The Fireworks Laws in Every State


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Student Loan Interest Rates Set to Drop July 1

There’s very little to celebrate when it comes to taking out student loans, but if you’re borrowing for the coming academic year, you have reason to let out a small cheer: Your loans will be cheaper.

That is, they will be if you’re taking out Federal Direct Loans (the most common kind), because the new interest rate on these loans goes into effect July 1, and it’s the lowest rate these loans have had in years.

When President Barack Obama signed a new student loan bill into law in 2013, an annual reset of federal student loan interest rates began. That law tied interest rates on government education loans to the 10-year Treasury note yield, and every year, the rates are set by the last auction of that note before June 1. For the interest rate that will be in effect from July 1, 2016, to June 30, 2017, that auction happened May 11, when the high yield of the 10-year note was 1.71%.

Add 2.05 percentage points to that yield, and you have the new interest rate of 3.76% for the undergraduate federal student loans (Congress wrote that into the 2013 law to cover the administrative costs of issuing the government-backed loans). Graduate students and parent borrowers will have a 6.31% interest rate.

Last year, interest rates on the same loans were a tad higher: 4.29% for undergraduate borrowers and 6.84% for graduate students and parent borrowers (parent loans are called PLUS loans). In 2013, Congress set a cap on how high these interest rates can get (8.25% on undergraduate Direct loans and 9.5% on graduate and parent PLUS loans), but contrary to many estimates when this process first became law, the interest rates haven’t climbed much closer to those rate caps. While the underlying factors behind these low interest rates may not mean great things for savers and the overall economy, at least student loan borrowers can enjoy relief in this area.

Of course, these low rates only apply to the loans taken out in the next 12 months. Existing borrowers have to deal with the interest rates as they were when they took out their loans, unless they look into refinancing their loans with a private lender. (The Education Department doesn’t offer student loan refinancing, though some borrowers may qualify for a Direct Consolidation Loan. Still, federal student loan consolidation doesn’t lower your interest rate — it averages the rates of all the loans you’re consolidating, which doesn’t translate into interest savings.)

The interest rate is only one part of what determines a borrower’s student loan payment, and if you’re struggling to afford yours, there may be some things you can do to ease the burden. Federal student loan borrowers may qualify for income-based repayment plans, student loan forgiveness or other repayment options that can bring short-term relief from high debt.

However you go about it, paying your student loans is incredibly important, because they generally cannot be discharged in bankruptcy, and, like any debt, student loans influence your credit standing. Making your student loan payments on time every month can help you build a good credit score, and you can keep track of your student loan’s affect on your credit by reviewing two of your credit scores for free every month on If you need help making your loan payments, don’t put off asking for it. One of your first steps should be to contact your student loan servicer and try to figure out a way to stay current on your loans.

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It’s Cheaper to Live on a Cruise Ship Than in These Cities

Cruise lovers, rejoice! It’s actually cheaper to cruise nonstop for an entire year than to pay rent and live in many major U.S. cities. That’s the latest finding of a study by cruise search engine

According to the study, citizens of Honolulu would save $7,518 per person each year if they went on continuous cruises in 2017. San Francisco residents would save $7,154, Los Angelenos $2,058 and Stamford, Connecticut residents, $3,878. New Yorkers topped the list with a savings of $10,430 for traveling the high seas nonstop.

CruiseWatch calculated how much an average person would spend for things like housing, transportation, utilities and other everyday living expenses. This averaged around $637 per week for an average household size of 2.5 people in New York City. “Currently, the best available prices for the cheapest cruises in our database average around $313.25 per week, which represents a significant savings of $323.75 per week,” the company said in a press release.

The cruise prices used for comparison were accurate as of June 16, 2016 and reflect costs for a two-person interior cabin. Ocean view rooms and suites would cost more.

To conduct the study, the company tapped data, including five years’ worth of cruise price information, to gain a historical perspective on how cruise prices fluctuate throughout the year. also relied on data from the 2012 U.S. Census to calculate the current cost of living in 132 U.S. cities.

The findings aren’t all that surprising, given several housing studies have found rent is becoming increasingly burdensome for many consumers. A recent study from the Joint Center for Housing Studies of Harvard University, for instance, found the number of renters devoting at least half of their individual income to rent hit a shocking all-time high in 2014 — 11.4 million.

