What’s the Difference Between Dental Insurance and Dental Discount Plans?

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Some employers offer dental insurance as an optional benefit, separate from health insurance. But those who don’t have this as an employer benefit, or don’t like their employer’s options, may want to find a plan on their own.

Choosing either dental insurance or a dental discount plan can save you big, but there are important differences to consider before deciding which route to choose.

Dental insurance versus dental discount plans

Before jumping into details, here’s a quick overview of the two offerings:

Dental insurance

Individual dental insurance costs more than insurance through an employer. According to the most recent figures from the National Association of Dental Plans, individual plans cost $4-$15 more per month than group plans (those offered through employers) and $20-$35 more for family plans. In 2016, the average DHMO (similar to HMOs for health insurance) premium cost $14.06 per month for employee-only coverage. The average DPPO cost $24.49 per month. Premiums for individual insurance would be higher, based on past research.

DHMOs are generally cheaper than DPPOs, both in premium and in service cost, but only if you go to an in-network provider, according to Guardian Life Insurance. Most DHMO networks are small, limiting your provider options, and you may be required to choose a primary care dentist. DPPO plans have larger networks and allow you to go to any dentist, though they may offer the best discount at in-network providers. DPPOs may have a maximum limit on coverage (often up to $2,000) per adult per year, while DHMOs do not have annual maximums, according to dental insurer Solstice Benefits.

Many dental insurance plans fully cover preventative care, like two cleanings and one set of X-rays per year. Insurers also tend to cover the majority (generally 80 percent) of basic procedure costs about half the cost of major procedures, according to Guardian Life. How much you have to pay will depend on the copay (DHMO) or coinsurance (DPPO) amounts set by your insurance. Your plan may or may not cover orthodontics, so that’s something to consider when shopping around.

Dental discount plans

With a discount plan, you pay a monthly or annual membership fee and will receive a discounted price on services. We looked at several discount plans on the comparison site DentalInsurance.com, and monthly membership fees for an individual range from about $8-$15, though costs vary by location.

Dental discount plan networks may be more limited than insurance networks, and compared with insurance, the out-of-pocket costs are often higher for patients. You can get full coverage of preventive care with a discount plan, but it’s less common than it is with insurance. With discount plans, there are no copays or coinsurance; rather, there are set discounts on specific services. Discounts range from about 20-50 percent, with routine procedures getting the highest discounts.

Based on a review of dental discount plans available online, it’s clear you’ll have to compare multiple plans to get a sense of your potential savings, as costs and coverage vary by provider and location.

Factors to consider when choosing one option over another
At first glance, you may think the only difference between dental insurance and a dental discount plan is the cost and amount of coverage, but there’s more to consider.

When do you need coverage to start?

Some insurance plans may allow you to get a cleaning or X-ray right away, but there are often waiting periods.

“It’s common to see six-month waits for fillings and one year for major services,” says Adam Hyers, owner of Hyers and Associates, an independent life and health insurance agency in Columbus, Ohio. “These waiting periods prevent consumers from abusing the plan” — using the insurance for a procedure and then dropping it right away.

By contrast, dental discount plans don’t have any waiting periods. It may take a few business days for your membership to go through. If you have an immediate (nonemergency) need, you may be able to pay for a dental discount plan and get a discount on the procedure a few days later.

How many options do you want?

An important consideration is how many dentists you can choose from, and if there’s a well-rated in-network dentist nearby. If you already have a dentist you like, check with the office to see if it will accept the insurance or discount plans you’re considering.

Brian Correia is a director of sales and client services for Solstice Benefits, which provides dental insurance and dental discount plans in five states. Correia says that generally, dentists who are just starting out will participate in dental discount plans and insurance networks because they’re trying to grow their customer base. Established dental businesses and chains might only accept insurance plans, although some offer in-house discount plans. Then there are dental practitioners who have a loyal client base.

“They may not take any insurance or discount plans, because people will keep coming to them and pay out of pocket,” says Correia. He adds that from a practitioner’s perspective, it’s easiest and most profitable to receive out-of-pocket payments from clients.

Dental insurance is the next most profitable for dental offices, because the dentist receives your copay or coinsurance and gets reimbursed from the insurance company. However, with a dental discount plan, the dentists only get what you pay — they don’t receive anything from the plan provider. That’s why new dentists, aiming to grow their client base, are often the only ones who accept discount plans and why your options may be limited.

What do the plans really cover?

As with any contract, you should carefully read the fine print before paying for insurance or a discount plan. Otherwise, you might be surprised to find out when you need to pay for a procedure, and how much it’ll cost you.

“With crowns and bridges, you might see a copay of $250 for a crown or bridge with an asterisk next to it,” Correia says. Read the content associated with the asterisk. It may say that laboratory fees — like the cost to get your new tooth molded — aren’t part of that copay and aren’t covered. You could also have to pay a materials fee if you want a more expensive material. And some inexpensive insurance policies may not offer any coverage for high-cost procedures, like a root canal.

Another fine-print point to consider is that your cost can vary depending on the dentist. Even two dental plan or insurance in-network dentists may charge different prices for the same procedure.

If you already have a dentist whom you want to stay with, you may want to call and confirm how different coverage will affect your costs. If you’re looking for a new dentist, create a short list of well-rated or recommended dentists and ask what your net cost will be before buying insurance or a dental plan.

Which option is best for you?

Compared with having no coverage at all, you can save money with either a dental insurance plan or a dental discount plan.

If you already have a dentist whom you like to visit and are looking to save money, your best bet may be to ask which options the dentist accepts and compare the costs for your family’s general needs. When you don’t have a dentist, it can be more difficult to compare all the different insurance and discount plans available.

For those who regularly get cleanings and don’t have a history of dental problems, a dental discount plan could provide adequate coverage for a low monthly fee. Although you may only break even or save a little money on your twice-a-year cleanings and annual X-ray, you’ll have some added security in knowing you can save money on other procedures. However, since the discount plan isn’t likely to cover the entire cost for major work, you may want to have some savings set aside for an emergency.

Buying dental insurance on your own could make both routine visits and emergencies more affordable, and may be the best option if you have a large family. But for individuals and those who aren’t prone to needing expensive dental care, the premiums can be so high, and the annual coverage limits so low, that you won’t always get a benefit.

The post What’s the Difference Between Dental Insurance and Dental Discount Plans? appeared first on MagnifyMoney.

The Ultimate Guide to Obamacare (Updated for 2018)

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Since Obamacare (or, as it’s officially known, ACA, the Affordable Care Act) created the first federal health insurance marketplace in 2013, some 20 million Americans have become newly insured.

Consumers who don’t qualify for Medicaid or Medicare or who don’t have private insurance through their employer can shop for health coverage either through the federal marketplace — HealthCare.gov — or by way of their state’s exchange.

This year, ACA applicants will have to wade through an average of 30 plans from two or three different insurers to make their insurance choice. The open enrollment period for Obamacare coverage begins Nov. 1 and ends Dec. 15, with coverage due to begin Jan. 1, 2018.

That’s where this guide will come in handy. We will explain exactly what it’s like to enroll, what documents you should have on hand, and, of course, how to sort through all the health insurance options you may find.

Have any burning Obamacare questions? Send us a note at info@magnifymoney.com.

Part I: What is Obamacare?

Most people use the blanket term “Obamacare” when they talk about President Barack Obama’s signature health care legislation, 2010’s Patient Protection and Affordable Care Act (ACA). The ACA touched almost every aspect of the health insurance industry. It had implications for employer-run health insurance plans. For government health plans, too.

One of the most visible features of the ACA was the creation of federal and state health care exchanges that sell health insurance to people who don’t have affordable coverage through other means. Many people who buy health insurance through the exchanges say they purchased Obamacare plans.

Some of the important features of these plans include:

  • Accessibility: All Americans may purchase health insurance through a federal or state-run health exchange even if they have a pre-existing condition.
  • Standardization: All health insurance plans must cover preventive care at 100 percent, and they must cover the costs associated with most medical procedures.
  • Affordability: The ACA offers tax credits and cost-reduction subsidies to limit the monthly premium costs for people earning less than 400 percent of the federal poverty line. Insurers may use age and smoking status to set monthly premium costs, but no other factors may be considered.

It’s also important to note that the ACA has a requirement called the individual mandate. You must get health insurance coverage, or you will most likely pay a penalty at tax time. You can get qualified health insurance through your employer or a government program. However, if you don’t get it there or through some other source, you will need to purchase an Obamacare plan or pay that penalty.

Who can buy insurance through a health care exchange?

Most Americans can purchase health insurance through a health care exchange. If you do not receive insurance through your employer and you don’t qualify for Medicaid or Medicare, then you are likely eligible.

Most long-term, legal immigrants to the United States may purchase insurance. HealthCare.gov maintains a comprehensive list of qualified immigration statuses for purchasing insurance through the marketplace.

Most large employers and some midsize or small companies offer health insurance benefits to their employees. If your employer offers affordable health insurance to you (costing less than 9.56 percent of your total income), you will not qualify for health insurance subsidies through the exchanges.

Incarcerated people and those living outside the United States cannot purchase insurance through the marketplace.

Part II: Obamacare costs and tax subsidies

One major factor to consider when weighing the options is your expected tax subsidy. Most people buying insurance through the health care exchanges will qualify for a health insurance subsidy. This subsidy is applied in the form a credit that immediately reduces the cost of your Obamacare plan coverage.

According to a study from the Centers of Medicare and Medicaid Services, 84 percent of people who purchased insurance through a health care exchange qualified for a health insurance subsidy in 2017. The average subsidy was about $371 in 2017.

With the subsidy applied, nearly eight out of 10 (77 percent) health insurance purchasers paid less than $100 a month for their health insurance premiums in 2016.

To qualify for a subsidy, you must meet three standards:

  1. You must not have access to affordable insurance through an employer (including a spouse’s boss).
    1. Affordable insurance for 2018 is defined as individual coverage through an employer that costs less than 9.56 percent of your household’s income.
    2. You can check that your insurance offers minimum-value coverage by having your human resources representative fill out this form.
  2. You must have a household modified adjusted gross income between 100 and 400 percent of the federal poverty line.
    1. You can calculate modified adjusted gross income using this formula:
      1. Adjusted gross income (Form 1040 Line 37) +
        Nontaxable Social Security benefits (Form 1040 Line 20a minus 20b) +
        Tax-exempt interest (Form 1040 Line 8b) +
        Foreign earned income and housing expenses for Americans living abroad (Form 2555)
  3. You’re not eligible for coverage through Medicaid, Medicare, the Children’s Health Insurance Program (CHIP) or other types of public assistance. Some states have expanded Medicaid to anyone who earns up to 138 percent of the federal poverty line.

How can I calculate my subsidy?

