Wall St Journal Letter

From the letter to the editor by me published in today's WSJ, commenting on a prior article on the problems with Flood Insurance in Mississippi and Louisiana.

Well said Mr. Wilson. (Real Insurance Fraud 11/16/07)

Nationwide, only about 1 in 20 households have flood insurance. As Mr. Wilson pointed out, traditional property insurance does not cover flood. Business owners are exposed too. I estimate that about 1% of businesses I consult with have flood coverage. That percentage goes up after I blow the whistle on the possible losses.

According to the National Flood Insurance Plan, almost 25% of flood losses each year are to properties not in designated flood areas. Just because it hasn’t flooded before does not mean it won’t in the future.

Some who have never experienced flood waters think the cleanup is just a matter of drying things out. Wrong! Flood water is dirty, smelly, and contaminated by everything in its path – oil tanks, gas pumps, dead animals, sewerage… Cleanup is not done with mops and sponges. Shovels, backhoes, and decontamination suits are required.

Your insurance agent can provide a quote. You might be surprised how cheap the coverage is. Why risk a lot for a little?

Life Insurance's advantage as a tax-sheltered investment

Life insurance could have two roles as a tax-sheltered investment:

• The earnings on a cash-value policy are not taxed until you take them out.
• The proceeds of a death benefit settlement are not taxable to your survivors.

Death benefit is not taxable for your survivors, and using the same logic, you may compare the taxable versus the non-taxable gain: Let's assume that you currently earn $80,000 a year, and you buy a $200,000 life insurance policy to help your family pass two-and a half years without your income. If you die, your survivors get a full $200,000, and without tax.
Because the proceeds for death settlement and the earnings of a cash-value life insurance policy are both tax deferred, they serve as excellent tax shelters.

Unique advantages of life insurance as an investment

Another advantage of having life insurance is to use it as part of your investment plan. Most financial advisors would encourage you to have balanced investments so that if one kind of investment goesdown (in the stock market, for example), another one will likely go up (such as bonds or real estate).
By using balanced portfolio and investments diversification, you can compensate loss in one area by having some assets in the other areas that is profitable.

Some life insurance policies are actually long-term investments, which you can contribute to and withdraw funds from before you die. The cash-value policies for whole life and universal life insurance are actually can be considered as savings accounts that will accrue cash value over time and also pay for your protection. Although these policies don’t provide highest interest rates available, they are untaxed earnings, so you get a higher return than simply putting your money in a savings account on which you must pay taxes.
This kind of life insurance should be your priority in choosing a life insurance plan.

Life Insurance as the financial protection for beneficiaries

The need to protect your survivors also means to replace the income you bring in if you die prematurely. Perhaps, you spend large part of your earnings on the costs of bringing them up. If you die, the life insurance death benefit replaces those earnings so that they won’t have a better financial situation. If you have a mortgage on your house, a life insurance death benefit can support your family to stay in the home even if you die.
Life insurance can help solve the difficulty of the need to totally change your way of life because you lose half or more of your income.
Lastly, if you are part-owner in a business, the business may purchase a life insurance policy on you so that if you die, your partner can use that death benefit to buy out your share of the business from your heirs, which in turn would also benefit your survivors by bringing them much needed money.

Life Insurance Myth #3: Life insurance is unnecessary for elderly

A few decades ago being older is meant "more than 50". But many people need life insurance at 50, 55, 60 or 65. Age is not always a reason to forgo life insurance. Even the so-called "old" people should, because they need income protection for their survivors if the head of household or primary caregivers die prematurely. People in their 50's and 60 (and sometimes into their 70s) are often in their peak earnings moments and have large family responsibilities.

You can give your family time to adjust to your death without having to change their usual standards. Today, many more people in their 50's and 60 are continue to support young children. If a woman has a child when she was 40 or 42, that the child will still in college when her mother is 60 years old. Or let's suppose you have a non-working spouses and you die at the age of 60 years, he or she may not be able to find a decent job that provides an income comparable to keep the same standard of living.
Many elderly people actually need more life insurance for a number of reasons:

• You may have less time to compensate for the loss of revenue.
• You may find that inflation has cut into the value of police insurance.
• You have a greater need for estate planning that you are older because you have less time to carry out your plan.
• You have a greater need for tax planning as you age because you are very likely to earn more, and life insurance
• It can play a significant role in your tax planning.

Life Insurance Myth #2: Life insurance is a bad investment

Life insurance may not be the most profitable investment available, but it is rarely bad one either. If you measuring an investment only in the amount that you get in return, Life insurance may or may not be a good investment. When you are planning to buy a life insurance policy, understands that you will pay your survivors with the same money. If your family is guaranteed to get more than the money that you spend then , life insurance is a good investment. If your family will get less, it's not a good investment.
However, life insurance is much more than seeking for profitable return on investment. Life insurance also offers protection for your dependents and peace of mind that your family is better taken care of.
If you are looking for a pure return on capital, you will find many more lucrative investment, even tax-deferred or taxfree advantages. The primary function of life insurance is not as an investment but as a protection. No other investment cCan offer the same degree of protection for your family.

Life Insurance Myth #1: I only need life insurance if I have children

Most people think they need life insurance only if they have a family - to ensure that victims are not left without proper medical care, due to the lack of fund. Life insurance is important for several other reasons, which you can read in more detail later in this blog. A single person with ordinary lifestyle might still need life insurance coverage.

Voice Recognition Software

Today's Boston Globe featured my use of voice recognition software.

I've played with the tool for several years now. I finally found a version that works pretty well.

See the article here.