You may be able to save on rent by negotiating with a landlord, signing a longer lease, finding a roommate or opting for a smaller space.

And, in the meantime, if you’re looking to save on a cruise —  whether for a week or a year — it’s a good idea to see if your credit card rewards can help pay for part of your trip. (You can view our roundup of the best travel rewards cards in America here.)

Remember, while rewards cards can be valuable, they are generally available only to applicants with good or excellent credit. (If you’re not sure where you stand, you can get a free credit report snapshot from In addition, rewards cards are a good deal only for those who pay their balances off in full each month. Otherwise, you’ll likely spend more on interest than you receive in rewards.

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The New Option That Might Help You Score Lower Airfare

It’s a struggle as old as air travel itself: Do I book this plane ticket now with my plans still in flux, or do I wait and risk prices skyrocketing? Airline travelers wrestling with this do-I-or-don’t-I dilemma have a new service at their disposal. For a few dollars, they can secure an option to buy their plane ticket later this week at today’s prices.

Expedia’s new TripLock feature is derived right from the derivatives market created by Wall Street — for a small fee, flyers can buy the option to purchase a plane ticket in the future at a locked-in price.

Various price-lock tools have been introduced in recent years — Continental Airlines introduced its FareLock tool in 2010, which was later inherited by United Airlines during its acquisition. But with Expedia introducing its new TripLock feature, the rules for buying plane tickets may be changing.

“TripLock allows customers to hold a flight for anywhere from two days up to a week for a small fee, which starts at [$5] and varies depending on the duration of the hold and the total estimated fare,” said Expedia’s Allison Farrar in an email. Expedia also owns Orbitz and Travelocity, which now offer the same feature.

“As you can imagine, this new button gives travelers additional flexibility — if you like a fare, you can hold it and think about it before locking it in,” Farrar said. “If you ultimately decide you don’t like the fare, you can just let the hold expire.”

TripLock is powered by Chicago firm Options Away, which has been quietly brewing its options-market-inspired formula for several years.

If prices for a locked-in flight rise during the lock period, Options Away is on the hook for the difference. CEO Robert Brown said he’s confident his firm understands pricing patterns well enough that its risks will be covered by the prices it charges consumers.

When pulling up flights between Seattle and Washington, D.C., for late July, a 2-day hold cost $7, a 3-day hold cost $9, and a 5-day hold cost $17. (Seven-day holds weren’t available.) If I’d purchased the 5-day option and decided not to travel, Expedia and Options Away would have kept the money. If prices went up, they would have covered the difference. If prices went down, I would have received a refund.

So how does Options Away manage the risk?

Brown, who has a background in trading, said the firm does so in several ways. “We do not offer TripLocks on every flight. If our models suggest that sell-out risk is too high, then we will not offer it. We only offer TripLocks on flights (more than five) days from departure … Our system is constantly monitoring availability once a TripLock is purchased. If we reach a critical level, our system has various ways it can mitigate risk or secure a seat.”

Brown says his product has a surprising benefit — roughly 6% of the time, prices go down during a lock period. On the other hand, prices rarely skyrocket during the lock period — that’s the algorithm at work. In fact, it’s possible that Options Away could be so conservative with its options offers that it virtually never sells an option for a ticket that goes up in price. Brown said he’d never do that, however. If word got out, people would stop using it, and it’s important to “share the winnings” with consumers, he said.

One risk to consumers is that an airplane could sell out during the option period. After all, Options Away can’t add seats to an airplane. But Brown says the risk is almost nonexistent.

“Other than during holiday periods, airlines do not like to sell out a flight before [five days from departure], as it prevents them from having tickets available for high-paying business customers,” he said. “There is virtually always a seat available if you are willing to pay for it.”

In three years of operations, Brown said, it’s only happened once.

“This was in our earlier days and we, of course, made sure the customer was happy and made it to their destination,” he said. “While there is a theoretical risk, our system is sophisticated enough to essentially make it irrelevant.”

When Expedia researched its TripLock feature, if found that folks wanted the option to buy options because they often are unsure of travel plans when flight shopping. But a surprising number (26%) said they wanted the feature because they are often waiting for friends and family to solidify plans when booking trips and they are concerned about prices going up while waiting for others.

The feature is good for the airline industry too, Expedia said.