The easiest way to calculate the subsidy you will receive is to use a subsidy estimator from HealthCare.gov or the Kaiser Family Foundation. Both calculators estimate your subsidy based on the information you provide. They also help you understand what factors affect your subsidy estimations.

Your income, household size and the cost of premiums in your state factor into your subsidy. Premium tax credits can help reduce the amount that you will spend on monthly premiums to a set percentage of your income. You will receive the same subsidy, no matter which plan you ultimately choose.

Below you can see the maximum amount you will spend on insurance premiums (for a silver plan) based on your income.

Income (based on 2017 federal poverty line)

Max monthly Silver Plan premium cost after subsidies

Special notes


Lower 48 states:
$12,060-$16,702



Alaska:
$15,060-$20,857



Hawaii:
$13,860-$19,195


Lower 48 states:
$20.20-$46.21



Alaska:
$25.23-$57.70



Hawaii:
$23.22-$53.11

Check if you qualify for expanded Medicaid.


Lower 48 states:
$16,703-$30,209



Alaska:
$20,858-$37,724



Hawaii:
$19,196-$34,718


Lower 48 states:
$47.05-$203.91



Alaska:
$58.75-$254.64



Hawaii:
$54.07-$234.35

You will qualify for cost-reduction subsidies if you purchase a silver plan.


Lower 48 states:
$30,210-$48240



Alaska:
$37,725-$60,240



Hawaii:
$34,719-$55,440


Lower 48 states:
$203.92-$384.31



Alaska
$254.65-$479.91



Hawaii:
$234.36-$441.67

If you earn more than 400% of the poverty line, you will not qualify for subsidies.

Income (Based on 2017 federal poverty line)

Max monthly Silver Plan premium cost after subsidies

Special notes


Lower 48 states:
$24,600-$34,069



Alaska:
$30,750-$42,587



Hawaii:
$28,290-$39,179


Lower 48 states:
$41.21-$94.26



Alaska:
$51.51-$117.82



Hawaii:
$47.39-$108.39

Children will qualify for CHIP. Check if you qualify for expanded Medicaid.


Lower 48 states:
$34,070-$49,200



Alaska:
$42,588-$61,500



Hawaii:
$39,180-$56,580


Lower 48 states:
$95.97-$259.94



Alaska:
$119.96-$324.93



Hawaii:
$110.36-$298.93

Children in 46 states will qualify for CHIP. You may qualify for extra savings if you purchase a silver plan.


Lower 48 states:
$49,201-$61,621



Alaska:
$61,501-$77,027



Hawaii:
$56,581-$70,864


Lower 48 states:
$259.95-$415.94



Alaska:
$324.93-$519.92



Hawaii:
$298.94-$478.33

In some states, children will qualify for CHIP. You may qualify for extra savings if you purchase a silver plan.


Lower 48 states:
$61,622-$98,400



Alaska:
$77,028-$123,000



Hawaii:
$70,865-$113,160


Lower 48 states:
$415.96-$783.92



Alaska:
$519.94-$979.90



Hawaii:
$478.35-$901.51

In a limited number of states, children qualify for CHIP up to 375% of the poverty line. If you earn more than 400% of the poverty line, you will not qualify for subsidies.

What circumstances might affect my eligibility for a subsidy?

Your subsidy can change if your circumstances change. It’s important to plan for such circumstances.

(Read ahead: “What happens if I don’t qualify for a subsidy?”)

Families with children:

Instead, they will receive free or low-cost insurance through CHIP. You can enroll your children in CHIP through the health insurance marketplace, or by calling 1-800-318-2596. You may need to speak with a Medicaid agent in your state to see if you qualify. You can also learn more about CHIP through InsureKidsNow.gov.

Your children may qualify for CHIP even if you and your spouse qualify for an employer-sponsored health insurance plan, though this rule varies by state. In some states, families that have children and employer-based coverage may receive financial assistance to purchase the coverage.

CHIP does not have enrollment deadlines, so you can apply at any time.

Families where one spouse has work coverage:

Some employers only offer health insurance to their employees. Spouses and children cannot get covered. In that case, you can buy insurance with a subsidy through the marketplace.

Families with expensive employer coverage:

If you can purchase family coverage through your or your spouse’s employer, then you will not qualify for subsidies. If an employee can gain individual coverage for himself or herself for less than 9.56 percent of total household income, the insurance is considered affordable. Coverage for the family isn’t factored into the affordability calculation.

This so-called “family glitch” affects two million to four million people and requires them to pay high prices for premiums. If you are caught in this situation, your children may qualify for CHIP. However, uncovered spouses and children must purchase insurance or pay the individual mandate penalty unless coverage for the family costs more than 8.05 percent of your household income. Even in those cases, you will still not qualify for premium assistance.

Senator Al Franken, D-Minn., has proposed a Family Coverage Act that may rectify the tax code, but it has not been passed.

Individuals getting married in 2018:

If you’re getting married next year, your subsidy depends on your combined income. In the months preceding your marriage, your income is one-half of your and your spouse’s combined income. Once you get married, your subsidy is based on your joint income and your qualifying family.

You need to report a marriage to be eligible for a special enrollment period on HealthCare.gov or through your state’s insurance exchange.

Individuals getting divorced in 2018:

If you get divorced or legally separated in 2018, you must sign up for a new health insurance plan after you separate. Your subsidy will be based on your income and household size at the end of the year. However, you will need to count subsidies received during your marriage differently than subsidies received when you’re legally separated.

For the months you are married, each spouse divides advanced subsidies received to each new household. If spouses cannot agree on a percentage, the default is 50 percent. If the plan only covered one taxpayer and his or her dependents, then the advanced tax credits apply 100 percent to that spouse.

Divorce reduces your income, but it also reduces your household size. These factors change your estimated subsidy. How much will depend on the magnitude of each change.

Reporting a divorce makes you eligible for a special enrollment period. When you enroll in a new plan, the exchange website will help you estimate your new subsidy for the remainder of the year.

Giving birth or adopting a child:

You have 60 days from the birth or adoption of your child to enroll him/her in a health care plan. If you miss this window, your child will not have health coverage, and you will pay a penalty. However, if you enroll your child in a timely manner, you can expect your subsidy to increase.

Report the birth or adoption of a child to be eligible for a special enrollment period on HealthCare.gov or via your state’s insurance exchange.

A newborn or adopted child may be eligible for CHIP rather than subsidized health insurance.

Turning 26:

If you’re on your parents’ insurance, generally you can stay until you have turned 26, but you should check your plan to be sure. You will have a 60-day special enrollment period to get your own plan from the health care exchange when you turn 26.

You may also be eligible for a special enrollment period from an employer-sponsored health plan. If you fail to have health insurance for more than three months, you will pay a penalty.

Losing employer coverage:

If you lose employer-based health coverage, you can either enroll in COBRA or purchase a plan through the health care exchange. Once you enroll in COBRA, you become ineligible to purchase subsidized coverage through the exchange.

You need to report job status changes to be eligible for a special enrollment period on HealthCare.gov or your state’s insurance exchange.

Changes in income:

Premium tax credits are based on your annual income. If you increase your income, you will be expected to pay back some or all of the advance premium you received. If you earn more than 401 percent of the federal poverty line, all premiums need to be repaid. If you earn less than 400 percent of the federal poverty line, you may have to pay back $2,500 of advanced premiums per family or $1,250 for individuals.

You need to report income changes to avoid under- or overpaying on your premiums throughout the year.

Moving states or counties:

Most insurance plans that you purchase through the marketplace are state- and county-specific. If you move, you need to report the relocation through the insurance exchange. You may have to change insurance plans after moving. Moving to Alaska or Hawaii will allow you to claim a greater subsidy amount than you can claim in the lower 48 states. If you move from Alaska or Hawaii, you can continue to claim the higher subsidy amount for the whole year.

Part III: Bronze, silver, gold, platinum: Choosing the right Obamacare plan for your needs

The health care exchanges — both federal- and state-run — classify health insurance plans into four categories: bronze, silver, gold, and platinum. Metal categories are based on how you and your plan split the costs of your health care.

According to a 2016 study by the Department of Health and Human Services, 76 percent of consumers who bought a silver plan in 2016 stood to save an average of $58 a month by switching to the lowest-premium plan in 2017.

But that doesn’t meant the cheapest plans are necessarily best for you. They often come with higher out-of-pocket expenses, like deductibles, which can make them very expensive if you end up needing lots of medical care through the year.

Think of this way — the higher the premium, the more comprehensive the coverage will be and the lower your out-of-pocket costs. If you expect that you’ll need fairly frequent medical care or treatment, you might be better off choosing a more comprehensive plan despite the higher monthly premium.

Obamacare ‘Metal’ Plans: Explained

Bronze Plan

Cheapest premium, 60% coverage

Bronze health plans offer the least amount of estimated coverage. Insurers expect to cover 60 percent of the health care costs of the typical population. These plans feature the lowest monthly premiums, the highest deductibles and high out-of-pocket maximum expenses. Just under one-quarter (23 percent) of health insurance enrollees opted for a Bronze plan in 2017.

Silver Plan

Moderate premium, 70% coverage

Silver health plans offer moderate estimated coverage. Insurers expect to cover 70 percent of health care costs, and plan members cover the remaining 30 percent. If you qualify for cost-reduction subsidies (also called “extra savings”), you must purchase a silver plan. In 2017, 71 percent of all participants in the health care exchanges opted for a silver plan.

Gold Plan

High premium, 80% coverage

Gold health plans offer high levels of estimated coverage. Insurers expect to cover 80 percent of health care costs, while plan members cover the remaining 20 percent. These plans feature high monthly premiums, but lower deductibles and out-of-pocket maximums. Only 4 percent of all health insurance consumers on the health care exchanged opted for a gold plan in 2017.

Platinum Plan

Highest premium, 90% coverage

Platinum health plans offer the highest level of protection against unexpected medical costs. Insurers expect to cover 90 percent of medical costs, and plan members cover the remaining 10 percent. These plans have the highest monthly premiums and the lowest deductibles and out-of-pocket maximums. Just 1 percent of all health insurance exchange participants purchased a platinum plan in 2017.

Catastrophic Plans

Cheapest premium, lowest coverage

Catastrophic health plans: People under age 30 or with hardship exemptions may purchase individual catastrophic health insurance plans. These plans are not available for families. Catastrophic plans do not have a cost-sharing component. Your out-of-pocket maximum will be $7,350. Once you reach $7,350 in medical expenses, your insurance company will pay the remaining costs.

Catastrophic plans cover most preventive services. Catastrophic plans generally offer the lowest monthly premiums, but you can’t use a premium tax credit to reduce your monthly cost.

Now that you know all the types of plans offered, it’s time to choose the one that fits your needs.

What to consider before choosing a plan

Choosing a health plan can seem like a daunting task, but you can get all the help and information you need to make an informed decision. Your health and your pocketbook matter, and we want to help you protect both.

