Archive for June, 2010

Individual Health Insurance & Healthcare Reform Act

Medical insurance is a big part of every American household. It takes about 5-10% of the income if covered by employer or more around 10-25% for self employed individuals. Self Employed individuals including myself are forced to shop for their medical insurance needs in the open individual market. With no proper regulation, they face lot of hazzles to get coverage for themselves and their family.  Without proper medical coverage is a major concern for many individuals.


The hazzle starts with coverage limitation for pre-existing conditions, even rejections in some cases, high premiums, high out of pocket expenses and much more. I myself changed insurers many times in the past 5 years just to keep low deductibles under the budget. With the new National Health Reform Act, we hoped for some relief and looks like some relief is here.


Drawbacks of Current individual insurance market


Let’s first look at some major downsides in getting individual health insurance coverage which might help to appreciate the changes.

  • An individual/self employed cannot buy coverage in the “group market” like small business or corporate companies. Employers usually cannot be turned down for coverage in the group market and also negotiation power.  Instead, the self-employed have to buy coverage in the open individual market which might allow flexibility to choose from different insurers but premium is not bargainable.
  • Also Insurance companies many times rejects applicants with pre-existing conditions and are not required to cover them at anytime. They even cancel the insurance for many individuals when they get sick very badly. So people with serious health conditions was never able to buy coverage in the individual market. Even if they do, they can only get very expensive coverage in the high risk pool, if they can afford it. On top of that, there will be annual or lifetime benefits limitation.
  • Treatment for pre-existing conditions can be excluded for up to 18 months for coverage offered to self-employed people in the individual market. Usually it is only 12 months for the coverage sold to small businesses or corporate in the group market.

Changes on the way by New Health Reform Act


That’s correct. Changes are coming on our way and we can only hope them to be good. Below are some of the proposed regulations, most of them are expected to go active by next year.

  • Insurance companies would no longer be able to deny coverage to kids with pre-existing conditions.
  • Certain annual and all lifetime limits on benefits would be prohibited.
  • Insurance companies would no longer be allowed to drop coverage when policy holders get sick.
  • Prohibits insurers from requiring policyholders to get prior authorization for emergency services.
  • Insurance companies must also spend at least 80 percent of their premium revenue on direct medical care for individual policyholders — or pay rebates, starting next year. 
  • Insurance companies will not be able reject applicants with pre-existing conditions or set premiums based on a person’s health status.
  • Individuals and Self employed people can buy coverage in the Health Insurance Exchange (just like members of Congress), where he/she can choose among competing insurance companies.

As per reports, National health reform act is expected to help around 13.1 million self-employed Americans. At the same time, there are things which still need to considered like Pregnancy coverage. I don’t see any relief for young self employed who want to grow their family. Maternity insurance is another area individual insurance doesn’t cover and hope they do something about it.

My CFP Certification Journey

This week I am so happy and mentally relaxed, feeling a big sigh of relief.  I finally completed the CFP course and I am so excited about it.  Yes, I did it after all!!

Many of you know or might have saw it listed as one of my goals is to get CFP Certified by 2010. Completing 6 course series is one of the education eligiblity requirement to sit for CFP Certification.  While I am thrilled about finishing the course, I know my journey is not over yet. I just crossed half of the ocean. I need to cross another half and hope to make to the other side soon!!

Like my friends you might ask, what is CFP actually? What is the big deal in getting CFP certified? Let me explain a bit if you didn’t google about it.

What is CFP?

Many say CFP certification has reputation similar to ceritifications like CPA and tough to pass close to bar exams. It is recognized as standard among those who seek the knowledge and skills necessary to objectively assess their clients’ current financial status, identify problem areas, and recommend appropriate actions–in short, to provide comprehensive, client-based financial planning. With trouble economy, consumers are looking for trusted and authority advisors. CFP is a symbol of authority for planners to show their expertise in financial planning to help guide clients in the right path of financial well being. 



What is CFP certified means?

CFP ceritification is administered by CFP board which enforces strict rules and ethics to be followed by the planners. This gives great level of comfort to consumers who wants to talk about their personal financial matters and their future growth. It is difference as simple as asking advice from nobody or certified plumber to fix your faucet.

The Certified Financial Planner® or CFP® Professional Education Program has defined the financial planning profession since 1972 and has been the basis on which many other financial planning education programs have been developed.  


To become a CFP certificant, you must get thru (5 E’s):

  1. Eligibility – To start with, certification will require an undergraduate bachelor’s degree from an accredited college.
  2. Education – Satisfy an educational requirement taking CFP board-registered program if you don’t have finance background.
  3. Exam – Pass the CFPCertification exam: a 10-hour test that takes 1.5 days (four hours on Friday and six hours on Saturday), conducted three times during the year (typically on the third Friday and Saturday of March, July and November).
  4. Experience – Acquire three years of qualifying full-time work experience (or equivalent). Qualifying work experience is defined by the CFP board as “the supervision, direct support, teaching or personal delivery of all or part of the personal financial planning process to a client.
  5. Ethics – Agree and adhere to the Code of Ethics and Professional Responsibility

As of now, I just got through 2 E’s and need to get pass another 3 E’s.

Motivation and Experience

I even asked myself, Why am I doing CFP? Being a software guy by education and profession, what is the need and motivation to take on this leap effort?  The answer in short, I am passionate about money management. At the same time, I want to share my wealth of every day successful experience about money and help guide others. In the blog flocked internet era, anybody who has small experience are also posting and sharing their experience. How can I differentiate myself and show authoritative. A person is only considered as an authoritative source only when he has formal education and experience.