“According to our research, 74% of travelers say they are more likely to travel given the option of putting a flight on hold,” it said in a report.

Remember, if you’re getting ready to book a trip, it’s important to stay on budget. High levels of debt can hurt your credit score, which indicates your financial standing. You can see where yours currently stands by viewing your free credit report summary, updated each month, on And if your wallet and credit card handle it, you may be able to use a travel credit card to mitigate expenses. You can learn more about the best travel credit cards in America here.

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What to Do When Parents Won’t Pay for College and FAFSA Won’t Provide Aid

college landscape_lg

When you’re applying for financial aid to attend college as an undergraduate, the amount of need-based aid you qualify for is usually based on your parents’ income and assets. The Free Application for Federal Student Aid (FAFSA) calculates your expected family contribution (EFC), and individual colleges and universities then use your EFC to determine how much need-based student aid you are eligible to receive. If it is determined that your parents can reasonably cover 100% of the cost of college, you may not qualify for any need-based aid at all.

However, this process of determining need-based aid is based on the assumption that if your parents can afford to make a substantial contribution to your tuition, room, and board, they will be willing to do so.

But what if your parents simply aren’t willing to make that contribution?

If you don’t qualify for need-based aid (or only qualify for partial need-based aid) and your parents simply aren’t willing to contribute, you may feel like college is not an option. And it’s true that tuition, room, and board can be very expensive—tens of thousands of dollars per year in many cases. However, don’t give up right away. There still may be ways for you to attend college even if your parents won’t help you out financially. Here are ways to start:

1. Check the current guidelines for dependent vs. independent students

All students applying to college are considered either dependent or independent by the federal government. If you are a dependent student, your parents’ income and assets are taken into account when determining need-based aid, but if you are an independent student, only your own financial situation (and that of your spouse, if you are married) is taken into account, which means you may qualify for more need-based aid. There are several ways to qualify as an independent student, including being married, being older than a certain age, having dependent children, or being a veteran of the U.S. armed forces. The FAFSA can help you determine if you are dependent or independent. More information is also available here.

2. If you haven’t already done so, fill out the FAFSA

Even if you are a dependent student and your parents have already told you they’re not willing to contribute to college costs, you should still absolutely fill out a FAFSA. You may find that you are eligible for more aid than you think. In particular, you may have the option of taking out student loans that would help you cover the cost of college yourself, without your parents’ help. Student loans should only be taken out under careful consideration, as they can take many years to repay, but if they are the only way you are able to go to college, they may be a good option for you. 

3. Remember that need-based aid isn’t the only type of aid available

There are many merit-based scholarships and grants available that you may be able to apply for. The school(s) you’re considering attending may offer merit scholarships; check with the admissions office for details and to determine whether or not you need to submit an extra application for these awards. You can also search online for grants and scholarships that are funded by external organizations and thus can be applied to the cost of any school. Apply for as many of these grants and scholarships as possible.

4. Consider asking for help from other relatives

Is there anyone else in your family who might be willing to help you out with college costs, perhaps through a personal loan? If you do take out a personal loan from someone you know, be sure to sit down with them and draw up a written agreement about interest and repayment so there are no misunderstandings.

5. Attend a state or community college

Tuition costs vary widely from school to school, so make sure you’re considering schools at the least expensive end of the spectrum. Many state colleges offer an excellent education at a much lower cost than private schools, and community colleges in some states even offer four-year degrees.

6. Consider taking a year off to work and save money, and apply next year instead

If your parents are open to it, you might be able to live at home while working and save even more money.

7. Look into supporting yourself through college by working full-time or part-time

Carefully calculate how much it would cost you per year to attend the least expensive school possible, taking tuition, fees, books, and living expenses into account. Is there any way you could pay for this yourself, either by going to school full-time and working part-time or (more likely) by working full-time and going to school part-time?

8. Look into applying for jobs at colleges that offer free/reduced tuition to employees

Some colleges and universities allow their full-time employees to take classes for free or at a reduced cost. However, note that this may vary widely by school, and there may also be a requirement that you must work a certain number of months or years before these benefits kick in. Not having a college degree yet may also limit the number and type of jobs you are able to apply for. However, this option is worth looking into.

Combine several of the above strategies

Putting together enough money to cover the cost of college yourself can be very challenging, but you may be able to make it work through a combination of merit scholarships, personal and/or federal loans, choosing an inexpensive school, saving money before you begin, and working while you’re enrolled in classes.