Your tax subsidy: Before you choose a plan, you’ll decide whether to receive advanced or deferred subsidies.

If you take your subsidy upfront, it will reduce your premiums right away. If you defer it, then it will be given to you as a tax credit when you file your taxes. If you over- or underpay your premiums throughout the year, the will have to reconcile the amount owed at tax time.

Most people with predictable income and household size should take most or all of the subsidy upfront. However, if you expect to undergo a major life change (such as an increase in income, a marriage or a divorce), consider taking less of your subsidy in advance.

Time to shop. For people shopping for 2018 coverage, the average number of plans available is 30. Rather than comparing every plan, we recommend creating criteria around the following variables:

  1. Monthly cost: Consider how the monthly premium will affect your budget. This does not mean you should choose the plan with the lowest premiums, but you should consider the price. People without chronic conditions who have adequate emergency savings may want to at least consider opting for an option with low monthly premiums.
  2. Deductible and co-insurance: Do you have the emergency fund or income you need to cover a small medical emergency? A broken arm, stitches or an unexpected infection can result in hundreds of dollars in medical costs. If you have a high-deductible plan, you’ll need to cover these costs without help from the insurance company. If possible, choose a plan with a deductible that you could comfortably cover out of your savings or income.
  3. Maximum yearly cost: Add the annual cost of your premiums and your out-of-pocket maximum to determine your maximum yearly cost. In a worst-case scenario, this is the amount you will pay out of pocket. People with chronic conditions that require heavy out-of-pocket fees should try to limit their maximum yearly cost. A plan with a higher maximum yearly cost may represent a higher risk.
  4. Services and amenities: All insurance plans from the marketplace cover the same essential health benefits, but some offer more unique services such as medical management programs, vision and dental coverage.
  5. Health savings accounts: If you choose a high-deductible plan, you may want to opt for one lets you contribute to a tax-advantaged health savings account. Any money you contribute to this account (up to annual established limits) reduces your taxable income, and will not be taxed upon withdrawal when it used for medical expenses.
  6. Network of providers. It’s important to be sure that your preferred medical providers contract with the plan you choose. Not every doctor is “in network” with every insurance plan. You can check each plan’s provider directory before making a selection.

Once you have a firm grasp of your particular criteria, look for plans that fit your needs and ignore the rest.

Using the exchange website, you can filter and sort plans based on these factors. Most people need to balance cost and coverage to find a plan that works for them.

If you are part of the minority that need to buy their own health insurance plans, you should know that not every state uses HealthCare.gov to host their state’s health insurance exchange. Residents in the following states should use their specific state exchange to look for health insurance:

California; Colorado; Connecticut; Washington, D.C.; Idaho; Maryland; Massachusetts; Minnesota; New York; Rhode Island; Vermont; Washington.

Part IV: How to enroll in Obamacare

Applying for insurance takes 30-60 minutes if you have all the necessary information in hand.

Your Obamacare enrollment checklist:

  • Names, birthdates and Social Security numbers for all members of the household
  • Document numbers for anyone with legal immigration status
  • Income information for all coverage-holders
  • Information about employer-sponsored health plans
  • Tax return from previous year (to help predict income)
  • Student loan documents
  • Alimony documents
  • Retirement plan documents
  • Health Savings Account documents

State or federal marketplace?

If your state does not offer its own health care exchange, you should use HealthCare.gov. As mentioned in the previous section, each state has the right to choose whether to run its own or use the federally run exchange and some do use their own.

The state-run exchanges perform the same functions as the federally run exchange. They allow you to estimate your tax credit and purchase insurance. As a consumer, you must provide the same information to your state as you would on the federal exchange.

While the online user experience will vary when states adopt their own online marketplace, the Affordable Care Act is a federal law and program. This means that the requirements and benefits do not change from state to state, even if the exchange platform changes.

The website interface for the federal exchange is simple, but answering the questions may be confusing. It’s important to fill out the application as accurately as possible so you can enroll in the best health insurance plan for you.

We’ve done our best to clarify the confusing portions in our step-by-step process below.

Filling out your Obamacare application

Family and household info

Start the application by filling out contact information and basic information about members of your household. Even if a member of your family will not need coverage, include that relative in your application.

The website will help you determine if a member of your household has insurance options outside the health care exchange. It will also help you determine if a person is a dependent. For the purpose of the health care exchange, your family includes all the people included on your income tax filing.

You need to know Social Security numbers, birthdates, immigration and disability status, and whether each household member can purchase health insurance through an employer plan.

Income and deductions

Next you’ll estimate your income for the coming year. Include all the following forms of income:

  • Jobs
  • Self-employment income (net)
  • Social Security benefits
  • Unemployment income
  • Retirement income
  • Pensions
  • Capital gains
  • Investment income
  • Rental/royalty income
  • Farming and fishing income
  • Alimony received

Afterward you’ll enter deductions. The application calls out student loan interest and alimony paid, but you should estimate all “above-the-line deductions” that should be included. These include:

  • Retirement plan contributions: 401(k), 403(b), 457, TSP, SEP-IRA, simple IRA, traditional IRA
  • Contributions to a Health Savings Account
  • Self-employed health insurance premiums
  • Tuition and fees paid
  • Educator expenses (up to $250 per teacher)
  • Half self-employment tax
  • Moving expenses
  • Early-withdrawal penalties from a 1099-INT

Do not double-count income or deductions since you’ll fill out these forms for each person. If you make a mistake, you can edit it when you review your household summary.

Additional information

Finally, you’ll fill out a few other miscellaneous details that will allow the application to confirm that you are eligible for subsidies or marketplace insurance.

It’s especially important that you have accurate information about job-related coverage for you and your family. This information will determine your eligibility for subsidies and other government programs.

Completing Obamacare enrollment

After you complete the application, you can review and submit it. At this point, the system will suggest which members of your household should complete CHIP or Medicaid applications. The remaining family members can enroll in a health insurance plan.

Part V: Where to get help enrolling In Obamacare coverage

Because of the complex nature of the marketplace exchange, there are marketplace navigators. These professionals provide free, unbiased help to consumers who want a hand filling out eligibility forms and choosing plans.

Marketplace navigators. You can find local marketplace navigators through the health care exchange website.

Be advised: The Trump administration has slashed budgets for health care navigators, leading some states to close down the programs altogether. As a result, it may make it difficult to find help locally from a navigator in some states.

Nonprofit organizations. Outside the exchange, nonprofit organizations are working to help people gain coverage by teaching them about their insurance options. Enroll America offers free expert assistance to anyone who makes an appointment. You can use the connector below to make an appointment with one of their experts.

Insurance brokers. Brokers can offer another form of help. Brokers aim to make it easier for consumers to compare insurance plans and apply for coverage. Insurance brokers have relationships with some or all of the insurance companies on the marketplace. Using a broker will not increase the price you pay for a plan, and it will not affect your subsidies. However, here’s another important note: Online brokers may not have 100 percent accuracy regarding a plan’s details. It’s important to visit a plan’s website before you enroll in a plan.

If you want to work with a broker, consider some of these top online brokers. PolicyGenius compares all the plans that meet criteria that you establish, and they serve up the top two plans that meet those criteria. HealthInsurance.com makes applications quick and easy, and the site specializes in special enrollment help.

Medicare plan finder. If you’re over age 65, use Medicare Plan Finder to find a Medicare plan that works for you.

CHIP: Likewise, if you think your children qualify for CHIP, use Insure Kids Now to enroll them in your state’s plan.

PART VI: Frequently asked questions

What happens if I don’t apply for insurance?

In most cases, you must enroll in health insurance or you’ll have to pay a penalty.

The penalty for 2018 hasn’t yet been released, but the 2017 penalty was calculated as the greater of 2.5 percent of your income (up to the national average cost of a bronze plan) or $695 per adult and $347.50 per child (up to $2,085).

This steep penalty means that most people are better off purchasing some health insurance.

However, under certain circumstances you can avoid buying insurance and avoid paying the penalty. These are a few of the most common exemptions:

  • Health care cost-sharing ministry members: Must show evidence of membership
  • Low income, no filing requirement: If you do not earn enough income to file taxes, then you are automatically exempt from paying a noncoverage penalty.
  • Coverage is unaffordable: For 2017, if you, your spouse, or your dependents cannot obtain employer coverage or a bronze plan for less than 8.05 percent of your income (after applicable subsidies), you may opt out of coverage. (However, if your individual coverage from an employer costs less than 9.56 percent of your income, and your employer offers family coverage, nobody in the family will qualify for subsidies).
  • Short coverage gap: You went without insurance for less than three months.
  • Living abroad: No coverage is required if you live abroad for at least 330 days.
  • General hardships:These include homelessness, eviction, foreclosure, unpaid medical bills, domestic violence and more.  (You must get a marketplace exemption.)
  • Unable to obtain Medicaid: If you earn less than 138 percent of the federal poverty line, and your state didn’t expand Medicaid, you don’t have to purchase health insurance.
  • AmeriCorps coverage
  • Members of qualified religious sects: Must be granted exemption through HealthCare.gov.

Although you will not pay a penalty, you may still want to seek out catastrophe insurance or some other coverage to help with high potential health costs.

What happens if my plan was canceled?

For 2018, some insurers dropped their insurance plans from the health care exchange. In some states, major insurers Aetna and Humana are exiting the exchange. As a consumer, you cannot assume that the plan you chose in the past will be around next year.

If you used HealthCare.gov in the past, and your insurance plan remains in place, you’ll automatically be enrolled in the same plan again this year. This is true even if important variables like the deductible and premiums changed from last year.

If your plan was canceled, HealthCare.gov will automatically enroll you into a new health insurance plan with a price and coverage quality comparable to your previous plan’s.

Although the federal exchange will help you opt into a new plan (ensuring that you have some health insurance coverage), it’s far better to select a new plan on your own. You can enroll in a new plan Nov. 1 through Dec. 15. If you do not enroll in a new plan during this time, you will be stuck with the automatic enrollment option.

Whether you’re shopping for a new plan or reviewing an old plan, take these steps before open enrollment ends.

  • Update personal information on your application. Your income, household size, where you live and more will affect plan and subsidy eligibility. It’s important to keep your application up to date. The plan that fit you last year may no longer be appropriate, but you won’t know unless you keep the information current.
  • Review your plan before you re-enroll. You should receive a notification in the mail if your plan has been changed or canceled. Take the time to understand if the changes affect you.
  • Compare plans that fit your needs. Consider enlisting free help from a health care navigator, a nonprofit or a broker to help you decide.
  • Choose the plan that best fits your needs and your budget.

What options do students (and their dependents) have for health insurance?

University students who are enrolled full time have multiple options for health insurance.

Under age 26: All student under age 26 may continue to receive coverage from their parents’ insurance plan even if living in another state. Of course, it may make more sense to gain coverage in the state where you’re living, so review the coverage network with your parents. Many coverage networks only include doctors in a few ZIP codes.

