MONEY

Think Health Care is Pricey? Get Ready to Spend Even More

pile of prescription medicine pills and tablets
Jan Mika—Shutterstock

Soon one out of every five dollars Americans spend will to go healthcare.

For the past six years Americans have gotten a respite from fast-rising health care costs. No more.

With millions of baby boomers entering retirement and pricey new drugs hitting the market, U.S. health care spending, which had increased at relatively moderate 4% rate since the financial crisis, grew 5.5% last year, according to a new government study reported on Tuesday by The Wall Street Journal.

You can expect more too. The actuaries who calculated the figures, project that spending will average 5.8% between 2014 and 2024. By then, health care as a share of the nation’s overall economy will have grown to 19.4% from 17.4% in 2013. In other words, our nation’s medical bills will account for one out of every five dollars we spend.

The changes aren’t totally unexpected. A big part of the extra costs are tied to the fact that baby boomers — many now in their 60s — are requiring more care. Important but expensive new drugs, like one that helps treat Hepatitis C, are also a factor, according the Journal.

Still, the rising costs aren’t good news, especially considering a key promise of the Affordable Care Act, which brought access to health insurance to millions of Americans, was to get the growth in health care spending under control, a goal known as “bending the curve.”

For people who get their health insurance coverage at work, rising costs are likely to mean a continued push by employers toward high-deductible plans, which can have steep out-of-pocket costs. Read here for more on tools for keeping medical bills under control.

MONEY Insurance

Why Your Auto Insurance Rate Could Go Up If Your Spouse Dies

couple holding hands in automobile
Marius Hepp—Getty Images

Critics are calling it the "widow penalty."

It’s hardly news that unmarried drivers tend to pay more for auto insurance than married ones. In today’s auto insurance industry, complex pricing algorithms take into account an ever-growing number of factors like driver credit score, gender, and age—factors that seemingly have very little to do with, well, actually turning the steering wheel.

But according to a new study by the Consumer Federation of America, a change in marital status from married to unmarried (through divorce or the death of a spouse) can cause a woman’s auto insurance premiums to rise as much as 226%—suggesting a “widow penalty” that CFA director of insurance Bob Hunter said in a press teleconference Monday with executive director Stephen Brobeck is “immoral and should be stopped at once.”

Using the stock profile of a 30-year-old female with a perfect driving record and holding all variables (from income to car model) constant except for marital status, the CFA study surveyed quotes from six auto insurance giants—State Farm, GEICO, Farmers, Progressive, Nationwide, and Liberty—across ten different U.S. cities. Of the six, State Farm was the only provider to never change its prices according to driver marital status; the remaining five routinely quoted higher prices to single—never married, divorced, or widowed—female drivers. Of those five, only Nationwide sometimes made exceptions for widows by not raising their rates. The “widow penalty” overall averaged to an approximately 14% increase.

The logic of the “widow penalty,” according to insurance companies, is simple: unmarried drivers are, allegedly, statistically riskier drivers. According to James Lynch, who serves as chief actuary and director of information services at the Insurance Information Institute, this is hardly immoral. Rather, it’s “very much the way that insurance works.”

“Rates aren’t supposed to be based upon what makes you feel good,” Lynch said of the CFA study. “Insurance companies are not in the business of creating favored classes of people.”

The CFA questions whether insurance companies’ risk information about unmarried drivers is even actuarially sound, claiming it comes primarily from a 2004 New Zealand-based study, which admits to including too few instances of accidents among divorced, separated, and widowed drivers to make any conclusive statements about them. Lynch counters that insurance providers are basing their rates on significant correlations in their claims data.

Yet it’s hard not to object to the notion of an insurance “widow penalty,” which seems to compound personal loss with financial loss, raising the question of how far insurance classification plans should be allowed to go. We wouldn’t, after all, accept a race-based insurance system; and under the Affordable Care Act, gender-based rating for health insurance is out.

