

Here’s a breakdown of 4 of the most important coverage options high value homeowners should look for and how they compare:

Building Replacement Cost Coverage Contents Replacement Cost Cash Out Option Backup of Sewers or Drains
– Class A+
AIG Guaranteed replacement cost Included Yes Unlimited
Chubb Guaranteed replacement cost Included Yes Unlimited
– Class A
AIG Premier Extra 100% of the dwelling’s coverage limit Included No Starts at $25,000 with additional offerred
Crestbrook Guaranteed replacement cost Included Yes Unlimited
Encompass Deluxe Extra 200% percent of the dwelling’s coverage limit Included No Unlimited
– Class A-
Hanover Platinum Select Premium Extended dwelling replacement cost at 150% of coverage limit Included No Up to $25,000
MetLife Grand Protect Guaranteed replacement cost Included No Starts at $10,000

How to Properly Insure Your Home for the Best Possible Price

So insurance that acts as insurance should, costs more, right?

It depends…

Most insurance is sold today because someone saves money. Turn on the TV and you’re going to see a commercial from one of the large insurance companies who “guarantees to save you money.”

And high-value insurance is no different…it still saves you money. Just in a different way.

At first, if you’re moving from a standard home insurance policy, you can typically expect to pay 15% more upfront when switching to an affluent provider of insurance.

However, as you now know, you’re not paying for the same protection. Which is why a few dollars a day spread out over a year for not only better peace of mind but better insurance is a sound investment.

However, over a ten year period, the 15% more investment upfront usually ends up paying for itself many times over.

But what about saving money today, while still be properly insured. Can it be done?

For many, the surprising answer is still YES.

Believe it or not because of our unique process at Weiss Insurance, we’ve helped many clients increase their coverage, all while saving money.

Insurance protects the assets you’ve spent years building. It’s important you make an informed intelligent decision about your insurance protection with someone you can trust.

What’s Next?

Why have some of the most respected names in insurance partnered with Weiss Insurance?

Weiss Insurance offers a “Concierge Insurance Department” whose sole purpose is to provide insurance services for the custom homeowners.

What will we do for you?

  1. You get a small team of trained high value home insurance specialists. From quoting out your current insurance to adding on a piece of jewelry once your policy is effective, you build a trusting relationship with a small team who understands your needs.
  2. Review every aspect of your home insurance portfolio to make sure there are no gaps. We do this upon becoming a customer and every year at renewal.

Here’s How it Works:

To start is simple, just visit our high value home insurance to request a coverage review and quote comparison or simply call our office at (630)584-1717.

We know your time is valuable, that’s why we have specific procedures and processes to make sure your time investment is minimal throughout the entire process.

You’ll also like to know that we’re licensed throughout the U.S. to protect our clients who own property in multiple states.

As a high value homeowner, you’ve worked hard to get to where you’re at. You deserve not only peace of mind but true protection from the best Illinois high value home insurance companies. Just as important, an agent who has protected the affluent in Illinois since 1905.

Get started now by visiting our high value home insurance page or call our office at (630)584-1717 to speak to a specialist today.

How to Build your Credit: The Definitive Guide for College Students

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How to Build Your Credit

It’s safe to say, understanding how to build your credit can save you over a hundred thousand dollars over your lifetime.

Don’t believe me?

Let’s say in a few years you obtain a $250,000 home loan on a 30 year mortgage. With a 4% fixed mortgage, you will make total payments over 30 years of $429,674 or $1,193.54 a month for 360 months.

If your interest rate was instead 6% due to your credit history, your total payments over 30 years will be $539,596 or $1,499 per month for 360 months. A difference of $109,922!

Do I have your attention now?

The savings doesn’t stop. Your credit score is factored into how much you pay for renters,  home and auto insurance also…

…And it’s not a few dollars a year difference.

You can save hundreds of dollars a year on home and auto insurance by optimizing your credit score.

Other benefits include:

  • Other loans such as private student loans, car loans, and others will have a lower interest rate. You’ll also have more negotiating power as banks love to deal with clients with a high credit score.
  • When renting an apartment, even long-term vacation rentals, it’s easier to do so with good credit history.
  • Employers now check credit history to see if you’re financially responsible
  • You’ll get better credit card offers and interest rates
  • And much more…

In the post, you’ll learn:

  • What exactly is your credit score, where to find it (for free), and how to improve it
  • The difference between your credit score and credit report
  • How to build your credit by applying for your first credit card

How to Build your Credit

To build and optimize your credit score, there are two things you need to understand:

  • Your Credit Score
  • Your Credit Report

First, let’s look at your credit score also known as your FICO (named so after the Fair Isaac Corporation) score. Your credit score is a simple number between 300 and 850. The higher the number, the better your credit history.