If you visit an out-of-network doctor, you will face higher deductibles and out-of-pocket maximums. As an alternative to staying on your parents’ plan, you can purchase your own health insurance plan through the health care exchanges even if you are a dependent.

Students who are dependents and over age 26 may be required to purchase their own health insurance plans.

University coverage: Many students will opt for a student health plan from their university. In general, student health plans meet minimum qualifying coverage criteria, and are affordable options. However, student health plans are not treated as employer coverage. Because of that, students may still qualify for Medicaid or insurance premiums. Students (especially independent students) should look into these alternatives when reviewing their insurance options.

The spouses and dependents of students must take time to understand their options. These are a few common scenarios:

If a student or spouse has an affordable employer-sponsored plan that covers family members: Student and spouse do not qualify for insurance subsidies or Medicaid. Children may qualify for CHIP. Student and spouse should seek coverage through either the student health plan or the employer-sponsored plan in most cases. All members of the family must have qualified health coverage, or they will pay the individual mandate penalty.

Student health plan doesn’t offer coverage for spouse or dependents, and neither spouse has an employer-sponsored health plan: Spouse and dependents can apply for Medicaid, CHIP or subsidized insurance through the health care exchanges (provided they meet income criteria). Student may choose any coverage option (including Medicaid or subsidized insurance) without paying a penalty.

Student health plan offers coverage of spouse or dependents, and neither spouse has an employer-sponsored health plan: Student, spouse and dependents may purchase the student health plan. They can also apply for Medicaid, CHIP or subsidized insurance through the exchanges (provided they meet income criteria). All family members may choose any coverage option without paying a penalty.

Where if I don’t qualify for a subsidy?

If you don’t qualify for a health insurance subsidy, you can still apply for health insurance through HealthCare.gov or your state’s health insurance exchange. However, some insurers offer more or different options outside the exchange. Anyone who doesn’t qualify for a health insurance subsidy should consider using an online broker instead to look for plans.

People who don’t qualify for a health insurance subsidy should reconsider their health insurance options in 2018. An analysis by the Kaiser Family Foundation said that a number of insurers have requested double-digit premium increases for 2018. Based on initial filings, the change in benchmark silver premiums will likely range from -5 to 49 percent across 21 major cities. (These rates are still being reviewed by regulators and may change, the analysis said.)

With rapidly rising costs, enrollees without subsidies may want to consider the lower-cost bronze plans to see if they meet their health insurance needs.

Part VII: The ultimate Obamacare glossary

Understanding basic health insurance terminology can help you make a more informed decision about your options. Here are common terms you should know.

This credit can be taken in advance to offset your monthly premium costs. The subsidy is based on your estimated income and can be taken directly from your insurer when you apply for coverage. You must repay credits if you qualify for a smaller subsidy once taxes have been filed. You can learn more about repayment limitations here.
This program was designed to provide coverage to uninsured children who are low-income but above the cutoff for Medicaid eligibility. The federal government has established basic guidelines, but eligibility and the scope of care and services are determined at the state level. Your children may qualify for CHIP even if you purchase an insurance policy through the health care exchange. You can learn about CHIP eligibility through the marketplace or by viewing this table at Medicaid.gov.
Your share of the costs of a covered health care service. This is the percentage you must pay out of pocket after you have met your annual deductible. You pay a specific coinsurance amount until you meet your out-of-pocket maximum.

If you earn between 100-250 percent of the federal poverty level, you may qualify for additional savings. This extra savings reduces your out-of-pocket maximum, and it offers assistance with copays and coinsurance.

Disclaimer: There is ambiguity surrounding whether or not Congress and the White House will appropriate funds for the cost sharing subsidies. In October, President Trump used an executive order to cut off funding for the subsidies. However, the Affordable Care Act still requires that health insurers must issue them to all people earning 100-250 percent of the federal poverty line. As a result of this Trump executive order, many insurers raised premiums for silver plans. The premium increases will not affect the prices that people with subsidies will pay, but they will affect the prices you pay if you do not qualify for a subsidy.

Until the Affordable Care Act or the cost sharing subsidies are repealed, insurers will continue to pay cost reduction subsidies in 2018.

A fixed amount you pay for a covered medical service, typically when you receive the service or prescription. Also commonly referred to as a “copay.”
The amount you pay for covered health services before your insurer begins to cover part of your costs. According to the IRS, a high-deductible health insurance plan is any plan with a deductible over $1,300 for an individual or $2,700 for a family.
Medical services are only covered if you go to doctors, specialists or hospitals in the plan’s network (except in an emergency).
These plans focus on integrated care and focus on prevention. Usually, coverage is limited to care from doctors who work for or contract with the HMO. Generally, out-of-network care isn’t covered unless there is an emergency.

Health Savings Accounts (HSAs) allow you to save and invest money for current or future medical expenses. You do not have to pay any taxes on money you contribute to an HSA, and you can withdraw the money tax- and penalty-free if you use the funds for a qualified medical expense.

You can only contribute to an HSA if your insurance meets the standards for a high-deductible insurance plan. Individuals can contribute up to $3,450 to a health savings account, and families can contribute up to $6,900 in 2018.

If you shop for insurance through Healthcare.gov, plans will indicate whether they are HSA approved. To be an HSA compatible plan, your deductible must be at least $1,350 for an individual or $2,700 for a family. The out of pocket maximums on these plans must be less than $6,650 for an individual or $13,300 for a family.

The out-of-pocket maximums required by the IRS do not line up with Affordable Care Act maximums, so many plans with high deductibles will not allow you to contribute to an HSA. If contributing to an HSA is an important part of your financial plan, be sure to filter for HSA compatibility on HealthCare.gov. And be advised: Not everybody will have an opportunity to purchase a subsidized HSA-compatible health insurance plan.

If you can afford to purchase health insurance and choose not to, you will be charged an individual shared responsibility payment, in the form of a tax penalty. There are a few qualified exemptions, outlined in the guide above, that allow you to avoid the fine. For example, if your employer-sponsored health plan costs more than 8.05 percent for individual coverage, you will not have to pay the fine (though you will not qualify for tax credits).

The fine for 2018 has not yet been released, and Congress has considered removing the individual mandate requirement for 2018. If it is removed, we will update this piece with the required information.

For the 2017 tax year, the individual mandate was calculated two ways:

  1. 2.5 percent of household income (up to the total annual premium for the national average price of the marketplace bronze plan)
    OR
  2. $695 per adult and $347.50 per child (up to $2,085)

You had to pay the greater of the two penalties.

Medicaid: A joint federal and state program that provides health coverage to low-income households, some pregnant women, some elderly Americans and people with disabilities. Medicaid provides a broad level of coverage including preventive care and hospital visits. Some states provide additional benefits as well.

If you were a foster child who “aged out” of foster care, you can continue to receive Medicaid coverage until age 26 with no income limitations.

Medicaid Expansion: Obamacare gives each state the choice to expand Medicaid coverage to people earning less than 138 percent of the federal poverty line. The primary goal of the ACA is reducing the number of uninsured people through both Medicaid and the health insurance marketplace. The Kaiser Family Foundation keeps track of expanded Medicaid coverage by state.

Medicare: Most people who are over age 65 and disabled people who have received Social Security Disability Insurance (SSDI) payment for 25 months in the United States will qualify for a Medicare Health Insurance Plan. Open enrollment for Medicare, which started Oct. 15, runs through Dec. 7. You can learn more about Medicare plans from the Medicare Plan Finder.

The amount you pay each month for your health insurance.
The highest amount you will pay for covered services in a year. In 2018, all health insurance plans sold through the Federal Health Exchange will have a out-of-pocket limits of $7,350 for an individual or $14,700 for a family plan.
You pay less for medical services if you use providers in the health plan’s network. You need a referral from your primary care doctor to see a specialist.
You pay less for medical services if you use the providers in your plan’s network. You may use out-of-network doctors, specialists or hospitals without a referral. However, there is an additional cost.
All health insurance plans purchased through the health care exchange cover some preventive care benefits without additional costs to you. These benefits include wellness visits, vaccines, contraception and more.
Most insurance plans have preferred pricing with a group of health care providers with whom they have contracted to provide services to members.
The federal subsidy for health insurance that helps eligible individuals or families with low or moderate income afford health insurance purchased through a health insurance marketplace.

The post The Ultimate Guide to Obamacare (Updated for 2018) appeared first on MagnifyMoney.

7 Ways to Save Money That Could End Up Backfiring

Saving money is a noble goal. It can even become addictive, like a game. But if you’re not careful, your savings strategies might lead you to spend more money in the long run.

These seven stories will help remind you to always keep your long-term savings goal in mind. That way you aren’t blindsided by short-term “savings.”

Couponing

Source: iStock

Who hasn’t been enamored with the “Extreme Couponing” TV show, where people get carloads of groceries for free? They make coupons seem like the equivalent of cash dollars — but the only way you can use those dollars is to spend money first. This sets up a snag where overzealous consumers can easily be tricked into spending more money than they otherwise would have in the quest of using the Holy Coupon and their “savings.”

Kendal Perez, a savings expert with Coupon Sherpa, has some tips: “Coupons, Groupons, and vouchers of any kind that save you money on products, services, or experiences you wouldn’t otherwise be interested in are ones you should stay away from. Instead of clipping ‘interesting’ coupons from the Sunday circular or browsing Groupon when you’re bored, look for coupons on items you already intend to buy.”

Trying to save too much money

Source: iStock

Joseph Hogue, a chartered financial analyst and personal finance blogger, was in a familiar trap in his first professional job: He hated it and wanted to leave. So he tried saving up all of his cash so he could retire early.

“I fell into the financial equivalent of yo-yo dieting,” he says. He would take on as much work as possible before becoming burned out and blowing all of his hard-earned money in a spending spree.

He learned the hard way that it’s not enough just to make and save a ton of money. You also need to pace yourself, set realistic goals, and reward yourself along the way. Hogue’s advice? “Find something outside of work you enjoy doing to make all the effort and saving worthwhile.”

Growing your own vegetables

Source: iStock

Growing your own vegetables doesn’t seem like it would cost much money. Just throw some seeds in the ground and add water, right? Wrong.

Once you factor in everything you need to grow a garden — tools, soil amendments, fences, plants, hoses, etc. — costs can quickly spiral out of control. Still, you have to be careful about cutting corners. Joshua Crum, a personal finance blogger, found this out firsthand when he forgot to include wild-animal-proof fencing in his calculations. “I spent around $100 and tons of work on a garden. Wild animals came and ate everything I planted.”

If gardening is your thing, see if you can reduce your expenses by buying used equipment instead of new. Also consider planting cost-effective vegetables for the maximum return for your buck.