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Can My Co-Signer Sue Me?


People who can’t qualify for a loan, credit card or rental housing on their own are often told the same thing: Get a co-signer.

It sounds like such a easy solution, but there’s nothing simple about tying your credit rating to someone else’s payment habits or being on the hook for a loan someone else is using. Co-signing a loan can be the right choice, but it’s a risky one.

One of our readers, who commented on our blog under the screen name CryscAz, is in a complicated situation after getting a student loan with a co-signer.

“I had a student loan for about $12,000. My boyfriend at the time was a co-signer on the loan and when we broke up I moved away. Recently we got in contact after all of these years and he is upset that he paid the loan for my student debt. He is now threatening to sue me for the loan that he repaid. Can this be possible?” —CryscAz

It depends on what exactly the agreement between the couple was, but the short answer is “Probably not,” wrote Persis Yu, an attorney at the National Consumer Law Center, in an email. Yu said the reader would be best served by asking a family law attorney to review the specifics of the case.

“It would depend on what state they are in and what agreement they made when he agreed to co-sign the loan and/or made the payments,” Yu wrote. For example, if when the boyfriend agreed to co-sign the loan, the couple agreed the student would be responsible for payments and would have to repay the boyfriend for any payments he made, then he “could probably prevail in a suit for those payment[s],” Yu said.

Yu went on to say that it also depends how the couple was handling finances before the breakup, like if they had shared household expenses and if the student loan was included in them.

“This is like any other expense one partner pays for the other prior to a breakup (Hence the family law lawyer…),” Yu wrote.

Co-signing a loan means taking on responsibility for that loan, regardless of how your relationship to the other borrower may change. That’s part of what makes them so risky. Before co-signing a loan, you need to consider potentially negative outcomes (that the other person won’t pay the loan) and how you might suffer because of it (you’ll have to make the payments, or the loan will become delinquent and damage your credit).

Generally, you probably don’t want to co-sign a loan if you’re not prepared to be fully responsible for repaying it. If you do decide to co-sign a loan, you may want to clarify the arrangement with the other borrower in writing and maintain clear communication with that person throughout the life of the loan. It’s also a good idea to track how that loan affects your credit standing, which you can do by getting two free credit scores each month on

If your credit has taken a hit because of a co-signing mis-step, you may be able to improve your score by paying down high credit card balances, disputing errors on your credit report and limiting inquiries while your credit rebounds.

If you have questions about co-signing a loan or other credit matters, you can share them in the comments.

[Offer: If you need help fixing errors on your credit report, Lexington Law could help you meet your goals. Learn more about them here or call them at (844) 346-3296 for a free consultation.]

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I Have Too Many Credit Cards. What Can I Do?


Besides the obvious fact that there are only so many credit cards you can squeeze into your wallet, there are times when you might consider paring down or simplifying the credit cards you carry.

Before You Close a Card…

Before you start cutting up cards and calling issuers to close your accounts, there are some consequences you should consider. Specifically, closing a bunch of credit cards — even if you have a good reason to — can hurt your credit and potentially make it more difficult to open new cards down the road.

When you close a credit card, you directly impact your credit scores in three ways: You reduce your overall credit limit on your revolving accounts, impact the age of your credit history and potentially hurt your mix of accounts, too. You can see where your credit scores currently stand by seeing two of your credit scores for free on

Whether you’re facing a tight financial time and need to cut back or have just realized that you’re not managing your credit cards smartly, each problem that might make you want to close a credit card has some alternate solutions as well. Here are some of the common problems that prompt consumers to close credit cards and how to make the right choice for your money and credit.

Problem #1: I’m Spending More on Credit Cards Than I Can Pay Back

If you find yourself unable to pay off your credit cards in full every month and are quickly seeing a pattern that’s making you worry about a major credit card debt problem, you might be thinking that cutting up your cards is the best move. And it very well could be. But closing the cards doesn’t erase the debt you currently carry on those cards — it just prevents you from adding to those balances. You may want to consider some classic get-out-of-debt options like a personal loan to consolidate debt (counterintuitive, I know) or opening a balance transfer credit card to get some 0% interest breathing room while you make a plan to pay off your debt and, more importantly, avoid getting back into credit card debt.

