As 2009 turns into 2010, the winter ice and snow has been particularly hard this year. It even snowed in Florida which shows how climate change is starting to affect local weather patterns. Needless to say, the number of traffic accidents has been at an all-time high. No-one is ever ready for ice on the roads. Yet, all round the country, ice is coming through the mail boxes. The insurance companies are sending out notices chilling our desire to drive – premium rates are being hiked (again). And this time, it’s not just a few percent. In most states, it’s averaging at around 10%. So we are not talking peanuts. This is serious money while the US is in recession and millions of people are out of work. What’s the result likely to be? If it comes down to a choice between food on the table and an insurance policy, food wins every time. Everyone has to eat and everyone needs a vehicle – even in the bigger cities, public transport is a joke. So, when push comes to shove, more people will drive uninsured. That’s bad news for the rest of us. Our premiums will rise with fewer policy holders sharing the rising costs of claims. If only the insurers would hold the premiums steady, more people could pay, and rates would stay lower for longer. If only. . .

So why are insurance companies hiking the rates? There are two common problems. The first is the broken healthcare service. Whenever there’s a more serious traffic accident, most people go to hospital. The obvious injuries are treated. Bodies are examined to ensure there are no other injuries. Except, the moment anyone steps through the door of a hospital or clinic, the medical expenses meter starts to run. Despite the recession, the drugs industry and healthcare service suppliers have been increasing their prices. There have been some high-profile disputes between insurers and hospital groups in California and Connecticut. The current fight is between the Continuum Health Partners of New York and United Healthcare. The hospitals have agreed pay increases with the labor unions, new technology is expensive to instal and operate. They want more money. The insurer is looking for a reduction in charges of between 7 and 10%. It’s painful to admit but, in this fight, the insurers are actually protecting us policy holders.

The second problem is equally easy to explain. When we claim, the insurer should have the money to pay. This money comes from cash reserves and all the different state Insurance Departments monitor the amounts held to ensure there’s always sufficient set aside. It’s standard for insurers to hold this money on investment so, when the recession came, they were slow to move out of stocks and bonds, and all the larger insurers lost a slice of their capital. Commissioners are offering their local insurers a choice. Either reduce the number of people holding policies or add more to your cash reserves. This forces companies to raise premiums and so, sadly, it’s getting more difficult to find affordable auto insurance. Even with the use of this site’s excellent search engine, it’s hard to find policies with lower rates. When you get the multiple auto insurance quotes, check through to find those with lower premiums. For good terms, look at the discounts available from these companies. Think about accepting a higher deductible. Using the auto insurance quotes as a starting point, negotiate directly with the insurers. Affordable policies are out there. You just have to work harder to find them.

As you get older, the mortgage is paid off and the kids have grown up and left the nest, there’s a temptation to switch off. You feel you have done all the heavy lifting. The pension will be coming soon when you retire… What’s wrong with this picture? Well, the majority of people were trading in property and, when the bubble burst, they are looking at negative housing equity and the threat of foreclosure. Even those who stayed in their own homes over the years, often borrowed heavily against them. With the recession, all those investments in the retirement fund have lost their shine. Unemployment is a more real threat to middle and upper class families. Children seem to be staying in the family home for longer. And all this at a time when life expectancy is increasing. Ten years ago, people might have dropped their term life insurance policies and found themselves with more disposable income. Now the decision is more difficult.

With the credit crunch, the pressure is on to keep paying the mortgage, reduce the outstanding household debts and put food on the table. Those of you with permanent or cash-value life insurance policies have a slightly easier path to follow. Premiums will be fixed but, if you stop paying, the policies may remain valid. The decisions are to:

• keep paying, which builds up the investment value and protects the family by maintaining the death benefit;
• stop paying and leave the cash value untouched;
• withdraw or borrow some of the cash value; or
• cancel the policy which usually involves a big tax bill.

If a term life insurance policy is falling due for renewal, here’s how the choice looks: if you renew, the premiums will be higher because, suddenly, you’re older; but, if you let the policy expire, your family could be hit hard if you die unexpectedly. Many of you may have bought term life cover when you were younger. Perhaps you thought you would convert to permanent policies or simply drop the cover when your children had grown up. Now that retirement funds are shrinking, it’s time to take another look at term insurance.

Allowing for inflation, the premiums have actually been falling over the last ten years as life expectancy has been improving. Go back fifty years and only a small percentage of people lived beyond seventy. Now, many people live into their eighties and beyond. This has prompted competition among companies who offer cheap life insurance to attract business from older people. As long as you are physically fit, you are likely to find the rates little changed from the ten, fifteen or twenty year term policy that is due to expire. Naturally, there will be a health exam to ensure you will live a reasonable number of years before a claim arises, but the option to continue a term policy or to convert to a permanent policy are better than you might imagine. This is a good time to start talking to the life insurance companies to see what your options are.