Not reading the fine print on a purchase

Source: iStock

There are a ton of ways to save money if you keep your eyes open. Receipt-scanning apps, rebates, sales, coupons, store loyalty cards — it’s a long list. The catch is that you have to carefully read the fine print so you can meet the requirements. Before you make a purchase with the intent of getting a rebate or some other discount, make sure you understand the terms and will actually benefit from the deal.

Mindy Jensen, community manager at BiggerPockets, recently found this out. She bought a ream of paper, expecting to use a rebate to have another free ream of paper shipped to her house. “I didn’t read the fine print, and the return was in the form of a store credit. I almost never shop there, so it was kind of a waste.”

In another incident she bought a bottle of alcohol specifically for a $5 rebate. “I have gotten in the habit of saying ‘No, thank you’ to receipts at the store, to save paper and the environment.” When she got home, she was stunned: “Guess what you need in order to get the rebate? A receipt. Of course, I felt like an idiot for not getting the receipt; having a proof that you purchased the product is a basic tenet to getting a rebate.”

Skimping on insurance

Source: iStock

No one likes paying their monthly insurance premium — until it comes time to make a claim.

According to Neil Richardson from the auto insurance comparison site The Zebra, getting just the minimum liability protection for your state “is simply too little financial protection to cover a number of common car insurance claims scenarios. People end up with huge bills because they wanted to save a few dollars off their premium.”

MagnifyMoney recommends checking what insurance options are available with your insurance broker. Ask yourself: Would you be able to fully cover the cost of any unfortunate events outside of the minimum coverage? If not, you might need to reconsider your insurance coverage.

Skipping doctor visits

Source: iStock

Going to the doctor is about as fun as stubbing your toe, not to mention being expensive. It’s pretty tempting to save some money by diagnosing yourself over the internet. Sometimes this works out, but it can have costly consequences if it doesn’t.

Abigail Perry, a personal finance blogger, once felt a urinary tract infection coming on but decided to treat it herself. It quickly turned into lower back pain, which was her signal that it was becoming more serious. She eventually ended up spending $75 to go to the emergency room, when a visit to her regular doctor would have had a $0 copay.

Perry’s advice is to “just go to the doctor. And if you can’t get an appointment there, find an urgent care clinic [rather than going to the emergency room, if possible]. Just be sure to bring a good book and a charge cord.”

Buying in bulk

Source: iStock

Smart shoppers know that the best way to save money is by looking at the per-unit price of each food item. This often means buying food in bulk. Even smarter shoppers know to take into account an item’s shelf life, so they can plan to use it before it goes bad.

But there’s more to it than that, like making sure you actually need what you’re buying. For example, Lisa Torres, a retired high school teacher, buys several boxes of Popsicles at a time when they go on sale during the hot New Hampshire summers. Buying Popsicles in bulk seems like a logical choice, because she’s going through a lot of them and they’ll keep for months. But Torres also likes buying fresh fruit in the summer, when some of her favorites are in season. When her family has both options as a snack, they tend to choose the Popsicles.

“The healthy fruit in the fridge goes bad because we are eating Popsicles instead of fruit,” she says. “And next week I have to buy more Popsicles.” Torres says she’s still working on making better buying decisions so she doesn’t waste food or money.

When buying in bulk, it’s always best to stop and think about whether you’ll be able to use all of the product, as well as if you have any alternatives at home. By keeping tabs on what you have at home and taking a minute to think before every purchase, you can successfully navigate these common savings pitfalls.

The post 7 Ways to Save Money That Could End Up Backfiring appeared first on MagnifyMoney.

5 Smart Ways to Lower the Cost of Therapy

Source: iStock

Sasha Aurand has had to scramble for four years to find high-quality mental health care she can afford on her salary from running a website on psychology and sex.

The 25-year-old New Yorker suffers from post-traumatic stress syndrome, depression, and anxiety, and has no health insurance.

“So I’ve always had to find other solutions,” she tells MagnifyMoney. Aurand originally sought help for these conditions while still a college student in Indiana. But after the school’s counseling center referred her to a private practice she couldn’t afford, she researched, asked around, and found a community health clinic where a therapist helped her for $20 a visit.

After graduating from college, Aurand moved to New York, where she briefly had health insurance, enabling her to see what she describes as a “phenomenal psychiatrist” for depression medications. But her insurance ended, and she could no longer afford the psychiatrist’s $350/hour fee.

Aurand is not alone, having to be resourceful finding doctors and therapists in her price range. According to the 2016 State of Mental Health in America report, one out of five American adults with mental illness report they are unable to get the treatment they need, often due to cost. And with an uncertain health care climate in Washington, the challenges are unlikely to ease soon.

Although the Senate failed in its recent attempt to repeal the Affordable Care Act — an effort, says Colin Seeberger, strategic campaigns director for Young Invincibles, “that would have allowed states to opt out of the ACA’s essential benefits, such as substance abuse and mental health coverage” — there’s still some instability in the insurance markets as a result.

In such a confusing environment, how can you find the help you need at a price you can afford?

Here are a few options if you’re looking for affordable therapy options:

1. Work with a therapist-in-training

If you live near a university with a graduate psychology program, it most likely has an in-house clinic. You can see a trainee at one of these clinics for a reduced fee. Yes, the therapists are students, but each one is closely supervised by a seasoned, licensed professional.

Pros: “Because the therapists are still in school, they’re up to date on the latest developments in psychology,” says Linda Richardson , Ph.D., a psychologist who works with the National Alliance on Mental Illness in San Diego. “You’ll also have the advantage of two heads being better than one.”

Cons: Most trainees work at these clinics for a year or less. If you find someone you like, they’re eventually going to leave.

2. Don’t be afraid to ask about sliding scales or reduced cash fees

After losing her insurance, Aurand went back to her $350/hr psychiatrist and “explained the situation and asked if there was anything she could do,” she says. The psychiatrist agreed to see Aurand for $100 a visit as long as Aurand paid in cash. Aurand now sees the doctor every three months.

Many therapists offer a sliding scale based on a patient’s income. If you find a therapist you like, let him or her know your financial concerns and inquire about paying a lower fee. Another option is to check out Open Path Psychotherapy Collective, a nonprofit that lists therapists who offer a few weekly sessions at a lower rate. There’s a one-time $49 fee to join the collective; therapists in the collective charge $30 to $50 per session.

Pros: With a sliding scale, you get all the benefits of good, one-on-one therapy at a lower rate.

Cons: If you don’t reassess the financial arrangement occasionally, says Erika Martinez, a psychologist in private practice in Miami, Fla., “a therapist can become resentful or frustrated with a client,” especially if your income rises. To avoid this, discuss payments every few months to see if an adjustment is needed.

3. Consider group therapy

According to the American Psychological Association, group therapy works as well as individual therapy for many conditions, such as depression, PTSD, and bipolar disorder — and for a fraction of the price. Martinez, for example, charges $150 an hour for individual therapy but only $65/hour for a group session.

Pros: There’s a lot of power in knowing you’re not alone. “When you share about your struggles in group where others have the same concerns, and you feel their empathy, that’s incredible,” says Martinez.

Cons: Some people aren’t comfortable speaking about emotional issues in a group. Also, you have to share the therapist’s attention with others.

4. Try online services & therapy apps

There are many online tools, including Breakthrough.com and Betterhelp.com that offer individual therapy sessions with licensed therapists over the phone or via a secure, HIPAA-compliant video for considerably less than an in-office visit. Rates vary, but if you search, you can find someone affordable.

Several California-based therapists (among the most expensive in the nation) on Breakthrough.com, for example, offer sessions for as low as $55 an hour. A note of caution: Choose someone licensed in your state. In case of an emergency, a therapist can only help secure needed services if you’re in the same state.

Pros: You can get high-quality, one-on-one therapy without ever having to leave your home, office, or pajamas — and at a reasonable cost.

Cons: Insurance often doesn’t cover phone or video sessions. “Also, you can’t fully see the nonverbal language of the therapist,” says Martinez. “And the Internet connection can be bad.”

Better Help App. Source: iTunes

Therapy apps — which allow you to text or chat with a licensed therapist — are becoming increasingly popular. Among the many available are Betterhelp.com, Talkspace.com, and iCounseling.com. Studies in both The Lancet and the Journal of Affective Disorders have shown that online therapy is an effective way to get help, and many services start for as little as $35 a week.

TalkSpace app. Source: iTunes

Pros: You can get help anytime, anywhere, even while sitting in a business meeting or on the subway. Also, it’s a good option for people afraid to walk into a therapist’s office.

Cons: Chat and text therapy, which are not covered by insurance, are inappropriate if you’re feeling suicidal or have severe mental illness. And some people find the technology alienating. “I tried one of these apps a few years ago,” says Aurand, “ and I just missed the human interaction of seeing a therapist in person.”

5. Tap into community resources for free or discounted counseling

You can find psychological and psychiatric care at public mental health clinics, which offer services for free or on a sliding scale, based on your income. Organizations devoted to helping survivors of sexual assault and domestic abuse also offer a wide range of services, including free counseling. And religious organizations, such as Jewish Family Services, often offer therapy on a sliding scale. The best way to find resources in your community, says Richardson, is to dial the information hotline, 211, on your phone or look online at http://www.211.org.

When her PTSD flares up and she needs to talk to a therapist, Aurand supplements her psychiatrist visits by going to a community health clinic, the Ryan/Chelsea Clinton Community Health Center, which offers a sliding scale based on her income and charges $100-$125 a session.

Pros: You can find good care for low or no cost.

Cons: The demand at public health clinics is huge, and staffs are often overwhelmed. “There can be long waiting lists, especially for individual counseling,” says Richardson. “You may have better luck if you’re willing to join a group, such as anger management, that fits your needs.”

The bottom line

When it comes to finding affordable mental health care, persistence is the key. “It can be really daunting, especially if you’re not feeling well or don’t have insurance and think you can’t get help,” says Aurand. “But if you take the time and do your research, you’ll find someone who wants to help you. There are a lot of good therapists and psychiatrists out there, and it’s not necessarily all about the money.”

The post 5 Smart Ways to Lower the Cost of Therapy appeared first on MagnifyMoney.

Guide to Liability Insurance: What It is and Why You Need It

When it comes to protecting yourself financially, things like an emergency fund, health insurance, and life insurance are typically some of the first topics that come up. And rightfully so, given that each is an important part of a secure financial foundation.

Liability insurance is a protection that often gets overlooked. If you have an auto, homeowners, or renters insurance policy, then you likely already have some level of liability insurance in place. But it may not be enough to fully protect you, and in this guide you’ll learn how to make sure you have the right coverage for your needs.

What Is Liability Insurance and Why Is It Important?