Today, I share my knowlege and experience through this money matters website and other avenues as ordinary individual. But I want to be an authoritative source. I have motivator that’s Mr. Ray Lucia, CFP who can talk and answer almost any type of financial questions. I want to be like him, may be work for him some day. Whether I make money or not, I want to help middle class individual with their money and financial issues. 

One more thing, I like to challenge myself now and then. I get bored if I don’t do that. I took the challenge to run a marathon in 2002 just after starting to run in 2001. I completed in 3 hrs 41 mins. So this is another challenge which can help others too. I feel this is even bigger than Marathon. I have done many Microsoft certifications in the past and I thought it would be a breese.  I was proven wrong. I signed up for Self study course with Boston University CFP program. The program was well explained and also got good support from tutors. I paid only 60% of fees compared to other insitutions charge because I signed up the right time to get a very good offer.

 
I started at Dec 17,  2008 and took me till Jun 15, 2010. There were hundreds of topics discussed in detail manner. I thought of completing well in advance but once I started it took me 4 months to finish my first course and another 3 months to do the next one. I realized, I won’t be able to complete all of the course in 18 months time period given by BU. I have heard many people took 3-5 years via self study path and I don’t want to take that long. So I decided to speed it up and start to put more time and completed one by one in every 2 months by skipping the reading assignment.

I am so glad it is over and my long study hours are done for now.  It took around one and half year while working full time and having another baby along the way. It is well worth an experience to learn and connect every aspect to the real life scenorio. But it wasn’t an easy task. I am happy to have accomplished part of my 2010 goal.

For all these, I owe a Big Thank you to my lovely wife. She stood behind me, pushed me by reminding and encouraging me all the time to get this course completed.

Next Step

I am taking a break for couple of months. I am so close in getting my 2nd rental property and need to  work on it to put up for rental. After that, I plan to sign up for review classes in August to prepare for the Nov exams. I have confident and hope to clear the exams in the first attempt and plan to write about it. 
 

Image source from bionicturtle.com

Auto Insurance: Do I really need to report minor accidents?

Last month, it was bad one for my vehicles. I was involved in two accidents. Fortunately, I am ok but it is unfortunate to have accidents and none of ’em is my fault. Both times, I was actually rear ended and spared with minor damages. It is not fun to get involved in any type of accident. That’s for sure. But what can we do, even if you drive safely and careful enough other drivers tends to just find us and hit.

First, it was my Ford Truck which is already 13 years old but runs quite well so I can’t complain. It was a teanage driver who was trying to squeeze her Ford Tarus car on the left side to take left turn while I was waiting infront of the light. She hit me on corner and caused small dent with scratches on the bumper. We stopped and witnessed the damage. I decided to let her go because it wasn’t that bad and truck was already old. I didn’t bother to get it fixed. For the benefit of her, I let her go even without taking any insurance information.

Next my Honda Accord which is only 6 years old. It is in good shape and I like to keep that way because it is our family car. This time it was lady again who thought I started moving after lights change and read ended directly behind me. I felt little neck pain but not bad. We pulled out of traffic and stopped near by to assess the damages. It wasn’t too bad outside but I was worried about internal cushion/absorber damage. So I took her license information anyways but didn’t call any cop for the report and we left.  

Daunting Questions

In both the instances,  damage was minor and nobody was hurt. Like any accident, they came shocking and unexpected, bringing in some kinda of uncomfortable feeling. At that moment, one has to act fast and think what needs to be done next.  This only holds true when it’s a small/minor accident and you are in stable and consicous condition. Questions I started thinking were,

1. Do I call the insurance company and report?
2. If I want to report, do I need to call Police to get report?
3. Am I ready go through the hazzle of getting this small problem fixed?

Answers to all the above question depend on analyzing various aspects like,

I. How old is your vehicle?
II. Do you own the vehicle or lease it?
III. Are you some one who care so much about your car, even small scratch bothers you?
IV. Are you willing to go thru the hazzle of insurance calls and fixing the vehicle?
V. Are you in hurry to go somewhere?

For example, if it’s my own car, reasonably new and damage was physically visible, I would better call and report to insurance and also get  a police report if I and other party has more time.

Let me remind you one important thing. As per the insurance contract, we all are suppose to inform the insurance company of any accidents to our vehicles. But how many people do it for sake of avoiding the hazzle and insurance premium increase.There are surely Pros and Cons behind reporting.

Pros

1. Increased resale value because of dent/damage free vehicle
2. Peace of mind because your Vehicle is safe without any internal damages


Cons


1. Your future auto premium can go up according to your Insurance score were claims are part of calculation. If you make more claims whether it’s your fault or not, insurer might have unfriendly logic to quote higher premiums as per my experience.


2. Hazzle and Time Consuming process – You either have to take your vehicle to body shop or make an appointment for an appraiser to come out and get estimate. Take to body shop to get it fixed. Meanwhile you need to get rental vehicle or alternative commute arrangement to work and list goes on.


3. Vehicle might not be safe to drive with damages unless they are cosmetic.


4. Carfax report gets updated with vehicle accidents and reselling might be hard. At the same time, if you didn’t fix the damages you won’t get price for the vehicle. It’s a catch 22.

So I would like to conclude by saying, Use your own judgement. My situation and decisions might not fit everybody’s. Try to use the lists of questions mentioned above which might help you to make a sound decision. Don’t drive a unsafe vehicle just because you need to spend some time and money. That would be my personal caution.

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