Friday, March 1, 2013

Events You Should Notify Your Insurer About

Insurance covers every aspect of life, from homeowner’s insurance to life, car, property, health, business and everything else. When events occur in life that can affect insurance premiums, it can be tempting to avoid communicating these to the insurance company because of the additional financial burden that the higher premiums cause. But all insurance policies contain the requirement of informing the insurer of any events or occurrences that could affect the cost and terms of the coverage. Not to do so may render the policy void.

Here are some of the common events that are either concealed from insurance companies or which are overlooked as not being relevant to the coverage:

In many cases, an insurance claim may be filed and the company will know about the event. But in some instances no claim may be raised and then it is incumbent upon you to inform the insurer.

In the case of homeowners insurance, events such as remodeling or major renovation or room additions change the value of your home. The insurance company should be informed about this and the policy modified to reflect the increased value so that if a claim should be raised, the policy provides adequate coverage.

In the case of business insurance, things like a need to increase stock or inventory levels or an increase in turnover must be reported to the insurance company so that your coverage can be modified to reflect the possibility of higher loss due to accident, theft or disruption of commercial activities.

Similarly, events like hiring new people should be conveyed to the insurer so that the health insurance and workmen’s compensation policies can be revised as needed.

Car insurance is an area where many events that can affect insurance occur. An accident that causes damage or injury may be covered by the other party’s insurance but you should inform you insurance company also, as the value of the car may be changed and the injuries could have long term health consequences.

Not all events result in increased insurance premiums. Many, such as installing a security system at the home or place of work, increased fire protection, putting anti-theft devices in your car or stopping smoking or excessive alcohol consumption can reduce what the insurer sees as risk factors and result in lower insurance costs.

The basic principle to follow is inform the insurance company about any events that could affect the policy either in terms of leaving you without inadequate coverage or affecting the coverage that exists. And if you are not sure about whether the insurer should be informed about a particular event, the policy should be “when in doubt – inform.”

An insurance company that sees that you are diligent about informing them about events that could affect your insurance coverage, even if they do not, will go out of its way to work with you when you do make a claim.

Smoking Could Cost You More With The Affordable Care Act In Place

The cost of cigarette smoking and other forms of tobacco use are well known, both in terms of effect on a smoker’s health and the rising cost of tobacco products. There can be no disputing the fact that smoking is injurious in more ways than one and can be lethal. However, this has not stopped the almost one in five Americans who still smoke regularly. Now, because of the tobacco use penalties that are present in the President’s health care law, the impact of smoking on their pockets will be even more severe.

Obamacare has a few little noted provisions that are only now coming to light and the impact of which are still being assessed. Among these is a provision that allows health insurers to charge individuals who smoke up to 50% more in their health insurance premiums. This will kick in from January 1 next year. While the exact nature and amount of the penalties will vary from case to case, a ball park estimate is possible. In the case of a smoker who is 55 years old, the additional financial burden by way of increased health insurance premiums will be in the range of $4,000 plus a year. For a smoker who is 60, the impact could be substantially higher – around $5,000 per year.

Since the increase in premium amounts is age related, younger smokers will pay less by way of the “smoking penalty.” This reduces the effective financial deterrent at the age when the habit develops and takes root. However, the impact is expected to be massive on older smokers because the high penalties appear at the age when most smoking related health complications begin to appear and when retirement and living on a fixed income is a fast approaching reality. Add to this the fact that smoking is highest among the lower income section of the population and the total impact of the increased premiums because of smoking becomes obvious.

Those who are covered under job related health insurance plans will be able to avoid the penalties by joining programs to enable them to give up the habit, but it is unlikely that this option will be available to individual policy holders. Additionally, although the law provides for those who are unable to get coverage under the new provisions to buy private healthcare insurance and provides for tax credits to keep the premiums at reasonable levels, this will not help smokers. The tax credits cannot be used to offset the higher premiums that may be charged on account to the insured person being a smoker.

The increase in premiums by up to 50% is a figure whose impact may not be obvious initially. A look at a possible scenario will make clear how huge an impact it will really have. If a person aged 60 years takes a health insurance policy under the new law the cost will be around $10,000 a year. The tax credits that can be availed of will bring this figure down to about $3,000. But the penalties could add another $5,000 to the cost of insurance, making the total $8,000 plus. If that individual is earning $35,000 per year, health insurance will cost him or her around 24% of the annual salary. By this calculation smoking will not just become very expensive, it will be financially unviable.

All those who have been trying to kick the habit and have not been able to succeed now have a huge new incentive to stop smoking. The cost of smoking, direct and indirect, is not a problem to be faced in the future. It is here and needs to be tackled now. And the only way to do this is by stopping.