Liability insurance protects you financially in case you accidentally injure someone or damage their property. Common situations include:

  • You’re at fault in a car accident, and the other party experiences neck pain as a result.
  • Someone slips and falls in your driveway and breaks their tailbone.
  • You accidentally back your car into someone else’s mailbox.
  • Your dog bites someone while you’re out for a walk.

Each of those situations are accidents in which someone else experiences either an injury or property damage that will cost them money to fix. And in each case, they could legally hold you responsible for paying those bills.

That’s where liability insurance kicks in. Instead of having to spend your own money, your insurance company would cover the bill as long as it fell within the limits of your coverage. Any costs beyond those limits would be yours to bear.

And truth is that some of these situations could be very expensive. Imagine, for example, a car accident in which multiple other passengers are seriously injured.

That kind of situation isn’t fun to think about. But it could happen, and at the very least you can protect yourself from the financial impact. Otherwise, you could be on the hook for:

  1. Medical bills.
  2. Fixing or replacing the other person’s property.
  3. Lost income if the other person is forced to miss work.
  4. Legal bills for both you and the other person if there is any disagreement about who is at fault.

That’s why liability insurance is so valuable. It ensures that even if the financial impact of an accident is high — such as someone being forced to miss work for an extended period of time — you won’t be on the hook for the cost.

Who Needs Liability Insurance?

Just about everyone should have some level of liability insurance, but the truth is that the more money you have, the more likely you are to need it.

The simple reason is that if you have either a sizable income or a significant amount of savings and investments, there’s more for the other party to go after. They know that you can afford it, so they’re more likely to push for getting it.

On the the other hand, if you don’t have much savings and you don’t earn much money, there’s less potential for the other party to get a financial benefit, and they may therefore be less likely to pursue it.

Still, you can be held financially liable for your actions no matter how much money you have, and in certain situations you can even be required to pay a part of your income to the injured party. Plus, with liability insurance in place, you get the benefit of an insurance company handling all the procedural aspects of dealing with a claim, which can make the entire process a lot easier.

So again, just about everyone should have some base level of liability insurance. But if you’re a high-earner, and especially if you have significant assets, you’ll probably want to make sure you have at least enough coverage to protect your entire net worth.

Four Major Types of Liability Insurance

There are four major types of liability insurance policies, two of which are simply part of insurance policies you may already have in place.

1. Auto Insurance

You typically face the greatest risk of financial liability when driving. The simple reality is that driving is risky, accidents are common, and even careful drivers make mistakes that could leave them financially liable for fixing someone’s car and paying their medical bills.

Most states require you to have a minimum amount of liability coverage as part of your auto insurance policy, typically covering the following things:

  1. Property damage
  2. Per person bodily injury
  3. Per accident bodily injury (for when more than one person is injured)

Some states also require you to have uninsured motorist bodily injury coverage, which actually covers you and other passengers in your car if you’re in an accident and the other driver is at fault, but either doesn’t have liability coverage or doesn’t have enough to satisfy your claim.

For example, the minimum coverage requirements in New York currently look like this:

  • $10,000 for property damage
  • $25,000 bodily injury and $50,000 for death per person
  • $50,000 bodily injury and $100,000 for death per accident
  • $25,000 uninsured motorist coverage per person
  • $50,000 uninsured motorist coverage per accident

The minimum required coverage is often enough to cover the most common scenarios, but typically doesn’t provide sufficient protection in the case of major accidents. When you consider the medical bills and potential lost income in an accident involving multiple people, the total cost could be much higher than even the amounts listed above.

And given that the main value of your coverage is the protection against financially ruinous outcomes, it often makes sense to increase your coverage above the minimum. Most auto insurers allow you to get up to $250,000 of coverage per person and $500,000 per accident.

Unfortunately, it can be fairly expensive to secure liability coverage through your auto insurance policy, ranging anywhere from a couple of hundred dollars per year to $1,000 or more at the upper limits. The cost depends on the amount of coverage you want and on your driving history, so a clean record could lead to lower premiums.

2. Homeowners or Renters Insurance

Like auto insurance, liability coverage is a standard part of both homeowners and renters insurance policies, although it’s not always required. And the good news is that it usually provides broad coverage at a relatively low cost.

First, it covers any accidents that happen while someone is on your property, from falling down the stairs to tripping over your toddler’s walker. If someone is injured while at your house, your liability insurance has you covered.

Second, it covers non-auto-related accidents that happen away from your home as well. If your dog bites someone while you’re out for a walk, you accidentally bump into your neighbor’s ladder while they’re cleaning the gutters, or your child damages someone’s property, your liability insurance has you covered.

And all of that coverage comes at a relatively low cost too, with even several hundred thousand dollars of coverage typically only costing a couple of hundred dollars per year.

Most homeowners and renters insurance policies start with $100,000 of liability coverage, though you can typically increase it to $300,000.

3. Umbrella Liability Insurance

An umbrella insurance policy provides additional liability coverage above the limits in your auto and homeowners or renters insurance policies. And you typically have to do two things before you can get a policy:

  1. Secure your auto insurance and homeowners or renters insurance with the same company you’re getting your umbrella policy with. Not all insurers require this, but most do.
  2. Increase the liability coverage in both your auto insurance and homeowners or renters policies to a minimum level set by your umbrella policy insurer, which is often $300,000 for homeowners or renters insurance and $250,000/$500,000 for auto insurance. This is to make sure that your umbrella coverage only covers situations in which there are extraordinarily significant damages.

Because of that second point, umbrella liability insurance is typically more than most people need. Unless your income is high enough or you have more than $500,000 in net worth, it’s probably not worth considering this additional coverage. Your auto and homeowners or renters policies are likely enough.

But if you have significant income or assets to protect, an umbrella policy can provide substantial coverage at a small cost. Coverage typically starts at $1 million, and according to the Insurance Information Institute typically costs $150-$300 per year for the first $1 million in coverage and increases by $50-$75 per year for every additional $1 million in coverage.

4. Business Liability Insurance

If you run a business, even if it’s a small side hustle, the insurance policies listed above will not cover those business activities. You will need to get a separate policy.

The tricky part here is that liability coverage varies from profession to profession, so it’s not as easy as going out and getting a generic liability insurance policy like it is on the personal side of things.

Business liability insurance is beyond the scope of this guide, but if you’re in a business where you could be held financially liable for your mistakes, getting the right liability coverage in place could be well worth your time and money.

Business liability insurance can vary so much profession to profession. For example, doctors have a completely different type of liability insurance than lawyers. And even within those professions, it will vary by specialty. So it’s pretty difficult to give a price range or even offer general resources.

Three Ways to Get Liability Insurance

When it comes to actually getting liability insurance in place, you have three main options

1. Your Current Auto and Homeowners or Renters Insurance Policies

If you already have auto insurance in place, then you already have some amount of liability insurance. You just need to check your policy to see how much you have, and ask your insurer about the cost of increasing your coverage if you’d like more.

The same is true if you have homeowners or renters insurance. Check what you have in place now, and, if necessary, ask your insurer what the cost would be to either add liability coverage or increase it.

If you’re renting and you don’t already have renters insurance, you can check with your auto insurance company about adding it. You can also refer to this guide to help you find a policy that meets your needs: Guide to Renters Insurance: When You Need it and When You Don’t.

2. Shop Around

While sticking with your current insurance company is the easiest way to secure liability insurance, it may not be the most cost-effective. You could save a lot of money by shopping around, especially if you’d like to add an umbrella policy, which would likely require you to have all three insurance policies with the same company.

Here’s a process you can follow, borrowed from the renters insurance guide mentioned above:

  1. Google “auto insurance” plus your city/state. Almost every company that offers auto insurance also offers homeowners, renters, and umbrella insurance, so this will give you a solid list to start with.
  2. Get a phone number for each of the major insurers providing coverage in your state.
  3. Call each insurance company directly and ask for quotes for both auto insurance and either homeowners or renters insurance, making sure to include the amount of liability coverage you’d like to have for each.
  4. If you are looking for umbrella liability coverage, make sure to ask for a quote on that policy as well.
  5. If you have any possessions that are particularly valuable, such as jewelry or artwork, ask how much it would cost to get additional coverage for those possessions in your homeowners or renters policy.
  6. Make sure to ask if they offer a multi-policy discount and, if so, to get the premiums quoted with that discount applied.
  7. If there are any particular threats in your region, such as flooding or earthquakes, ask about their coverage of those specific threats.
  8. Compare the coverage and cost from each insurance company, including your current insurer. If you can get a better deal elsewhere, it should be relatively easy to switch.

3. Independent Insurance Agent

A good independent insurance agent will be able to help you evaluate your need for coverage and find that coverage at the best possible price given your needs and situation.

To find one in your area, you can Google “independent property and casualty insurance agents” + your city/state.

It won’t cost you any extra to work with an agent, but you should be aware that some agents may try to direct you to higher levels of coverage than you need, simply because it provides them a better commission. You should interview a few to make sure you find someone you trust.

The Forgotten Insurance

Unless you’re running a high-risk business, liability insurance probably doesn’t need to be at the top of your list of financial priorities.

But it provides valuable protection, and it’s something that shouldn’t be forgotten. It’s typically easy to add or increase the coverage you have through your existing policies, and doing so ensures that no accident will put you in a situation where you can’t reach your other financial goals.

The post Guide to Liability Insurance: What It is and Why You Need It appeared first on MagnifyMoney.

3 Things to Know About Long-Term Care Insurance

Long-term care insurance is designed to save you money later in life if you need medical care, such as hospice or round-the-clock assistance from nurses.

But some long-term care insurance policyholders are feeling the financial crunch because of a rise in premiums.

An estimated 7.2 million Americans held long-term care insurance policies in 2014, according to The State of Long-Term Care Insurance 2016, a report by the National Association of Insurance Commissioners and the Center for Insurance Policy and Research. An estimated 15 million Americans will need long-term care by 2050, the report notes.

Here are three things to consider about purchasing long-term care insurance.

Long-term care insurance is only getting more expensive

In 2016, insurance companies raised premiums, outraging policyholders. Customers in Pennsylvania saw a 130% increase in their premiums, and New Yorkers under Genworth’s policy faced a 60% premium increase. Federal government employees, insured by John Hancock Life and Health Insurance Co., saw their premiums rise by an average of 83%.

“The rising costs for long-term care insurance are directly linked to the rising costs of long-term care,” says James Carson, Daniel P. Amos Distinguished Professor of Insurance at the University of Georgia. “Insurers vastly underestimated costs associated with long-term care, and subsequently revised upwards their insurance premium structures, even on existing policies.”

While the increases in premiums were legal and authorized by the state, this left many policyholders unhappy, Carson says.

Since its emergence in the 1970s, expenditures in the long-term care market have grown. Less than $20 billion was spent on long-term care when it appeared in the marketplace. By 1980, these expenditures had grown to $30 billion.

Now more than $225 billion is spent on long-term care, according to The State of Long-Term Care Insurance 2016. As more long-term care is demanded, these expenses are pushed onto the insurance companies, resulting in rising incurred claims costs.

