Monthly Archives: November 2012

People don’t understand Insurance (and why nothing is really being done to remedy this situation)

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SONY DSCWatching the news, I (like yourselves perhaps) couldn’t help but notice the frustrations of the Hurricane Sandy victims, now going on almost a month with power, and in some cases, homes. I also couldn’t help but hear some of the complaints that had to do with homeowner’s insurance. “My homeowner’s insurance said they can give me $150”. Well now, if you live in NY, that probably can’t even get you one night in a hotel, much less put any dent whatsoever in doing something to get there home back. These families have lived in these houses or apartments, paying premiums for a product that has given them no benefit. Is it just me, or is there a huge disconnect between what people think they are buying and what they actually have. I had a similar sales experience where my movers actually used their insurance as a leading factor on why I should hire them. A few broken pieces of (expensive) furniture late, the insurance covered no one, wouldn’t even pay for the tax for the repair, and the people that broke the pieces help no responsibility. Others have probably had similar experiences with auto insurance. From here I am going to make a statement that isn’t based on any studies, but willing to take the risk that it might hold some truth: people do not understand insurance. In my days as a financial advisor, for the beginner, I always advised them to buy life insurance, as it is the most straight forward. You pay a set rate, and you know exactly how much you will get when you die. And the best part is, because there is only one definition of death, the insurance companies can’t argue their way out or try not to pay you. (Some have suicide clauses, or people that lied to get the insurance – however if you were honest, you know exactly what you get when you are approved for life insurance). Critical illness insurance is a well-designed product as well, as  it is very clear on defining the benefits – 28 days after being diagnosed with a critical illness (heart attack, cancer or stroke, in most cases), a benefit is paid directly to the survivor. It is when insurance products have a lot of ‘grey’ is when you have to be careful.

People looking for insurance should look for the clear answers on what the product is that they are looking for – if your advisor or bank can’t even give you a straight answer, find a new one. Look for the black and what, and make sure there is a clear definition of when the benefit kicks in. Anyone that has faced a injury on the job, become sick and had to pay for the treatment themselves or paid out-of-pocket for a car accident knows the importance of get an insurance policy that works, and also knows the frustrations of an insurance policy that does not.

Do you have any insurance horror (or heroic) stories? Share them here! What are your tips?

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My ideal bank looks like …

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Sometimes I think I should change my bank, and it’s not just that Mint.com sends me weekly reminders on how much I may in bank fees. While the biggest deterrent is the that I have automatic bill-pay set up so I can pay utilities, telecommunications, maintenance and I can receive rent at my current bank account, and switching would require an unpleasant afternoon of being placed on hold at various bureaucratic institutions setting up my new one. Nonetheless,  I am aggravated by Scotiabank’s $12/mth fee, $1.50-$3.00 charges whenever I use non-home bank ATM’s, $5.00 ATM fees abroad and $35+ for cheques each refill. I’ve been moderately shopping for a new lending institution, and while I’ve made my list of what I am looking for, I was wondering what others look for in a perfect bank? Is it cafe-like branches filled with iPad’s and tellers in bright orange t-shirts like the ING model, or is it telephone banking, or automatic bill-pay? Or does your perfect bank a mixture of features that you just don’t think you can get anywhere? And as such, I put it to you – check out the poll below and vote for the most important feature of YOUR perfect bank, or what would make you switch lending institutions. Time to hear directly from the consumers!

When Your Cell Phone Bill is Higher than your Rent (Thanks Canada)

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Sometimes you try to stay within a budget, you see where you can cut back, you make certain adjustments, and all in all you think you are making some progress — and then another thing happens and makes you realize, once again, that most things in life (mistakes and otherwise) are learnt from experience. And like all experiences, hopefully we can look at it and make sure it never happens again. For me, this came in the mail 2 weeks ago, and proved to be the biggest monthly cell phone I have ever had. (Like in my life) And while I am contractually bound to stay in my cell phone plan (or pay a lot to get out of it, also not worth it), I can hopefully adjust to ensure this never, ever happens again. And so, here is the process I went to after getting the bill, and becoming enlightened cell phone customer #489,345,932.

1. Open the bill. Read the bill.

2. Read the bill again, this can’t be right?

3. Read the bill again, like, all 6 pages including all fine print.

4. Realized I should have updated my address sooner, as I missed some of the previous month’s payment.

5. Realized I really shouldn’t of boughten that brand new cell phone the week before. (My phone may have been broken beyond repair, however a cheaper one could have been had from buying on-line)

6. Realized I should never, ever use my cell phone outside the border, and if I do, I should call Bell (my cell phone carrier) ahead of time, to pay for a package to use my phone abroad, if so package exists.

7. Call the cell phone company, hope the CSR is as shocked by my bill as I am. (She was, and gave me $300 off) Not amazing, but I took it.

8. Re-prioritize debt repayment.

Other take aways I would give is to check out some of the different carriers, and use the phone in moderation. More and more it is looking like internet phones are the way to go, especially for long distance, and cell phones for local calls — at least for us Canadians. What are your telecommunications borrow stories? And how did you deal with it? Share your experiences here!

The Daily Commute

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Unless you’re a complete shut-in, you go out of the house. To grocery shop, to walk, to go to school, to work, to travel, to socialize. Whether you walk, drive, take transit, carpool, you have to think about how you are going to get from point A to point B, and most times there is a cost to that travel.

Your first decision to make is how much time you want to spend commuting everyday. If you are a student, the decision to go to a local university in your own city may mean you wil be living at your parent’s house, which may mean you will be spending up to three hours a day commuting — is this worth it to you? Those that may go away may live in a small town, with a cheaper cost of living, in which they will be able to live a 5 minute walk to school, thus saving on a commute. It is important to think that sometimes what you think is the easier option might not be as convenient as you think! The same goes for work – if you have a full-time job that you like, it might be worth moving closer to work, to save time and costs of commuting — walking to school or work is the best choice for time management and cost effectiveness.

If, however, you do not live close to your school or work, you will have to commute – from transit to car to bike to carpool — you get the picture. If you live in a city, chances our the transit system can get you everywhere you need to be, for unlimited travel, for about $125/month. While a good bike retails for about $1000, it may be a bit cheaper than transit, however transit runs all the time, and you don’t have to worry about cold, icy or wet weather, which you might on a bike. A car is the most expensive option, but sometimes the best choice. When buying a car, always be wary of low financing plans and potentially high interest rates — trying a site like ‘Leasebusters’ might be your best bet for a good deal. After securing your car, make sure you can carry the cost when it comes to registering your vehicle, license plate renewals, insurance and gas charges. A car is best when you have enough money and only for occasional travel. Try not to use it everyday for your commute, as the traffic and costs can easily suck up money that is more enjoyable to spend elsewhere!

November is financial literacy month, and so to you I challenge you to take the car less — and even bike if you can! Try to cut down your transportation costs, and share here in the comments field how you were able to do so!