The CFA argues that “widow penalties” are part of a trend in the auto insurance industry of charging higher premiums to those least likely to be able to afford them. Drawing a parallel to the practice of charging higher insurance premiums to customers with bad credit scores, Hunter and Brobeck noted during the teleconference that unmarried women tend to be less well-off than married women. “[Insurance companies] are just not that interested in selling liability coverage on an older car to a younger or lower income person, and they price it accordingly,” they said.

It’s an insurance landscape not unlike that which has provoked efforts to overhaul the American healthcare system—and that in December 2013 caused the Federal Insurance Office to issue a report entitled “How to Modernize and Improve the System of Insurance Regulation in the United States,” including the suggestion that states revisit the question of “whether or in what manner marital status is an appropriate underwriting or rating consideration.” The report pointed to same-sex couples in states where it was then illegal for them to get married as one key population discriminated against by marital status ratings.

But what to do for the single consumer here, now, and not looking to get hitched?

Shop around. Get as many quotes from as many providers as you can. And take into consideration all of the factors (and not just your single status) that might jack up your insurance rates. Most importantly, don’t feel tied to the same insurance provider you’ve been using for years. Should your marital status suddenly change, get back out there and shop some more.

MONEY Budgeting

8 Ways to Simplify Your Finances

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Marc Romanelli—Getty Images

Consolidate. Prioritize. Automate.

Do you find yourself overwhelmed by your financial responsibilities? Do you sometimes ignore your accounts and budget because thinking about them adds stress or confusion? Understanding the steps for good financial decision-making and simplifying your role can help you take control of your finances. Check out the following tips to create an easier structure in your finances and watch how each small change adds up.

1. Pare Down Your Accounts

You probably don’t really need more than one savings or checking account or to have accounts with many different financial institutions. One method to simplify your financial life is to consolidate your bank accounts to one checking account and one savings account to cut down on the paperwork and tracking.

2. Prioritize

Picture your future and choose a few financial goals to focus on at a time, like boosting your 401(k) or growing an ample emergency fund. It’s important to be specific about the goals you want to accomplish and plan the clear steps you need to take to reach them. Writing your goals down can help you stick to them.

3. Consolidate Insurance

Just as you probably don’t need multiple bank accounts that serve the same purpose, you probably don’t need multiple insurance accounts. You can save money and stress by bundling your assets that need insurance and consolidating your policies. You can compare the various companies to see who will help you save the most in this process.

4. Keep Track of Your Comprehensive Budget

When you are ready to get control of your financial life, it’s important to make sure you are living within your means. It is important not just to create a realistic, comprehensive budget but to take the steps to stick to that budget. Once you start tracking where you money is going, you may be surprised by how much you are spending in each category and how your money can be put to better use.

5. Pool Your Plastic

If you have debt, you may want to consider transferring the balances on high-interest credit cards to a credit card with a lower rate. This will help cut down on your money management and save you some money on interest. It’s important to inquire about balance-transfer fees and factor that into your decision.

To get a good balance transfer offer, you’ll need a decent credit score.

6. Go Paperless

You only need to keep important papers, so go through what you have and shred whatever you don’t need. Then streamline your future financial records by going paperless. Most companies and banks offer this feature and this can cut down on your clutter and filing. Call to set up paperless statements or bills and keep folders on your computer to help you track where your money is coming and going.

7. Automate Good Habits

If you can’t trust yourself to follow through on positive financial behaviors, consider not giving yourself the option. Set up direct deposits and contributions so you can watch your financial goals come into grasp without having to be proactive about it. If you never see the money sitting in your account, you can’t spend it.

8. Inventory Your Stuff

Take stock of everything you own, from clothes to furniture. You will find that you probably have more than you need and even things you have forgotten about. You can sell or donate what you don’t need and watch your financial clutter decrease with your life clutter.

The easier your financial management is, the more likely you are to stay on top of it and be in better fiscal health. Use the tips above and search for your own shortcuts to make this strategy a reality and watch your assets grow.