Meanwhile, Americans are living longer and spending more on health care. Americans aged 55 and up accounted for 55% of all health spending in 2014, even though they represent only 28% of the U.S. population, according to the Kaiser Family Foundation.

“Millennials should start paying attention to the looming costs associated with long-term care, and possibly also long-term care insurance, because they are going to live a really long time,” Carson says. “Health costs tend to get much larger when we get older.”

Once in retirement, the average American is expected to spend as much as $250,000 on medical expenses, says Tony Steuer, founder of the Insurance Literacy Institute, based in California.

Like any insurance, the trade-off with long-term care insurance is the leverage provided. If you can’t afford the premium and it doesn’t provide good leverage, investing in long-term care insurance might be unwise, says Steuer, also a member of the National Financial Educators Council Curriculum Advisory Board.

Timing is everything

Unlike traditional health insurance, long-term care insurance covers health services in late stages of life, alongside Medicare. Medicare may not cover all the services you need after it kicks in once you turn 65, especially if you are battling illnesses such as dementia or cancer.

For example, the U.S. Department of Health and Human Services projects that an American who turned 65 in 2016 will incur $138,000 in future long-term care expenses. About half of those costs will be paid for out of pocket, and the other half will come from private insurance and government assistance programs, such as Medicaid.

Purchasing long-term care insurance now can protect you from paying so much out of pocket at a time when medical needs are greater and often more expensive.

Long-term care insurance is most beneficial for those who can’t perform two out of six daily activities of living, such as eating, bathing, dressing, and walking. The insurance reimburses policyholders up to a preselected limit daily, so customers receive the services that get them through activities of daily living.

Services covered by long-term care insurance become more necessary as life expectancy increases and retirement funds drain.

Typically, long-term care insurance is purchased by those over the age of 50, says R. Vincent Pohl, assistant professor of economics at the University of Georgia, whose research interests include health economics.

“For a monthly premium that may depend on age and health, insured individuals get nursing home stays and other forms of [long-term care] paid for by the insurance,” Pohl says. “Long-term care insurance can only be bought before someone enters a nursing home for the first time.”

Steuer advises those who expect a need to purchase a long-term care policy after the age of 40. But purchasing long-term care insurance in your 40s also could save you hundreds of dollars in premium costs, compared to doing so in your 50s.

One way to consider your need for long-term care insurance is to look at your family’s medical history. For example, if a parent or grandparent has Alzheimer’s or Parkinson’s disease, long-term care insurance is something to consider. Once a debilitating condition develops, you may not qualify, or it may be more difficult to find a provider.

Long-term care insurance helps you pay now for options later

In these cases, knowing about long-term care insurance and having invested in it before your health started to decline can prove to be beneficial.

Joanne Westwood, who lives in Ohio, learned the value of long-term care insurance when her father developed Alzheimer’s disease, and her stepmother, the primary caregiver, became ill.

“We needed to get [my father] in a place with consistent caregiving, and we needed to take it off of [my stepmother] because she was killing herself trying to be his caregiver,” Westwood says. “If he didn’t buy long-term care health insurance 20 years ago, we’d all be in a heap of trouble right now.”

Westwood’s father, now in his mid-80s, qualifies for Medicare, but Westwood says it isn’t enough. Medicare offered the bare minimum, not enough for him to stay in a facility without paying out of pocket.

Long-term care insurance gave the family options.

“It’s a lot of peace of mind and comfort,” Westwood says.

Westwood, 57, is now trying to purchase long-term care insurance for herself. After doing the research, she expects to pay much higher premiums than her father did 20 years ago, since she’s getting started in her late 50s and because of rising costs.

She says she wishes she had purchased long-term care insurance at a younger age. Even though you’re paying for a longer time, the premiums are much lower, she adds.

Pros & Cons of Long-Term Care Insurance

The Pros:

  • Future medical costs will be lower. Long-term care insurance can help you pay for the health care expenses not covered by Medicare or Medicaid. One in six individuals, or 17%, will pay at least $100,000 out of pocket for future long-term care services and support, according to the U.S. Department of Health and Human Services.
  • You could buy a bit of peace of mind. If you’re investing in retirement accounts, a long-term care insurance policy provides another layer of confidence that if significant medical costs arise, it won’t eat into your nest egg.

“Living longer means an increased chance of needing long-term care,” says Kerstin Osterberg, a spokeswoman for Northwestern Mutual. “It’s critically important that individuals have a financial plan in place to protect their assets and cash flow if they should need long-term care.”

  • Buying a policy in your high earning years could cut the costs later on. Peak earning years for most people are in their late 30s to early 50s. You’ll pay more if you wait until your 50s, 60s, or 70s to sign up for long-term care insurance, and even risk not finding an insurer willing to give you coverage.

Because long-term care insurance premiums are based on several factors, such as age, sex, policy, and location, costs vary from person to person. Even if two people purchase insurance at the same age in the same state, they’re likely to pay different rates.

A 55-year-old male in Georgia will pay an annual premium of $2,645 to receive $200 of coverage a day over four years, according to Genworth’s long-term care insurance calculator. In comparison, a 40-year-old male in Georgia will pay $2,272.40 annually for the same policy. The Genworth calculator assumed a 90-day elimination period.

“In the world of insurance, you can almost always find someone willing to insure you. The problem then arises — is the coverage enough to support you?” says Jeremy Pierce, who has worked as a financial planner in Georgia. “In many cases, when you wait too long, that cost simply isn’t affordable.”

The Cons:

  • You may not need to use it. Long-term care insurance requires that you pay now to have coverage when you are older. If you don’t need medical care when you are a senior, you paid for something you won’t use.
  • You may not be able to meet the requirements. To use the benefit, you have to be unable to perform two of six activities, such as bathing or feeding yourself. Your health may not be poor enough to use it as a result. “It is likely that a claim won’t be made until someone reaches their 70s,” Steuer says.
  • You may not be able to afford it right now. If you have student loans and other expenses that have placed you in debt, paying for a long-term care insurance premium simply may not be possible. Steuer advises those who expect a need to purchase a long-term care policy after the age of 40 and if you have assets between $1 million and $5 million. “Someone who either has less than $1 million or more than $5 million should not consider it,” he says.

The post 3 Things to Know About Long-Term Care Insurance appeared first on MagnifyMoney.

Mortgage Insurance Explained: What It Is and Why You Should Have It


There’s a lot to consider when purchasing a home. Location, size, and cost spring to mind as three of the most important factors. Perhaps you’ve budgeted and figured out how much you can afford for a down payment, but have you also considered your total monthly mortgage payments?

If you’re applying for a mortgage and can’t afford to put at least 20% down, you may have to pay for mortgage insurance.

What is mortgage insurance?

Mortgage insurance helps protect the lender’s investment, not the homeowner.

A homeowner’s insurance policy may reimburse you for a variety of expenses, including vandalism, thefts, and environmental damage to your home. Mortgage insurance is a bit different. Although you are responsible for mortgage insurance premiums, the policy protects the lender.

Casey Fleming, mortgage adviser and author of “The Loan Guide: How to Get the Best Possible Mortgage,” explains mortgage insurance “insures the lender against principal loss in the event you default, they foreclose, and the foreclosure sale doesn’t bring in enough money to cover what they’ve lent you.” In short, if you don’t pay your bills, the insurance company will help make the lender whole.

The 20% down payment rule

Mortgage insurance isn’t required for all homebuyers. “Typically, homebuyers looking to get a conventional mortgage must pay PMI if they are making a down payment of less than 20%,” says Josh Brown of the Ark Law Group in Bellevue, Wash., which specializes in bankruptcy and foreclosures. Brown points out PMI serves a valuable function by allowing otherwise qualified homebuyers (with an acceptable debt-to-income ratio and credit score) to be approved for a conventional loan without the need for a large down payment.

How to find mortgage insurance

Mortgage lenders will often find a PMI policy for you and package it with your mortgage. You will have a chance to review your PMI premiums on your Loan Estimate and Closing Disclosure forms before signing paperwork and agreeing to the mortgage.

Types of mortgage insurance

There are two main types of mortgage insurance: Private mortgage insurance (PMI) and mortgage insurance premium (MIP).

PMI helps protect lenders that issue conventional, Fannie Mae and Freddie Mac-backed, mortgages. You’ll often be required to make monthly PMI payments, a large upfront payment at closing, or a combination of the two. These payments are made to a private insurance company and are required unless you have at least 20% equity in your home. You may request to cancel your PMI once you have paid down the principal balance of your home to below 80% of the original value.

Mortgages issued through the Federal Housing Administration (FHA) loan program also require mortgage insurance in the form of a mortgage insurance premium (MIP). You will be required to pay an upfront fee at closing and an MIP every month as part of your monthly mortgage payment. Your MIPs depend on when your mortgage was finalized and your total down payment.

How much mortgage insurance will cost you

Protect Your House

PMI premiums can vary depending on the insurer, your loan terms, your credit score, and your down payment. The premiums often range from $30 to $70 per month for every $100,000 you have borrowed, according to Zillow.

Many homeowners’ monthly mortgage payments include their PMI premium. Alternatively, you might be able to make a one-time upfront PMI payment. Or, you could make a smaller upfront payment and monthly payments.

As we mentioned earlier, for an FHA loan, you will have to pay upfront mortgage insurance premium (UFMIP) which is generally 1.75% of your loan’s value. You may have the option of rolling this premium payment into your mortgage and pay it off over time. Your MIP depends on your down payment, the base loan amount, and the term of the mortgage and can range from .45% to 1.05% of the loan’s value. The MIPs must be paid monthly.

Mortgage insurance doesn’t have to be forever

There are a few situations when you may be able to stop making mortgage insurance premium payments.

There are two eligibility requirements for conventional mortgages closed after July 29, 1999. As long as you’re current on your payments, PMI will be terminated:

  • On the date when your loan-to-value is scheduled to fall below 78% of the home’s original value.
  • When you’re halfway through your loan’s amortization schedule; 15 years into a 30-year mortgage, for example.

Your home’s original value is often the lower of the purchase price or appraised value. The current value of your home and your current loan-to-value aren’t figured into the above criteria.

You can also submit a written request asking your lender to cancel your PMI:

  • On the date your loan-to-value is scheduled to fall below 80% of the home’s original value.
  • If your current loan-to-value ratio is lower than 80%, perhaps due to rising home prices in your area or renovations you’ve done.
  • After refinancing your mortgage once you have at least 20% equity in the home.

Unlike PMI, if you have an FHA loan, your MIP may not ever be removed. The date your mortgage was finalized and the amount you put down determines your eligibility:

  • The MIP stays for the life of the loan for mortgages closed between July 1991 and December 2000.
  • The MIP will be canceled once your loan-to-value is 78%, if you applied for the mortgage between January 2001 and June 2013, and you’ve owned the home for five or more years.
  • If you applied after June 2013 and put at least 10% down, the MIP will be canceled after 11 years. If you put less than 10% down, the MIP stays for the life of the loan.