The number was originally created to make it easier for lenders to determine if you’re worthy of a loan or not. Just by looking at your credit score, a bank can decide if they will lend you money and at what rate.

However, your credit score now impacts many areas of your finances.

Note: There are other services now maintaining your credit score. I used FICO because it’s the most well known. All the scoring services (TransUnion, Vantage, Experian, and Equifax) have a different formula; however, all are similar.

What Makes Up Your Credit Score?

FICO hasn’t released the exact formula for calculating your credit score, but it has released what your credit score is based on. Here is the formula from their website:

Here’s what you need to know about each factor…

Payment History – 35%

Your payment history takes in account the timing of your past payments on accounts such as your credit card, retail accounts, and your mortgage. It also takes into account any bills that have gone to collection.

In college I was in a car accident. Wasn’t my fault but the other driver didn’t have insurance. He was going to pay me out of pocket. I had the bill sent to my dorm room. However, I switched dorm rooms over semesters and didn’t receive the bill.

Turns out the bill ended up going to collections. This one mistake cost me when I went to apply for a mortgage six years later.

It’s not rocket science, if you want to improve your credit score, pay your bills on time. It’s the #1 thing you can do.

Amounts Owed – 30%

The amount owed is the next biggest weight on your credit score. It’s also commonly referred to as, your credit utilization rate.

This is a ratio of the amount you owe and the amount available. It also takes into account the number of accounts you have with balances.

This perfect credit utilization rate isn’t known. However, we do know some basic facts:

  • Don’t max or come close to maxing out your available. A good rule of thumb is to not go beyond 33% of your available credit.
  • You want to use at least some credit. Therefore, a utilization rate of 0% could actually hurt your credit score.

Length of Credit History – 15%

15% of your credit score is based upon how long you have had credit. The longer your credit history, the better.

This is why it’s a good idea to apply for a card when you’re in college and keep that card for life.

It’s also why it’s a bad idea to cancel your oldest card.

Although it’s not my primary card, I still have my first card for this reason. I use it to pay my cable bill, which is automatically billed each month.

I keep this card active because you want to always have some activity on your credit. Like I mentioned before, applying for a credit card and then never using it, can actually hurt your credit card.

New Credit – 10%

Would you lend $100 to a friend who just borrowed $100 from three other friends? Of course not.

Which is why lenders, don’t like to see a lot of new activity, including credit inquiries, on your credit history.

Types of Credit Used – 10%

Lenders prefer to see a variety of credit on your credit score. For example, it’s better to have a student loan, one credit card, and a car loan then three credit cards.

This is only 10% of your score, so don’t go out and buy or car just to get variety. The most common mistake made here is carrying too many credit cards.

What It All Comes Down To

Many people try to crack the FICO equation, to determine their exact credit score. FICO has never and will never release the exact equation.

It all comes down to common sense. Pay your bills on time, don’t use all of your credit available, and don’t close your oldest account.

How to Get Your Credit Score

So now that you know 99% of what there is to know about credit scores, you probably want to see what your score is.

Option # 1 – Mint.com

Mint.com is an all in one personal finance tool.

You can track your account balances, get notifications of bills, create budgets and more.

I use Mint to track my finances and have recommended the software to many others.

They have a feature which allows you to view your credit score. The score is pulled from Equifax, one of the big three credit scoring agencies.

Option # 2 – Credit Karma

Another free option is to use CreditKarma.com.

I love the service but there are a few things you should know to get the most out of it.

  • Your score at Credit Karma can be different from your score at Mint. As mentioned, there are many different credit score reporting services and Credit Karma doesn’t use FICO. For more, read their FAQ.
  • Sign up the alerts. This will let you know of any new activities.
  • Use the Report Card to identify strengths and weaknesses

Personally, I login to Credit Karma a few times a year just to make sure there’s nothing unexpected. Plus, I’ve signed up for their alerts.

It’s a convenient way to monitor if you are on the right path.