Note: It’s important to remember that interest rates, fees and terms for credit cards, loans and other financial products frequently change. As a result, rates, fees and terms for credit cards, loans and other financial products cited in these articles may have changed since the date of publication. Please be sure to verify current rates, fees and terms with credit card issuers, banks or other financial institutions directly.

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TIME

You Won’t Believe What Cost Us Nearly $740 Million Last Year

It's literally shocking

They say lightning never strikes twice — which is a good thing, because it’s expensive when it does. Even though 2014 was a pretty mellow season for storms, lightning-related insurance claims shot up, according to new data from the Insurance Information Institute.

The trade group found that insurers paid out $739 million in lightning-related property damage claims last year, up about 10% from 2013, even though there were 13% fewer claims filed. And the average loss per claim grew by 26%, rising from $5,869 in 2013 to $7,400 last year.

Insurance experts blame our growing appetite for complex electronic devices.

“[The cost] has generally continued to rise, in part because of the huge increase in the number and value of consumer electronics in homes,” the Institute says. The group points out that adding lightning rods and surge protectors can help protect against lightning frying our electronics, but not everybody’s been getting the message.

“In addition, better protection systems may have eliminated some smaller claims, while larger claims remain that drive the average higher,” it says. Since 2010, the average cost per claim has ballooned by more than 50%, the Insurance Institute says.

Perhaps unsurprisingly, Southern states bear the brunt of lightning-induced damage. Florida was the top state for claims last year, followed by Georgia, Texas, Louisiana and North Carolina, respectively. The top 10 states for lightning claims made up just under half of all claims paid.

While overall losses are still down compared to four years ago, as we keep adding more gadgets and devices, it’s unclear if this rising trend is here to stay. In a release, the Insurance Institute points out that this week is Lightning Safety Awareness Week, and suggests homeowners go to the Lightning Protection Institute for tips on how to protect their homes (and electronics).

MONEY Insurance

Here’s How to Figure Out How Much Life Insurance You Need

Ask the Expert - Family Finance illustration
Robert A. Di Ieso, Jr.

Q: How much insurance should I have? I was recently married and have been considering acquiring life insurance. We do not have any children, and I cannot really find any information on how much I should get. — Marcus Smail

A: It’s a smart move to get life insurance if you have a spouse or other family members who depend on you and your income, especially if you don’t have a large savings account.

Figuring out how much insurance you should buy basically boils down to answering one question: How much income do your survivors need if you’re gone?

Of course, to know this you’ll need to first look at your debt, monthly spending, monthly savings, and your long-term savings goals, as well as your expected funeral/estate settling costs. Steven Weisbart, senior vice president and chief economist at the Insurance Information Institute, recommends using this calculator from Life Happens, which walks you through the process by allowing you to input those details, as well as play with the estimated inflation rate and after-tax investment yield to get a recommended figure for the amount of life insurance you need.

Weisbart suggests getting coverage equal to 10 times your annual income, if you can afford the premiums. “Anything less doesn’t provide much transitional time for your surviving spouse or children,” he says. “You don’t want to put them under time pressure while they try to adjust to life without you.”

This approach, which is focused on income replacement, generally results in a large amount of insurance coverage. Another approach people use when determining life insurance needs is to focus instead on buying enough insurance to keep their financial obligations from causing a hardship to their survivors. “They’d look at the mortgage, car leases, and other commitments they’ve made and figure out how much their family would need to cover those bills without their income,” Weisbart says.

Keep in mind that you may already have some life insurance coverage through your employer and that your spouse and children may be eligible for Social Security survivor benefits, depending on how many credits you have earned at the time of your death. Any funds stored away in retirement accounts or other savings vehicles can also be factored in to lower the total amount of insurance coverage you’ll need.

