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The story every life insurance company tells is the family tragedy. Both husband and wife go out to work, leaving their two teens to cope on their own. Knowing life would be a struggle if one spouse died, they were both insured. So, when the worst happens and one is unlucky to be caught in a traffic accident, the rest of the family is able to pay off the mortgage and other major debts, with enough left over to see the children through college. This general story is reassuring. It addresses the natural worries of parents and gives them a good night’s sleep every night. Except life does not always run as the marketers would have us believe.

Let’s change the story so that disaster strikes the whole family. They are all in the car together as it is forced off the road in a collision with a driver under the influence of alcohol and crashes into a tree. They all die in the resulting fire. So there’s no convenient family member who opens the drawer of the desk in the living room and takes out the policy to make the claim. Indeed, the insurance company may be completely unaware of the deaths. The only sign will be that the premiums are unpaid. The company may write a warning letter or two to the family’s address. There’s no reply so the policies are cancelled.

The question, therefore, is what should happen to any money that’s unclaimed. Obviously, we should distinguish the cases where the insurer knows or does not know of the deaths. Sadly, there’s no consistency in the laws dealing with this. All the states have slightly different laws. There’s some current discussion with a new model law proposed to clarify the confusing legal requirements but, so far, there’s no agreement on what the final version of the model law should look like and there will be no obligation on states to implement it.

There should be a standard system in all states for deaths to be notified to life insurance companies or every insurance company should be under a legal duty to monitor the register of deaths. That way, insurers would know if policyholders have died. If no claim is received within a set period of time, the insurer should begin a search for beneficiaries. If a will is submitted for probate, it would not be difficult to identify the legitimate claimants and to notify them that money is being held for them to claim. But if there’s no will, the insurer should be required to spend a reasonable about of time and effort in tracking down the next of kin. Many insurers quietly absorb the unclaimed money. In some states, however, the government claims the money. Again, there are no consistent auditing rules about how the amount is calculated. All we can say is that, every year, several hundred million dollars of all life insurance moneys goes unclaimed and so often ends up held by the states. Details of the unclaimed money are then advertised, but only about 20% of that money is ever claimed. This benefits the state treasuries and taxpayers when no one claims. So when you get life insurance quotes, tell all your relatives and beneficiaries which insurer will be paying out. That gives them the chance to claim.

This is something of a rarity: a tax provision that actually works in your favor. So it is worth knowing what it is and how it can help you. As the title to the article suggests, this is all about Section 1035(a) to (d) of the IRS Code and it allows you to avoid paying tax when you sell an asset. Take the example of shares on which you have made a good profit. You decide you would like to take that profit and reinvest the original capital. So you sell the shares and then discover you have to pay tax on the realized gain. Indeed, almost all rollovers with this purpose will result in a bill from the tax office unless you are exchanging insurance assets. What is wrong with paying tax in this situation? In a capitalist society, the government is supposed to encourage people to invest their money in assets likely to grow in value. If tax interferes with the decisions of when and how many assets to sell, this is an artificial deterrent to commercial decision-making. Indeed, some people may deliberately sell some shares at a loss to set off against gains in other shares. You cannot get more irrational than that when everyone is supposed to be working to maximize their profits.

In this instance, the IRS is encouraging competition between different insurance products by removing the tax incentives from changing one for another. This allows fair competition. So, for example, you may start off with a moderate guaranteed minimum life policy but find competing products are offering a better minimum payout for the same premium payments. More importantly, it allows policyholders to change policies to reflect changes in circumstances. This could be financial problems in the insurer. If the policyholder loses confidence in the insurer and fears it may go into bankruptcy, there should be no penalty to changing. Similarly, if the policyholder is struggling to pay the premium, it should be possible to switch to another insurer who will carry a similar benefit for a lower premium.

Section 1035 allows a transfer between “like-kind” insurance assets. This means you could exchange a health for a life policy, or convert to an annuity or endowment. However, nothing this simple in principle can ever be allowed to remain simple in practice. So you have to get an agreement from the new insurance company to act as your trustee in holding the capital value of your existing assets. The new insurer then writes to the existing insurer to request a transfer of the funds to its possession so that this is a business-to-business transfer and not a cent passes through your hands. You should be warned, some less than responsible insurers can take up to six months to make the transfer.