Problem #2: I Have Too Many Credit Cards With Annual Fees

Carrying six or seven credit cards in your wallet and not using them is costing you nothing — unless some of those cards have annual fees. Then, it could be costing you hundreds of dollars a year. You could close the cards, but you also may be able to work with the issuers to get some of your annual fees waived temporarily. Or, potentially, you could ask to move to a no-annual-fee option of the same card. That option may not be available from every issuer, but it’s worth a phone call to customer service to explore your options.

Problem #3: I’m Missing Payments Because I Can’t Keep All My Credit Cards Straight

Payment history is the most important factor in your credit scores, and recovering from a negative hit like a missed payment can take years, though there are things you can do to improve your credit score in the meantime.

If you’re missing payments or paying late purely because you have too many credit cards to keep organized, you have a great reason to consider closing accounts. One thing you might consider first, though, is setting up payment alerts. Most of the major credit card issuers have account alert settings that will email or text you reminders of your payment due date. These issuer reminders, or even setting calendar reminders for yourself on your smartphone, could be a great way to tackle the problem without closing a card.

[Offer: Your credit score may be low due to credit errors. If that’s the case, you can tackle your credit reports to improve your credit score with help from Lexington Law. Learn more about them here or call them at (844) 346-3296 for a free consultation.]

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Fewer Than 1-in-5 Families Use a Tool That Could Limit College Costs


Setting aside savings can be difficult, particularly if you’re trying to raise a family — and that includes saving for your kids’ college educations. Only two out of five families have a savings plan for higher education prior to their student’s enrollment, and just 16% of families are using 529 college savings vehicles to pay for college expenses.

That’s according to the annual survey report “How America Pays For College” from Sallie Mae and market research firm Ipsos. The report reflects the results of telephone interviews conducted between March 16 and April 18, 2016, with 799 parents with children ages 18 to 24 who are enrolled as undergraduate students and 799 undergraduate students, ages 18 to 24.

The number of families using savings from 529 college savings plans or other college savings vehicles fell slightly from 17% in 2015 to 16% in 2016, the survey found. The average amount used from these accounts also dropped slightly, from $9,129 in 2015 to $8,315 this year.

Much like a Roth IRA, 529 savings plans have several tax advantages that can make them useful when saving for college. Contributions to the account are taxed but any earnings made on interest accrue federal tax-free. And withdrawals from the account are also tax-free so long as they’re put towards college expenses.

Families With a Plan Spend Less

The survey also found that families who did not have a college savings plan in general prior to their student’s enrollment reported spending more than twice their savings and income on college expenses over those families who did. Also, those families who had a plan reported a full one-third less borrowing by the student than those from families without a plan.

“It’s clear that having a plan for college really does pay off,” Rick Castellano, a Sallie Mae spokesperson, said in an email. “Those families with a plan are, as you might expect, more informed, but they are also saving more for college and borrowing less.”

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Chart courtesy of Sallie Mae

Families with a plan also reported greater peace of mind in regard to paying for college. The survey showed:

  • 61% of families with a plan felt completely confident they had made the right financial decisions about paying for college, compared to 41% of families without a plan.
  • 45% of planners reported never or rarely being stressed over education expenses, compared to 32% of non-planners.
  • Parents who planned were less likely to be very worried than non-planners about the possibility of loan rates rising (12% vs 29%) or tuition increasing (17% vs. 28%).

Scholarships, Grants Still Largest Resource

Of the average amount families reported paying for college — $23,688 — scholarships and grants funded an average of $8,059, or 34%, the report said. That’s an increase of four percentage points over 2014-15 and represents the largest proportion of any resource used to pay for college in the past five years, according to Sallie Mae.

Parental income and savings averaging $6,867, or 29% of total spending on college, came in as the second largest funding resource. That’s slightly lower than last year’s high of 32%, the report said.

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Chart courtesy of Sallie Mae

Student borrowing was the third most-used resource to pay for college, averaging $3,176, and money borrowed by students paid 13% of all college costs, the survey found — slightly less than the prior year’s 16%.

The survey also found that 90% of families expect their college student to earn at least a bachelor’s degree, including one-third of those students attending community college, and more than half (54%) expected their student to get a graduate degree.