Note: Both Mint and Credit Karma are free sites that earn money through affiliate commissions from credit card companies. Their recommendations are not always was it’s in your best interest.

How to Build Your Credit – The Credit Report

Your credit report is a more detailed report of your past credit history. It provides a future lender with just about financial transaction from your past. A little scary, but true.

Getting your credit report is simple and free.

Go to annualcreditreport.com.

You’re entitled to a free copy of your credit report from each of the report agencies once a year. You can get these all at once or over a period of a year.

I prefer to spread it out, just in case someone requests a copy (most landlords will) of my credit report, I don’t have to pay to get one.

Once you get your credit report, review it!

You want to double check everything.

Even basic information such as your name, social security number, address, etc.  You won’t believe how many stories I have heard of this information being incorrect, and consequently, negatively affecting someone’s credit without them knowing it.

Besides your basic information, you need to review everything on your credit history. Start from the first page and work your way toward the end.

To show you what you should be looking for, I’m going to take you through a recent copy of my credit report. (The report varies depending on what credit bureau you obtain it from, so don’t worry if yours isn’t the same).

Potentially Negative Items or Items for Further Review

If you have any unpaid bills that were sent to collections, this is where they’re listed.

Worth mentioning is that, Chapter 7, 11, and 12 bankruptcies and unpaid tax liens will remain up to ten years.

Accounts in Good Standing

The next section gives my accounts that are paid up to date, along with a balance history. Mine include three credit cards and one mortgage. All accounts status currently list “Open/Never late”, a great sign.

On one of my credit card accounts, I’m listed as an authorized user.

Meaning it’s not responsibility to pay the bill. Even though this isn’t my credit card, being an authorized user still affects my credit rating.

A bit of history on the authorized user because this has been a back and forth issue. One of the ways you used to be able to increase your credit score was to add yourself as an authorized user to an account in good standing. For example, if your parents had good credit, you can ask for them to add you as an authorized user and their credit history would go on your credit history.

FICO figured out this trick quickly and decided to eliminate authorized user status from the credit score equation for a short time. About two months after, the reversed their decision after the changed reversed their decision stating:

“After consulting with the Federal Reserve Board and the Federal Trade Commission earlier this year, Fair Isaac has decided to include consideration of authorized user trade lines present on the credit report in the FICO 08 model.” – Tom Quinn, Vice President of Global Scoring Solutions for Fair Isaac Corporation

I don’t know this for a fact, but from reading in between the lines I’m guessing that there is no way being an authorized user helps your credit. If the account holder is in good standing and has a good history of paying its bills, it will have no effect at all.

If the account is in bad standing, it will negatively affect your score. Therefore, if you’re an authorized user on an account with a bad credit history, ask to be removed immediately. =

Record of Requests for Your Credit History (Hard Inquiries)

Hard inquiries are done when you’re taking on additional financial obligation. Unfortunately, many businesses don’t come right out and tell you that they are performing a hard inquiry on your credit. However, it does make its way into the fine print.

The most common hard inquiries you will find on your credit report include:

  • Banks & Credit Unions
  • Credit Card Companies
  • Car Dealers
  • Insurance Companies – They’re required by law to ask.
  • Property Management Companies & Landlords
  • Phone & Cable Companies
  • Utility Companies

Here’s the statement from Experian on my credit report:

“We make your credit history available to your current and prospective creditors and employers as allowed by law. Experian may list these inquiries for two years so that you will have a record of the companies that accessed your credit information. 

The section below lists all of the companies that have reviews your credit history as a result of action you took, such as applying for credit or financing or as a result of a collection. The inquires in this section are shared with companies that view your credit history.”

Each hard inquiry on your credit report will lower your anywhere between 5 and 10 points. If you’re worried about your credit score, anytime before you open a new account just ask if they perform a hard pull on their credit.