Before you decide to purchase a policy and select a coverage amount, it is a good idea to meet with a fee-only certified financial adviser, who can tell you if the amount you estimated using the calculator is, in fact, correct for your situation and family. An adviser can also help you decide what kind of life insurance you should purchase and the amount you should expect to pay for it. Says Weisbart: “It’s good to talk through this with someone who has done this a couple of thousand times before and who can really guide you.”

Be sure to revisit your life insurance coverage amount when major life events occur, such as the birth of a child, divorce, or when you become empty-nesters, as your coverage needs will likely alter.

TIME

Looking To Stay On Your Partner’s Insurance? It May Be Time To Get Married

Empire Blue Cross Blue Shield health benefits cards are arra
Bloomberg—Bloomberg via Getty Images Empire Blue Cross Blue Shield health benefits cards are arranged for a photograph Tuesday, September 27, 2005.

Domestic partner benefits may become a lot less common.

It’s official. The Supreme Court ruled 5-4 in favor of legalizing gay marriage across the U.S., opening up the rite of commitment to any person regardless of their sexuality.

It’s a historic moment–and the last thing that’s on many peoples minds is insurance. (Though, quick reminder! The Supreme Court also made an important decision yesterday to uphold Obamacare subsidies.)

But, now that the right to marry is extended to everyone, many companies could start streamlining their benefits packages and take away the perk of insurance coverage for domestic partners, according to analysis by Aon Hewitt. If you want to stay on your significant other’s employer-sponsored insurance policy, now may be the moment to pop the question.

Such a move could affect both gay and straight couples who may opt to be committed partners but not marry, which is more common for the Millennial generation. Nearly 9.2% of Millennials co-habit with a partner, nearly twice the rate of Gen Xers at the same age, according to the Pew Research Center.

About 77% of employers currently offer same-sex domestic partner health care coverage, according to data from Aon Hewitt. Such benefits were a way for companies to even the benefits playing field for couples who couldn’t legally wed. But many companies could opt out of that offering, streamlining their benefits (and costs) to only cover spouses–now that all people have equal access to marriage.

Some companies, including Delta Air Lines and Verizon Communications, had already started to eliminate domestic partner benefits in states where gay marriage was legal prior to the Supreme Court ruling. Those policies will likely be extended now that marriage is widely accessible, making insurance benefits available only to legal spouses–gay or straight.

“The main idea is to make things fair for everyone,” Verizon spokesman Ray McConville, told the Wall Street Journal. “Currently, if you’re a guy living with a longtime girlfriend or vice versa, you don’t have the ability to get health insurance for your partner.”

Streamlining benefits helps companies ease the cost of administrative functions, especially when it comes to applying different standards to employees in various states, said Aon Hewitt.

Other companies, like Google, IBM and Dow Chemical, offer domestic partner benefits to all couples and don’t envision getting rid of the perk anytime soon. They see it as a way to attract top talent, recognizing that some people simply prefer not to marry.

MONEY

The Hidden Costs of Homeownership Are Way Higher Than You Think

man fixing sink
Andersen Ross—Getty Images

In some areas, they add up to more than $1000 a month.

Buying a home is so much more than finding the perfect place, applying for a home loan and budgeting for a monthly mortgage payment — it’s thousands of dollars more than many homeowners expect. American homeowners pay about $9,500 annually in unexpected home expenses, according to an analysis by real estate company Zillow and Thumbtack, a company that helps consumers find service providers.

The bulk of those expenses come from necessary bills like property taxes and insurance — things all homeowners need to deal with but many forget to factor into their expenses when determining what they can afford in a new home. On top of that, many consumers find themselves unprepared for the cost of home maintenance, particularly if the home is very different from where they’ve previously lived, either in structure or location.

“Homebuyers too often fixate on the sticker price or monthly mortgage payment on a house, and don’t budget for the other expenses associated with ownership — which can add up quickly,” said Amy Bohutinsky, Zillow chief marketing officer, in a news release about the analysis. “For example, new buyers can get really excited about having a backyard of their own for the first time, without budgeting for how they plan to maintain that space.”