If you’re ready to start saving for your child’s college education, it’s a good idea to educate yourself on the various forms of student loans and the federal aid options that might be available to you and your family — and how those options might impact your finances and your credit. (You can see a summary of your credit report for free on to get an idea of where you stand.) The more informed you are, the less worried you may be about affording college expenses.

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Being Poor Can Cost You Big on Your Auto Insurance



If you’re single, a renter, out of work or haven’t owned a car in a while — even your perfect driving record won’t be enough to get a good auto insurance rate.

It’s no secret that auto insurers consider a lot more than just your driving record when they calculate your premium. New customers are routinely asked to provide personal details, such as whether they’re married or single, renters or homeowners, unemployed or employed, college- or high school-educated.

It is how you answer these personal questions — not your driving record — that can result in higher premiums, a consumer advocacy group argues in a new report.

In a study of five of the leading auto insurers in the U.S., the Consumer Federation of America found drivers with a good driving record pay 59% more — or $681 per year on average — when their answers to these personal questions point to a lower income status (e.g.: people who answer that they are single, out of work, or have only a high school education). The CFA has long studied how economic status can be tied to higher auto insurance premiums.

For this report, they used the online quote features at Geico, State Farm, Farmers, Progressive, and All State. They created four driver profiles to test — two men and two women, each pair including a high and low socioeconomic status — and requested quotes from each insurer in 15 major cities.

All four drivers shared characteristics in common. They each had a stellar driving record, with no prior accidents or traffic violations. They were each listed as 30 years old living at the same address in each city tested.

Where the two test groups (we’ll call them Group A and Group B, for simplicity’s sake) differed was in how they answered the personal questions on each quote request. In group A, one woman and one man were married homeowners with executive level jobs, a master’s degree and three years with the same insurance company.  In group B, the man and woman were single renters with high school degrees, and neither had owned a car in the last six months.

When the insurance quotes rolled in, an obvious trend emerged: across the board, Group B drivers were hit with higher premiums. On average, Group B drivers were quoted an average annual premium of $1,825. On the other hand, the married, home-owning, college-educated drivers from group A were quoted $1,144 per year.

Source: Consumer Federation of America
Source: Consumer Federation of America

GEICO and Progressive turned out to be the most costly option for drivers in Group B, charging premiums that were 92 percent and 80 percent more expensive, respectively, than premiums for Group A. In one extreme case from the report, GEICO quoted a man living in Minneapolis, Minn. from Group B two and a half times as much as the man from Group A – $1,840 per year compared to $528. The difference between premiums GEICO quoted for a low-economic status and high-economic status woman in Minneapolis was even more staggering — $2,158 vs. $528, amounting to a 300% upcharge.

MagnifyMoney reached out to all five insurers included in this report for comment. Each declined to comment.

James Lynch, senior actuary for the Institute, which represents the interests of insurers in the U.S., said insurers use personal information like marital status and education for a simple reason: they are highly predictive of whether a potential customer will cost the insurer in the future.

“Driving record is an important factor but it’s not the only predictor,” he added, noting insurers use upwards of 20 different factors to assess rates.

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Get the best auto insurance rate possible

Short of state regulator intervention, auto insurers will be able to assess risk in their customers however they see fit. It’s up to drivers to do their due diligence in order to get the best rate possible. Even then,

Start with your state’s insurance department website. Since insurance is regulated at the state level, Hunter recommends checking your state’s office of insurance website to find out what average premiums are like in your area. This website should also list a number of reputable insurers you can contact for quotes. Take those names and check them out on the National Association of Insurance Commission’s database, which maintains a history of service issues and complaints.

Never accept your first offer. Asking several different insurers for auto insurance quotes is an important yet often overlooked part of the shopping process. As the CFA found in this report (among others), premiums can vary widely by state by state and insurer by insurer.

Let your good driving speak for you. Some auto insurers today offer usage-based tracking technology that allows them to see just how often and how well (or, how poorly) you drive. This technology can be a boon to good drivers who have low annual mileage and aren’t hit with any traffic violations. You’ll likely qualify for insurance discounts. It is entirely optional to allow your insurers to track you, as it obviously requires you to forfeit some privacy while on the road.

Have a question for us? Send us a note at 

Mandi Woodruff is the Executive Editor of MagnifyMoney and host of Brown Ambition, a weekly podcast about career and finance. Follow her on Tumblr or Facebook.