Other Ways to Limit Hard Inquires include:

  • Ask – Anytime you’re opening a new account, ask if they are pulling your credit, when they are pulling your credit, how many times they are going to pull your credit, and how you can get that removed.
  • Don’t Rate Chase – A common, but damaging trend is to chase low introductory rates on credit cards. The more accounts you open, the more hard inquiries you will see on your credit.
  • Avoid Applying to Receive 10% Discount – When you’re checking out at a popular retail store they will ask you if you want to save 10% today by applying for a store card. The same “trick” is done by issuing free T-Shirts at sporting events. Every time you fill out an application, they pull a hard inquiry.
  • Don’t Do Business With Companies That Routinely Check Your Credit – A lot of businesses will make it a habit to pull your credit on a regular basis. Unfortunately, this is legal because they put it on the 22nd page of their terms and conditions that you had agreed to.
  • Avoid A Sharp Increase in Inquiries – This isn’t exactly a tip to eliminate a hard inquiry, but it’s still important. Many people, who want to get a credit card, will go out and apply for 4 or even ten credit cards at once. Please avoid doing this. It shows you’re in desperate need for credit, which isn’t what a future lender wants to see.

Getting Rid of Hard Inquiries

There used to be a common technique to get rid of hard inquires, that if you did a soft inquiry on yourself once a day, hard inquires would eventually get bumped. Credit reporting agencies are smart and quickly caught onto this.

If you don’t recognize or don’t remember giving authority for a hard inquiry on your credit, you have the right to get it removed by mailing or faxing a request to the creditor. You want to do this immediately, before they make another unauthorized inquiry.

The contact information for the creditor should be on your credit report. If it’s not, visit the company’s website and search for a contact number. Then call the creditor, and ask for either a fax line of mailing address to submit your formal letter. (Note: I wouldn’t ask for it to be removed over the phone because there is no paper trail)

Below is a copy sample letter you send via fax or certified mail to each creditor.

 

Your Name

Your Address

Your Phone Number

 

RE: Unauthorized Credit Inquiry

 

I was recently going over my credit report from (Insert Creditor’s Name), and I happened to see a hard inquiry listed from your company. 

The details of the inquiry are below. 

Date of Request: (Insert Date of Request)

Creditor Name: (Insert Creditor Name)

In which I am aware of, I have never approved your company for this inquiry. Under the Fair Credit Reporting Act, it is stated that you must have my authorization to perform a hard inquiry on my credit. 

Unless you can provide me a written proof of authorization signed by me, I’m asking you to contact each credit reporting agency to have your illegal inquiries removed, immediately. I also ask that you remove any personal information of mine from your records.

I’m sending this letter through certified mail, to ensure it’s delivery. 

Thank you for your attention to this matter,

Your Name

Your Signature

Removing a hard inquiry on your credit report, can give your credit rating a slight boost. The biggest benefit to doing so is less information in the hands of careless organization. The less personal information about you is circulating around, the less chance you have of getting your identity stolen. (More on this to come)

Inquiries Share Only With You (Soft Inquiries)

Soft inquiries are inquiries that you’re not even aware of. For example, the companies that send you pre-approved credit card applications through the mail perform a soft inquiry before sending you that application. When it comes to learning how to build your credit, soft inquiries have no bearing on your credit score.

On my credit report from Experian it states in bold letters:

“We offer credit information about you to those with a permissible purpose, for example to:

  • Other creditors who want to offer you pre approved credit
  • An employer who wished to extend an offer of employment
  • A potential investor is assessing the risk of a current obligation
  • Experian Consumer assistance to process a report for you
  • Your current creditors to monitor your accounts
  • A static copy of your credit report provided to a subsequent user necessary to complete your mortgage loan application

These inquiries do not affect your credit score.”

Although they don’t have any bearing on your credit score, it’s still interesting to take a look at what companies are looking up your credit history each year.

Common Questions about Credit Reports

What do I do if there is an Error on my Credit Report?

If something is wrong on your credit report, you want to immediately contact the reporting agency that issued the report.

The FTC has great instructions on what to do if there are any errors.  Follow their steps, including using their template. Make sure to copy anything you send, for your own records and record dates of everything you send.

What is Revolving Credit?

Revolving credit is a term used for credit that has no expiration. For example, a car payment, student loans, or a mortgage isn’t considered revolving because you eventually pay these types of loans off. Otherwise known as installment credit.

A credit card is a revolving payment because the credit is always available. As long as you pay it off each month, it’s always there for you.

Your FICO score looks at the amount of revolving credit you have compared to installment credit. The less revolving credit the better, in the eyes of FICO. If you’re looking for a quick increase in your credit score, a great way to achieve this is by paying off your revolving credit.

Does Applying for a Credit Card Hurt Your Credit Score?