Because of this, you will probably benefit from talking with an advisor before starting out. A tax consultant can get life insurance quotes for trading down the premium payments and give you a detailed projection of savings and long-term benefits. In this way, you can potentially find cheap life insurance through the transfer market without having to pay any tax on your accrued investment gains. In many cases, even after the consultant’s fees, this is a good deal.

We live in the cradle of capitalism. No matter what the Occupy movement may actually want to happen to Wall Street (and that’s by no means clear), the underlying truth is we all depend on the financial system for America’s economy to work. It’s therefore reassuring when we see the latest consumer survey show confidence at the highest level for the year. As a nation, we are starting to buy more goods and services. With increased demand, our industrial and service sectors can slowly return to profit. As all of us who watch the stock exchanges will know there was a marked drop in values followed by considerable volatility. There’s been slow upward movement and many of the larger corporations have managed to maintain their dividends despite the recession and its aftermath. Taking the general view, this is good for the economy. Taking a more limited view, times have been difficult and this has put a break on the profitability of the service sector including the insurance industry. Insurers cannot continually increase the premium rates to their clients when even a small increase in business overheads may be the difference between survival and bankruptcy.

It’s therefore interesting to see the commercial insurance market now beginning to increase its rates. Not surprisingly, the companies formally announcing this trend have seen their stock prices rise – an increase of revenue triggers greater profits and better dividends. For businesses of all size who must carry insurance, this is bad news. Already under pressure, seeing the premium rates go up by 5% and more is not welcome. Looking across the commercial sector, it’s difficult to get an overview. Neither side of the bargain publicizes the rates paid for each type of policy. Every company wanting cover, regardless of size, negotiates with the insurance industry based on their individual risks. Most of the rates are tailored within bands. Nevertheless, there are more general signs of rising rates. MarketScout, an insurance exchange based in Dallas, showed rates rising by 1% in November.

In a way, we should not begrudge the insurance industry a little latitude. Under normal trading conditions, it invests its premium revenue in stock exchanges and different forms of portfolio. When the recession arrived, investments lost their capital value and underperformed in returns. By coincidence, there have also been a series of bad years for claims with 2101 and, now, 2011 breaking records for catastrophic weather events. It’s ironic to see revenue falling at a time when extraordinary amounts of money have been paid out. The insurers need to start the process of filling their bank accounts and making new investments, hoping to recover their previous strength.

All this means your next round of discussions with your business insurance agents are going to be tougher. Hopefully, you can pass on the increase in your cost overhead to your customers. If their level of business confidence is rising and they are spending rather than paying down their debts, we can all trade our way out of this recession. This still leaves the worry of what may happen to our economy should the Europeans fail to prop up Greece and the Euro fails. There’s a real risk America may be pushed back into recession. Until then, we hope the large and small business insurances rates rise only moderately.

The need for government to balance the budget at every level is starting to bite. While Washington struggles to cut a few trillion off the federal budgets without raising taxes or cutting entitlements (it will be a good trick when someone works out how to do it), state and local governments face each new day without enough money to pay all their bills. This has been forcing lay-offs, cuts in pensions and other benefits, and a reduction in the quality of services provided local taxpayers. The pain is being felt all round the country. So what’s a local government to do when it’s supposed to keep providing services but it’s not sure whether there’s enough money to pay the bills. For example, fire departments have to keep their equipment in a constant state of readiness with enough people to send out to actually fight the fires. Local residents would not be pleased if their calls for emergency assistance were met with the reply the pumper had broken down. Men were being sent with buckets.

So to help pay all the bills, many local governments have hit on the idea of charging those involved in traffic accidents for all the assistance they receive. So, if you have the misfortune to find the metal of your vehicle round you like Christmas wrapping, you will be relieved when you hear the police, fire department and ambulance roaring to your rescue. Relieved, that is, until you realize you are being billed by the hour for all these rescue services. This is a rental for the benefit of all the transport bringing the cutting equipment and staff to operate it, plus the paramedics to stabilize your condition until you can be extracted, and law enforcement officers to control traffic and keep spectators away. When you get the bill, you will understand just how expensive it is to hire all these people to save you. There’s a moment of panic and then you smile. That lasts for another minute as uncertainty gnaws away at your confidence. Does your insurance company pay all these bills?

At this point, we come to a point of considerable controversy. With some consistency, the insurers argue these are services for the benefit of the public and paid for out of tax revenue. As such, the local and state governments are not entitled to charge for the services. Put simply, the insurers refuse to pay. This sends the bill collectors to your door. It’s at this point you come to appreciate how vulnerable you are to extortion. The bill collectors make a simple threat. We say you owe this money. Here’s a copy of the city ordinance or state law. If you fail to pay within seven days, we will report you in default and that will wreck your credit score.