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4 Reasons to Have Your Own Life Insurance, Even if it’s Already an Employee Benefit


If you work for a company that offers life insurance through a group policy, you may be surprised to find out that there are good reasons to consider getting additional coverage.

Before discussing why you may need additional coverage it’s really important to understand why you need coverage at all. The purpose of life insurance is to protect people who depend on you financially when you die. With adequate coverage, when you die, you can be sure that the people who depend on you have enough money.

According to LIMRA, more than 70 million people know and admit they need more life insurance in the United States. Yet, they aren’t making it a priority.

The scariest part about this is that you jeopardize the financial lives of the people you love the most when you have inadequate coverage.

Consider life insurance planning as part of your overall financial plan and make it a priority. This includes know the reasons why your employer coverage may not be the only coverage you need.

Reason 1: Your Employer’s Coverage May Be Inadequate

Your group life insurance coverage may not provide a large enough death benefits for your dependents when you die.

For example, if your coverage pays out a $50,000 death benefit, and your family would need $1,000,000 to live off without you, then your employer plan would be inadequate and you would need additional coverage.

Understanding how much insurance you need is crucial to knowing how much additional coverage to purchase. There are several approaches to determining how much life insurance you need, so it’s important to talk with a professional to know what’s best for you given your specific family circumstances. Some professionals use an old school model where the rule of “10 times your income” is how much life insurance you should have. Beyond general rules that you can find online, a professional will be able to tell you how much life insurance you need, given your specific circumstances.

Your coverage may fall short in other areas in addition to the death benefit, too. For example, you may want riders on your life insurance plan that you can’t add with an employer plan.

The customization of an employer plan is limited compared to life insurance you can buy on the open market. For this reason, you may find your life insurance coverage through your employer inadequate.

Reason 2: You May be Able to Get a Better Deal Somewhere Else

Your employer provided life insurance coverage may not the best financial decision for you. You may be able to find a better deal by shopping for life insurance through an insurance broker. Not only can you price shop, but you can shop for insurance that fits your needs.

Shopping for a good deal on life insurance now is important. If you wait until you switch jobs, you are giving up time that could work in your favor. For example, if you change jobs in five years, you will likely pay a higher rate for life insurance (assuming you’re in the same health, which is also a risk) than if you got the life insurance policy earlier. Locking in a price now will help you get the best deal you can, regardless of your job status.

Reason 3: Your Insurance is Dependent on Your Job

With employer group life insurance, the coverage only exists so long as you are an employee. If you quit, are laid of, or are fired, you most likely lose your life insurance coverage.

The average employee works at his job for 4.6 years according to the Bureau of Labor Statistics. This means that most people are changing jobs a lot. With each job change, benefits end – life insurance coverage included.

While you may think you can always get life insurance with your next employer, your next employer may not offer life insurance or some other turn of events may happen in your life where you don’t have access to employer life insurance coverage.

Reason 4: If Your Health Changes You Put Your Coverage at Risk

If you get sick or become disabled you put your life insurance coverage at risk. Getting an illness may cause you to have to leave your job, which means you may lose your benefits, including your life insurance coverage. In this case, as opposed to quitting or being fired, your ability to get life insurance somewhere else may be very difficult because it’s hard to get life insurance (if not impossible) in poor health. Life insurance is easiest and cheapest to get the younger and healthier you are.

For example, if you are the sole provider for your family, become disabled, have to leave your job, and die a few years later, you would leave your family without life insurance money after you passed away if you only had employer life insurance coverage because of the years where you lived disabled and unemployed. If you had additional life insurance coverage in place before you became disabled, your loved ones would receive a death benefit regardless of whether you worked in the last years of your life. This is a really important reason to consider shopping for life insurance above and beyond your employer group coverage.

Shopping Young Makes Sense

Life insurance is easiest and cheapest to obtain when you are your youngest and healthiest self. Therefore, it’s really important that you consider your health and your age when you decide how to meet your life insurance needs.

You need life insurance if you have people who would financially suffer if you died. The purpose of life insurance is to protect your loved ones financially when you’re no longer here. With adequate life insurance coverage you can have confidence that the people who depend on you will have enough money to live without your support.

The post 4 Reasons to Have Your Own Life Insurance, Even if it’s Already an Employee Benefit appeared first on MagnifyMoney.