Yes, applying for a credit card is a hard inquiry, which can negatively affect your credit score in the short-term. You can expect your credit score to go down around 5 points for six months any times a hard pull is done.

Keep this in mind, if you’re applying for a loan in the near future. For example, don’t apply for a new credit card right before applying for a car loan, to increase your credit utilization rate.

Opting Out of Credit Card Offers

Once I moved into a home, the amount of credit card offers I received was startling. Every day, I would receive at least one and sometimes more of the following applications in the mail; credit card, home equity line of credit, and mortgage insurance.

Luckily, I discovered OptOutPrescreen.com, where I can stop this junk mail from filling up my mailbox. The site was created as a result of Fair Credit Reporting Act and a link to the site can be found on the Federal Trade Commission’s website.

There are many advantages to stopping junk mail:

  • No chance of someone stealing your credit card applications through the mail.
  • Out of sight, out of mind. You willn’t be tempted to sign up for any credit card offers that you don’t need.
  • Save paper.
  • The fewer the amount of companies with your social security number the better.

You can choose to either opt out electronically or permanently by mail. If you choose electronically, you will be opted out for only 5 years. If you choose to opt out by mail, you will never receive a credit card offer again.

I wasn’t tracking the days to the exact date, but I would estimate that around four weeks after opting out, I was no longer receiving any prescreened offers through the mail.

Another tip, if you’re also tired of receiving catalogs, there is a free service Catalog Choice that can help you reduce your junk mail even more. It’s pretty simple; you just enter in your address and the catalog number of the catalog you want to eliminate.

Applying For Your First Credit Card

Applying for your first credit card is a big financial decision. When it comes to learning how to build your credit, it is the decision.

As you learned, length of credit history makes up 15% of your total credit score. Therefore, it’s possible you may keep this card open for the rest of your life.

The Credit Card Act of 2009 requires anyone under 21 to either have a co-signer or show proof of income.

A co-signer simply means that someone with income, typically your parents, have to personally guarantee you’ll pay the balance. If not, the credit card company has the right to go after the co-signer to pay.

If you do have proof of income, you’re able to apply for a card without a co-signer.

Credit card companies have designed specific cards marketed towards college students.

There are two types of cards:

  1. Secured
  2. Unsecured

With a secured card, you put down a cash deposit with the bank and that cash deposit is your limit.

What you’re doing here is giving the bank a lump sum of money (you get it back once you close the account) that they make available to you each month.

Why would you want to give a bank money, that if you don’t pay back you would get charged interest?

First of all, it builds financial responsibility. Second, secured cards are easier to obtain as you don’t need a cosigner.

Next are unsecured cards. As the name implies, with an unsecured card you’re not putting up a balance upfront. This is the biggest advantage here but there are downsides as well.

The biggest downside is the need for financial willpower on your end.

Credit cards make spending money easy. This is both an advantage and disadvantage.

An advantage because you don’t have to walk around with cash to pay for goods and services.

A disadvantage because it makes it very easy to spend money you don’t have. When you spend money you don’t have, you’re charged interest and it’s not a small amount of interest either.

So if there’s a unsecured credit card offer that interests you, it’s important that you’re able to pay in full every month the balance.

If you have the cash to put down a deposit on a secured card, my opinion is that this is the way to go as it promotes better individual financial responsibility.

What to Look For In Credit Card Offers

The first decision you’ll make is whether or not to apply for a secured or unsecured card.

There’s no right or wrong answer. There are both good and bad secured and unsecured cards.

Once that decision is made, you can then look at different card offers.

What do you need to look for?

Here are 3 tips to choosing your first credit card.

  • Review All Potential Fees – Each credit card has a different fee schedule. There’s the APY, which is the interest rate you’ll pay on any balances. There are late payment fees, which are flat one-time fees for missing payment. Unfortunately, the list goes on. The amount of fees credit card companies collect each year is startling. Know the fees ahead of time.
  • Bonus Offers – Don’t worry about rewards and sign up bonuses for now. The goal here is establishing and building your credit. If you do that, there will be opportunities to earn lucrative rewards down the road.
  • Automatic Payments – When you get your card, set up automatic payments through your checking account. Missing payments result in not only fees but a potential ding to your credit. Even if it’s just the minimum amount, setting up your automatic payments will help you avoid these nasty fees.

Now I’ve got a Question for You…

Was this guide on how to build your credit helpful?

Let me know in the comments.