These so-called hidden costs vary by location, but nationally, they average $9,477 annually. To arrive at that figure, Zillow analyzed data like property taxes and insurance, and Thumbtack assessed service costs for five common maintenance costs homeowners hire professionals to complete, like carpet cleaning and yard work. The companies also looked at the costs in 15 large metropolitan statistical areas. Here’s how the costs vary in some of the most populated areas of the country.

15. Phoenix-Mesa-Glendale, Ariz.
Annual unexpected homeowner expenses: $7,550

14. Atlanta-Sandy Springs-Marietta, Ga.
$8,043

13. Denver-Aurora-Broomfield, Colo.
$8,146

12. Las Vegas-Paradise, Nev.
$8,789

11. Charlotte-Gastonia-Rock Hill, N.C.-S.C.
$8,865

10. Minneapolis-St. Paul-Bloomington, Minn.-Wis.
$9,782

9. Orlando-Kissimmee-Sanford, Fla.
$10,100

8. San Diego-Carlsbad-San Marcos, Calif.
$10,647

7. Portland-Vancouver-Hillsboro, Ore.-Wash.
$10,672

6. Los Angeles-Long Beach-Santa Ana, Calif.
$11,333

5. Seattle-Tacoma-Bellevue, Wash.
$11,549

4. Philadelphia-Camden-Wilmington, Pa.-N.J.-Del.-Md.
$11,953

3. Chicago-Naperville-Joliet, Ill.-Ind.-Wis.
$12,236

2. San Francisco-Oakland-Fremont, Calif.
$13,287

1. Boston-Cambridge-Newton, Mass.-N.H.
$13,930

Determining how much house you can afford is only one of many things you need to figure out financially when buying a house. A large down payment and high credit score will help you access the best interest rates on a home loan, but don’t forget to shop around for estimates on other expenses as well, so you are prepared to handle the full cost of your new place. Without proper planning, you may find yourself in a challenging financial situation that could jeopardize your ability to pay for your house or make other important payments, which could cause credit damage and long-term harm to your finances.

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MONEY Insurance

Study Shows Taxpayers Subsidize Rich People’s Ocean Views

Flood Insurance Cheap Rich Towns
Tim Laman—Getty Images/National Geographic RF Edgartown, Martha's Vineyard, Massachusetts

Research on flood insurance in Massachusetts shows wealthy towns pay disproportionately low premiums.

Rich residents of coastal areas may have yet another financial advantage over poorer neighbors, according to new research from the University of Massachusetts Dartmouth.

The study finds that homeowners in more affluent Massachusetts towns tend to pay hundreds of dollars less in flood insurance premiums than those in poorer communities—despite similar levels of storm and flood risk.

The taxpayer-subsidized National Flood Insurance Program does not use income to determine eligibility, and for a host of potential reasons wealthier people end up paying disproportionately less for protection, says study author Chad McGuire.

“Those with more expensive properties receive more of a subsidy,” McGuire says.

For example, in the more blue-collar town of Fairhaven, residents pay an average premium of about $820 per $100,000 in property value, compared with $400 for residents of Edgartown on Martha’s Vineyard, widely known as a summer playground for the wealthy.

The study did not determine precise reasons for the disparity, but several factors may be at play. For one, McGuire says, many expensive older homes may have grandfathered status and be eligible for lower premiums because they were built before the current flood maps were drawn. Additionally, richer towns might be more likely to be able to afford the modifications—such as building seawalls and elevating houses on stilts—that lower risk and therefore premiums.

But those factors don’t entirely explain the study findings, says McGuire, and the way NFIP community ratings translate into federal dollars allocated is not fully transparent.

As a result of the relatively low cost of insurance, wealthy homeowners are incentivized to keep rebuilding along coastal areas—and hundreds of thousands of federal dollars can be used to repair flood damage to the same expensive vacation homes, over and over again.

“The government shouldn’t be incentivizing risky behavior,” McGuire says.