Refinancing an FHA loan to a conventional mortgage may provide you with additional options.

The pros and cons

There are a variety of pros and cons to consider when weighing the options of waiting to save a 20% down payment versus paying mortgage insurance.

Melanie Russell, a mortgage loan officer in Henderson, Nev., points out buying now can make sense if you expect home prices to increase or interest rates to climb.

What about waiting? In addition to avoiding mortgage insurance, putting more money down could lead to lower closing costs and a lower interest rate on your mortgage. Also, if you expect prices to drop, you’re saving on all the costs that could come with ownership, including taxes, mortgage, insurance, maintenance, and potential homeowners’ association fees.

In the end, it’s often a situational and personal choice. While Russell shared a few positives to buying early and paying for PMI, she also notes, “Only you can answer this question for yourself.”

When you don’t need mortgage insurance

There are also a few options that don’t require mortgage insurance, even if you can’t afford a 20% down payment.

For example, Veterans Affairs (VA) loans, offered to qualified veterans, don’t require mortgage insurance. You might not have to put any money down either, but these loans usually require an upfront payment at closing.

The Affordable Loan Solution program offered through a partnership between Bank of America, Freddie Mac, and the Self-Help Ventures Fund allows borrowers to put as little as 3% down without taking on PMI. Maximum income and loan amount limit requirements may apply.

You may also find some lenders willing to offer lender-paid mortgage insurance. You’ll pay a higher interest rate on the loan, but in exchange, the lender will make the insurance payments for you. “The math works differently every time,” says Fleming. “If a borrower thinks they won’t be in the property very long, [lender-paid mortgage insurance] might be a good choice, as sometimes the additional amount you pay is lower this way.”

However, if you’re in the home and paying off the mortgage for a long time, it could be more expensive than taking out a conventional loan with PMI. Because the premiums are built into your mortgage, you won’t be able to get rid of the extra payments after building equity in the home.

Another option could be to take out a second loan, called a piggyback mortgage. Although there are potential downsides to this route, you can use the money from the second loan to afford a 20% down payment and avoid PMI. Some people also borrow money from friends or family to afford a 20% down payment, but that could put your relationship in jeopardy if you run into financial trouble.

Finally, you might also discover lenders offering no-mortgage-insurance loans with a 10% to 15% down payment. As with the lender-paid mortgages, it’s important to review the fine print and the potential pros and cons of the arrangement.

The post Mortgage Insurance Explained: What It Is and Why You Should Have It appeared first on MagnifyMoney.

4 Credit Cards That Will Make It Right If You Get Ripped Off

credit-card-purchase-protection

If your credit card has been stolen or used without your consent to make purchases, you’re usually protected. Under federal law, consumers who report credit card fraud or theft cannot be held liable for more than $50 (and often aren’t even faced with paying that penalty, depending on the circumstances). If the credit card isn’t present at the point of sale of the purchase(s) in question, the cardholder cannot be held liable for any damages. When it comes to credit card theft or fraud, you should be covered in most cases as long as you catch the activity fairly quickly.

But what if you’ve been ripped off or incurred property loss in other ways?  What if your property was damaged or stolen, or a retailer sold you faulty goods or won’t honor a return? In short, what if you suffer losses after the point of an intentional purchase?

In these situations, purchase protection that comes with many credit cards may be able to help. Purchase protection plans can cover your purchases against accidental damage, theft or even price gouging.

Here are four of the best purchase protection cards on the market. (Note: These plans only apply when you use that card to make the purchase.)

1. Citi Prestige Card

The Citi Prestige card (which you can read our review of here) comes with a long list of benefits, and an advanced purchase protection policy is one of them. (Full Disclosure: Citibank, as well as American Express and Chase, advertise on Credit.com, but that results in no preferential editorial treatment.) It offers damage and theft protection for all purchases up to $10,000 per item, with total coverage at $50,000 per year. It even extends manufacturer warranties for 24 months on qualifying items. If you try to return an item within 90 days and the merchant won’t accept the return, you could even be reimbursed the purchase price.

Citi Prestige even offers a search feature that looks for lower online prices for certain registered items you buy. If they find the same item within 60 days of the purchase date, you could be reimbursed the difference. And, if you can’t attend a sports or entertainment event you purchased tickets to using your Citi Prestige credit card for a number of reasons — including your ticket being stolen or the event being cancelled with no refund — the plan could have you covered.

2. American Express Premier Rewards Gold Card 

With the American Express Premier Rewards Gold credit card (which you can read a review of here), you’ll be protected if any of your purchases are accidentally damaged or stolen for up to 90 days from when you bought them, for $10,000 per occurrence, up to $50,000 per year. Unlike the Citi card, American Express also covers jewelry. American Express has a few purchase protection policies, so if you have a different American Express card, you may want to consider looking at your terms and conditions to see if you have any purchase protection coverage.

3. Chase Sapphire Preferred Card

The Chase Sapphire Preferred credit card (which you can read a review of here) has excellent travel rewards and comes with purchase protection.

With this card, you may be able to receive a replacement (or be reimbursed) for lost or damaged items for up to 120 days, up to $500 per claim and $50,000 per account annually. They may also reimburse you if a product your purchased is advertised for less, in print or online, up to $500 per item and $2,500 total per year.

The Chase Sapphire Preferred card also extends eligible warranties by an additional year. If a merchant won’t accept a return within 90 days of purchase, Chase may reimburse you for the purchase, up to $500 per item and $1,000 per year.

4. United MileagePlus Explorer Card From Chase

The United MileagePlus Explorer Card (which you can read a full review of here) is another credit card option for travelers. You can be reimbursed for certain items if a retailer won’t accept returns, within 90 days of purchase, up to $500 per item and $1,000 per year. The card may also reimburse you for stolen or damaged purchases for 120 days, up to $10,000 per claim and $50,000 per year.

This card offers extended warranties for an additional year and offers price protection up to $500 per item and up to $2,500 per year.

Most of these credit cards have a long list of excluded items and scenarios covered by the purchase protection policy. If you ever do need to file a claim, most cards will require you provide specific paperwork, including original receipts, insurance claims and even police reports in the case of theft. You may want to carefully review the details of any purchase protection plan before you choose a credit card.

Applying for a New Credit Card

If you’re looking to add a new piece of plastic to your wallet, there’s a lot to consider, like what you want your card to offer you and if you can afford an annual fee. To start the process, you may want to get an idea of what types of cards you can qualify for. To do this, you can take a look at your credit scores, as many premier credit cards are only available to those with good or excellent credit. (You can see two of your credit scores for free, updated every 14 days, on Credit.com.) If, after you review your credit, you discover your scores aren’t quite where you’d like them to be, you may want to consider doing what you can to repair them. This includes things like paying down debts, disputing any errors you discover on your credit reports and limiting the number of inquiries on your credit until your score rebounds.

At publishing time, the Citi Prestige and American Express Premier Rewards Gold cards are offered through Credit.com product pages, and Credit.com is compensated if our users apply and ultimately sign up for these cards. However, this relationship does not result in any preferential editorial treatment.

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.

 

Image: Geber86

The post 4 Credit Cards That Will Make It Right If You Get Ripped Off appeared first on Credit.com.

How to File an Insurance Claim When Disaster Strikes

man grieving over house destroyed in flood.

Hurricane season is an old and familiar threat for many residents living along the southeastern coast of the U.S. Hurricane Matthew, which made landfall in the U.S. Oct. 8, left an estimated $6 billion worth of property damage in its wake across five states (Florida, Georgia, North Carolina, South Carolina, and Virginia).

Unfortunately, many insurance policies require homeowners to purchase supplemental policies for specific coverage for natural disasters like hurricanes and flooding. Homeowners in Matthew’s path will need to act quickly to file damage claims with their insurance companies.

Here are some tips to get started:

  1. Report any crimes to the police. If your home has been burglarized or vandalized, you should report that to the police first. File a police report and make sure to write down the names of all of the officers that you speak with. Your insurance company will ask for those police records.
  2. Contact your insurance agent. Next on your list should be contacting your insurance agent to get any damage and/or loss claims started. Contact the insurer as soon as possible. Insurance companies typically put limits on the time homeowners have to file claims, which vary by state. Ask the insurance agent if your coverage includes hurricane insurance. Disaster policies often have deductibles, so be sure to ask your agent if you will have to meet a deductible before your coverage kicks in. Lastly, ask for a timeline for your claim, so you know when to expect it to be completed.
  3. Gather all necessary paperwork. Take this time to ask your insurance company what documents you’ll need to report damage or loss. They may ask for repair estimates or evidence of structural damage.
  4. Make temporary repairs. Insurance claims can take weeks or even months to process. Don’t wait that long to make repairs to your home that could pose a safety risk to your family. Keep all of your receipts so that you can be potentially reimbursed down the road.
  5. Beware of contractor scams. Sadly, natural disasters can be a prime breeding ground for contractor scams. Be wary of anyone who charges a fee to help you complete disaster assistance forms like those offered by the Federal Emergency Management Agency. Those are provided for free from both FEMA and the American Red Cross. Also, don’t agree to a random inspection by someone posing as a federal emergency response agent. Check their credentials first and ask for a phone number to verify that they are with an authorized agency. Some scam artists have been known to charge unwitting homeowners fees to enter them into federal “grant programs” that purport to help hurricane victims. Legitimate grant programs do not require upfront fees.
  6. Relocating? Keep your receipts. If your home has been rendered uninhabitable, and you are forced to relocate, keep track of those moving expenses as well. Some insurance policies will cover you for the “loss of use” of your home.
  7. Take inventory of damaged or lost items. Make a list of damages, and check it twice. You’ll need it to prove any losses that you claim. Take pictures or video of the damage, and don’t throw anything away yet. Make note of all of the damages you’ll need the adjuster to see. If an item is not properly recorded, you could lose its value in the claim. While you’re at it, get your electrical system checked. It may cost you upfront, but it’s worth checking, and most insurance companies will reimburse you for the inspection. Pull together your inventory and bundle it with any copies of receipts you can find for your damaged items to give to the adjuster when they arrive. Turn it over with any repair estimates that you’ve gotten from licensed contractors, as it could help speed up the process.
  8. Make an appointment with the claims adjuster.
    More than likely, your insurance company will also send an adjuster to check out your home, verify your claims, and tell you how much the damage is worth. They should connect with you soon after you contact the insurance company to arrange a time to come to assess the damages. When they connect with you, make sure you have any necessary paperwork ready to go, and you will be all set to finish your claim.

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12 Ultimate Rides for Tailgate Parties

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Photo: Steve Debenport

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