The goal was to create the guide I wish someone handed me in college.

I had no idea how much of an impact credit had on my future.

You now do.

Good luck!

Life Insurance for Parents: An Insider’s Guide To Saving Money

By | Life Insurance | No Comments

PersonalInsuranceYou may be expecting. You may have a newborn. You may be on your third.

As a parent,  the question now is not if you need life insurance, but rather which type to buy, what company to buy it from, and how to get it for the best price.

When developing a life insurance plan for a client, I’ve seen my share of mistakes and misconceptions.

Most common are:

  • Buying the wrong type of insurance for a lot more money
  • Not understanding exactly what it is that they’re buying
  • Not understanding where fees and commissions come from
  • Overestimating the amount of money life insurance for parents costs
  • Underestimating the amount of insurance they need

That’s why I decided to write a post dedicated to life insurance for parents.

In this comprehensive post, you’ll learn:

  1. How to decide what type of life insurance is best for you
  2. How to decide how much insurance you need
  3. How to buy the right type, with the right amount, for the lowest possible price
  4. 8 Steps to buying life insurance

What Type Of Life Insurance Should Parents Buy?

Your first step in purchasing life insurance is to decide what type of insurance you need.

There are two basic choices:

  1. Term life insurance
  2. Whole life insurance.

Then, there are choices within these types.

Let’s start with term life insurance.

Option # 1 – Term Life Insurance for Parents

Term life insurance offers guaranteed protection, for the length of the contract, which ranges from 1 to 30 years.

The most common type of term life insurance bought is level guaranteed term life insurance.

In a level guaranteed term life insurance policy, premiums stay the same for the duration of the contract. At the end of the contract, you have the ability to continue the contract, but, at an increased premium.

If you don’t want to pay the new premium, which goes up a lot, the contract ends.

You no longer have any life insurance, nor is any premium paid returned.

While some see this as a negative, remember, the benefit is term life insurance is much less expensive. Thus, you’re saving a lot of money on premiums.

Option # 2 – Whole Life Insurance for Parents

Whole life insurance is a combination of term life insurance and an investment. Every time you pay your premium, part goes to the life insurance and part to the investment.

What makes whole life insurance different?

Whole life insurance is permanent.

While term life insurance lasts for a certain period of time (e.g. term), whole life insurance lasts as long as you pay.

Most whole life insurance endow when you reach the age of 100. Meaning, on your 100th birthday, you receive the death benefit. (Keep in mind; you’ve been paying premiums on it each year).

The advantage of permanent is in its name…it’s permanent. There’s no guaranteed time of the contract. As long as you pay, your contract remains in-force.

The disadvantage is the cost. Whole life insurance is more expensive than term.

Which Is Better, Term vs. Whole Life Insurance?

In most cases, term life insurance is better for new couples. (I say “almost” because whole life does provide benefits in specific situations like estate planning and maximizing investments).

As a CERTIFIED FINANCIAL PLANNER®, who works a lot of couples, I look at a their entire financial situation.

When I first sit down with clients to discuss life insurance, one of the things I go over is their “balance sheet”. Meaning, identifying which assets are in what type of account.

In the past, I’ve seen couples not contributing to tax advantaged investments like a 401(k), when they have an employer match. Or, have no strategy for paying off their student loans with high interest rates.

Yet, they’re considering buying permanent insurance.

This makes no sense to me and for a good reason, the numbers don’t add up.

The goal is to invest in the account which is going to give you the highest after tax returns.

A 401(K) with an employer match and paying off high interest debt, are two of the best after tax returns available.

While whole life insurance, can provide a great after tax return in the right circumstances, it’s typically not the highest and best use for parents.

If you’ve taken care paying off high interest debt and maximizing your 401(K) with an employer match…whole life insurance can make sense.

If you’re still unsure what’s best for you, look into a convertible term policy. A convertible term let’s you buy term now, than convert it into an investment down the road. If you’re in a career where you’ll be earning more down the road, this option makes a lot of sense.

At the end of the day, never buy something you don’t understand. Life insurance is a contract you’re going to have for 30 or more years. It’s important to speak to someone who has your best interests in mind (more on this to come).

The American Council of Life Insurers estimated that 63.7% of all policies sold are whole life. In my opinion that number should be much, much less if advisers were acting in their clients best interest.