Federal Emergency Management Agency is reviewing the study results, a spokesperson told the Boston Globe.

McGuire says he and his coauthors plan to look at flood insurance data for other coastal states next.

MONEY real estate

Atlantic Hurricane Season Could Bring High Costs

Prepare your home and finances for a disaster.

Atlantic hurricane season runs from June 1 through November 30. While the 2015 season is expected to bring ‘below average’ activity according to NOAA, that still means six to 11 named storms. Homeowners in geographic areas susceptible to hurricanes should be prepared with homeowners’ and flood insurance. For more information about hurricane-proofing your finances, check out It’s Hurricane Season: 5 Ways to Disaster-Proof Your Finances.

MONEY Insurance

Am I Insured If I Take an Uber?

150529_EM_RidesharingInsurance
Justin Sullivan—Getty Images A Lyft customer gets into a car in San Francisco, California.

Answer: It's complicated.

Drivers for ride-sharing services such as Uber and Lyft are under increased attack from insurance companies. However, there is less publicity regarding ride-sharing passengers and their insurance coverage. Are they covered during ride-sharing, and if so, by whom? The answer is not always clear.

Both Lyft and Uber have $1 million of liability coverage along with $1 million of uninsured/underinsured motorist coverage, in case passengers in a ride-sharing vehicle are injured by another motorist with insufficient coverage. According to Lyft’s website, this coverage applies from the time the rider accepts a ride request until the time the ride is officially ended in the app (presumably, after the passenger has exited the vehicle).

It would seem that for most cases, the policy of the ride-sharing company will cover your costs — but it’s not obvious whether you will have to go through other insurance paths first. Theoretically, damages could be covered by the ride-sharing company’s liability if your driver was at fault, a third-party’s insurance company if they were at fault instead of the driver, or your own personal auto insurance company. Insurance is state-regulated, and as Lyft’s website notes, “…coverage may be modified to comply with local regulations and state laws.”

Both Uber and Lyft make it clear on their terms and conditions pages that passengers assume risk in using their services. Experts think the disclaimers alone are not likely to shield Uber and Lyft from liability when push comes to shove, especially if the ride-share driver is clearly at fault.

What happens if a third-party driver is involved or causes the accident? If fault is in question, it’s not obvious with whom a harmed passenger should be filing a claim. There’s no guarantee that third-party coverage is sufficient, or whether ride-sharing services can force you to go through the third party’s insurance if the fault is still in question.

The Insurance Information Institute published a recent ride-share Q&A sheet stating that passenger’s personal auto policies would probably not apply since they are not underwritten to take on that risk. Others in the insurance industry have stated that passengers may be covered by their own insurance policies up to their personal injury protection (PIP) limits depending on their state’s regulations. However, unless you somehow caused the accident as a passenger, your insurance should only be the claim of last resort.

Some clarity may be provided by an unfortunate test case near Sacramento, where 24-year old Lyft passenger Shane Holland was killed in November 2014 in an accident on Interstate 80. As of this writing, it isn’t clear how fault will be assigned and who will pay for the collective damages. PropertyCasualty360° reports that Lyft’s policy is expected to cover the accident regardless of fault.

There is another odd case from September 2014 working through the court system in San Francisco regarding an Uber driver that got into a heated argument with passengers and ended up attacking one of them with a claw hammer. Do the liabilities intended for car accidents cover attacks by a driver? That remains to be seen.

Ride-sharing rules on insurance coverage are still being hammered out on state and local levels, as are the legality and licensing requirements. Given their popularity, it seems like ride-sharing services are here to stay, and it’s important for you to check the current rules before using them. By the time you read this article, the rules where you live (or at your travel destination) may have changed.

Check with both sides of the argument — the ride-share company and the appropriate state insurance commission. Certainly, it’s an annoyance, but it may save you many thousands of dollars if you’re involved in a ride-sharing accident. Without local clarification, you could end up in legal and insurance limbo.

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