It may come as a surprise that many life insurance salesman aren’t bound to act in their clients best interest. In my opinion, this is something we can and should change.

There’s a movement you can take part of to called The Whole Life Rebellion. As a consumer, I encourage you to join the rebellion, which includes signing the Insurance Consumer Bill of Rights, which among other things would force agents to act in your best interests.

Step # 2 – How Much Life Insurance Should You Buy?

Have you heard the phrase, “If all you have is a hammer, everything looks like a nail”?

This is how many inexperienced life insurance advisers approach a sale

Their only tool is life insurance.

Whether it’s right for you or not, it doesn’t matter.

This is when life insurance gets complex. It’s when couples buy a policy they don’t understand, for far too much money.

Or, there’s the opposite approach where advisers insist on using rules of thumb to calculate your needs.

Using rules of thumb, as I’ll explain, is over simplification.

So, when calculating the amount of life insurance to buy, where do you start?

The best place is to remind yourself of the purpose of life insurance, which is income replacement.

For a short while think about…

  • What would life be like without you or your spouse?
  • What would your income look like?
  • Who would raise the children, full-time?
  • Would you move?
  • What extra costs would you have?
  • What costs would go down?

Yea I know, not fun. But, important.

And now that it’s over and you’ve thought a bit how life would be like, we can get into calculating the amount you need.

Let’s start by examining the rule of thumb for calculating your life insurance needs that’s widespread on the Internet.

I’ve seen finance sites recommend to buy anywhere between 5-20 times your income in life insurance.

While simplifying can be good, this rule of thumb leaves much at your digression.

To start, who needs to buy 5 X their income in life insurance and who needs 20 X?

That’s quite a difference.

Next, if you’re a one income household, does that mean the spouse that doesn’t work, doesn’t need life insurance?

Adding on, what about children?

Shouldn’t a couple with three kids own more life insurance than a couple with one?

Get the idea?

For one of the biggest purchases of your life, a rule of thumb isn’t the best way to go.

What about online calculators?

Should You Trust Online Life Insurance Calculators

Since a generic rule of thumb isn’t helpful in calculating your needs, the next place to turn is an online calculator.

That’s simple, right?

Just enter a few numbers in and out comes a number.

Well…A Google Search brings up 38,500,000 different calculators.

If you used 5 different calculators, you’d get 5 different results.

Often, much different.

So, we’re back to the same problem of using 5-20 X your income. Results vary.

The best place to start is not with a Google search but knowing, what makes up a good life insurance calculator.

When it comes to life insurance calculators, I’ve found one thing to be true.

Typically, the more questions it asks the better.

You want to make sure the calculator is at least asking you about the following:

  • Estimated final expenses
  • Mortgage debts
  • Your student loans
  • How many children you have
  • Your children’s college funding
  • Your current savings and investments
  • The amount of current life insurance you own
  • Your current income

Last, read the fine print for the estimated inflation and after-tax investment yield.

What should you be looking for?

  • An inflation rate should be between 3-4%.
  • After-tax investment yield between 4-7%

If the calculator doesn’t tell you what these numbers are, I wouldn’t use it.

Of course, make sure it’s from a trusted site.

There is one life insurance needs calculator I recommend. The calculator from the non-profit, Life Happens.org

It easy to use and asks the right questions.

Go over to LifeHappens.org right now to discover how much life insurance you need. 

While no calculator is perfect, including my favorite, a good one like the one above will get you close to your number.

Step # 3 – Start With Your Group Insurance Plan

You need life insurance. Your employer has a group life insurance plan.

You’re thinking, “Hey. Maybe I can wrap this life insurance thing up with one email to HR. Just tell them I need some coverage and I’m all set.

Well… it’s not that simple.

Yes. When shopping for life insurance, your group insurance is the first place to look.

But, as you’ll discover, it’s a bit more complex. There are advantages to group life insurance and there are disadvantages.

Let’s start with the advantages.

The Advantages of Group Life Insurance for Parents

  • Guaranteed Issue – Most group life insurance plans come guaranteed issued. Meaning, there’s no medical underwriting to bind coverage. There’s no physical, no blood draw, no waiting for coverage. For someone with a poor health history, this is a huge advantage.
  • It’s Free (Sometimes) – Many employers pay 100% of the contribution for group life insurance. Then, if you want extra coverage, you have the option to buy up. For example, your employer may provide you $50,000 of coverage at no cost. Then, you have the option to buy up to $200,000 more in coverage.
  • Convenient – If you’re one to put something off, group life insurance plans are convenient. Unlike buying coverage on your own, it’s a much shorter and simpler process buying group life insurance.

The Disadvantages of Group Life Insurance for Parents

  • Low Limits – Group life insurance plans limit the amount of coverage you can buy. For new couples, this limit is usually below the amount that’s needed.
  • Portability – If you leave your job, what happens to your insurance? A scarier thought, if you leave your job due to health issues, what happens to your insurance? Many group life insurance plans are not portable. Meaning, you can’t transfer your coverage to an individual policy if you’re no longer employed.
  • Cost – For healthy individuals, cost is the biggest disadvantage to buying group life insurance. Why is group life insurance more expensive? The reason is adverse selection. Remember, most group health insurance plans come without medical underwriting. Thus, those who have trouble finding coverage as an individual, buy as much group insurance as they can. So, the pool of people who buy group insurance isn’t as healthy as the pool of people who buy individual coverage.
  • Term Only – Most group life insurance plans offer only term life insurance. It’s rare to find an employer that offers whole insurance for parents. If yours does and you’ve determined that whole life insurance is best for you, you still have the problem of high costs due to adverse selection.

Summary of Group Life Insurance for Parents

If your employer offers to pay for life insurance, take it. If it cost you nothing, there’s no reason not to.

If your employer doesn’t contribute, buying insurance through your employer is likely more expensive. If that’s the case, you’re better off shopping the individual market (if healthy).

The important thing to keep in mind is your employer’s plan is only the beginning. You not only need to buy life insurance, you need to buy the right amount.

Last, most group plans offer low limits at a higher cost. Thus, it’s in your best interest to shop the individual market regardless of what your employer offers.

Step # 4 – Comparing Life Insurance Quotes

You know what type of life insurance you want to buy. You know how much life insurance to buy.

And, you’ve reviewed your group life insurance plan.

In step # 4, you’ll learn how to buy individual life insurance at the lowest possible price.

As I discussed in Part # 1, the majority of couples should buy term life insurance. So, I’ll be taking you step-by-step through buying a term policy.

Phase # 1 – Buying Life Insurance for Parents – Know The Company – Inside & Out

The most important decision you’ll make when comparing life insurance is deciding what company to buy from.

When buying life insurance, you’re entering into a long-term contract.

Unlike auto insurance or home insurance, this isn’t a one year contract. This is a long-term contract. For younger couples, this contract could last up to 30-years.

Why does this matter?

Well…imagine you uphold your end of the contract by paying your premiums for 17 years. But, the insurance company files for bankruptcy in year 17.

You’re 17 years older now. You have a few health issues. And, you still have a need for life insurance.

Or, here’s another common scenario.

You compare quotes, choose the cheapest one, and apply for coverage.

But little did you know, the company you choose has the tendency to change your rate class.

So, instead of getting a preferred plus rate, you’re now paying 60% more with their standard rate.

Why Use An Independent Life Insurance Agent

Life insurance is a complex, long-term contract.

If you overlook one “small” part of this contract, you could be making a serious financial mistake.

A GOOD life insurance agent – one that has your best interests in mind – can guide you through the process, can make sure you understand 100% of what you’re buying,  and can make sure you’re buying the right type of life insurance, for the best price, from a quality company.

In the end, a good life insurance agent will save you not only money but time.

Here are 3 more reasons for choosing an independent agent:

  1. Independent life insurance agents don’t charge fees. Instead, they’re paid from the insurance company after you’ve purchased.
  2. You don’t save any money shopping at a rate comparison site. The insurance companies set the same rates for agents as they do for a comparison site.
  3. You get to compare quotes from different insurance companies. (Tip: Find out beforehand what companies your agent represents.)

Not All Independent Agents Are Equal

You want to find an independent agent who has your best interests in mind.

How do you tell?

The easiest way to tell…make sure your agent is asking you questions.

If they’re quick to recommend a solution, without making a diagnosis of what’s best for you, find another agent.

As I mention above, it’s important you work with a professional. Someone that will ask the right questions and listen to your needs. Someone you can trust.

Summary – Life Insurance for Parents

Congratulations on your family.

When it comes to life insurance for parents, you now know enough to protect your family properly for years to come.