So before you get to this stage, ask your prospective insurers when the auto insurance quotes come in. If there are cities in your state which are billing everyone involved in traffic accidents, you should know whether you are going to be covered. If not, get more auto insurance quotes and ask more insurers whether they will cover you. If the answer is none will cover you, ask your state’s Insurance Commissioner for help. Never be passive when you could get stuck with a big bill.

Someone somewhere once said a sucker never gets an even break. So the unwary need to be careful when reviewing their insurance cover. Sadly, insurers are for-profit organizations and that means your every last cent is at risk. The standard business model is for the insurers to pull in as much money as possible and then hold on to as much of it as possible. This is done, in part, through delaying payment on legitimate claims whether by asking for more information in support of the claim or disputing liability. However, the latest strategy is to persuade you to self-insure. This is, in a way, the ultimate scam. What the insurers say is that you are covered except you have to pay the deductible first. Up to a year or so ago, the deductibles were not unreasonable. Now, many of the policies are changing to significantly higher deductibles. The more the company get you to pay on individual claims, the less likely it is ever to have to return any of your money.

The trend is most obvious in the health plans offered by employers who are slowly abandoning traditional policies in favor of indemnity plans and health savings accounts (HSAs), both of which have high deductibles. The advantage to the employers lies in the cost. Any plan with a high deductible has a lower premium. But it’s the marketing to the employees that wins a prize for subtle manipulation. These plans are described as “consumer-driven”. This means the policyholder pays a lower premium and “stays in control of the treatment” – a remarkable way of saying that, if you cannot afford the high deductible you decide not to have the treatment. The more you pay as the employee, the better for both the employer and the insurer.

You would imagine this strategy would be met with howls of complaint except, of course, all the young employees are strongly in favor. They are still optimistic about their health and believe they will never have to find the deductible. This makes the lower premium very attractive and a growing number of companies are now offering HSAs to all their employees either alongside traditional plans or as a substitute. The additional advantage to the employee is that the savings account belongs to them.

Some employers are selling HSAs by offering additional contributions if the employees go through a wellness program. The idea is simple. Preventive medicine saves longer term costs. The better the health screening, the lower the premium paid by the employer. In theory, therefore, everyone benefits except, of course, for those employees who are seriously injured or prove to have a chronic illness. It’s at this point the employee realizes the full weight of the higher deductible that must be paid before any benefit is claimable under the plan. The idea of cheap health insurance is very attractive. The more your household budget is under pressure, the more you are tempted into self-insuring by increasing the deductible. Assuming you are allowed a free choice, it’s better to stay on the traditional group plan. It may not be the cheap health insurance you were hoping for but, should the worst happen, you are in a far stronger position.

Parents may dread the day their teenager begins driving for more than one reason. Their sons or daughters safety is an overwhelming factor, but another one is the expense the family takes on when carrying auto insurance for a teenage driver.

Why is Auto Insurance for Teens so Expensive?

Teenagers are new drivers and new drivers are inexperienced. Even though they may be careful drivers, teenagers don’t have the experience to know what to do if another driver does something wrong.

In addition to that, it’s a fact that teenagers are more likely to exceed the speed limit, try to pass when a more experienced driver would wait, race yellow lights, change lanes and make turns carelessly and drive too close to other cars. Teenagers are more likely to be on their cell phones while they’re driving and more likely to be texting, which is even more distracting and dangerous than talking on the phone. Teenagers are the ones with their music blasting, which can interfere with their hearing what’s going on around them.

And the more teenagers there are in the teen driver’s car, the more speeding and distraction are factors. Not only that, but teen drivers may engage in dangerous behaviors to show off for their friends or on a dare. Teens are also more likely to drive when they are emotionally upset and their normal alertness is impaired.

For all of these reasons, teens may frequently have or cause accidents and the auto insurance companies know that.

How Can You and Your Teen Get Cheaper Insurance?

It is possible to get cheaper insurance, even with teen drivers.

Some companies give discounts for good grades. They assume that students with good grades are more focused and responsible, as well as more likely to spend less time on the road and more time studying or at a job.

You can get a safer car. This has the double advantage of giving you peace of mind about your son or daughter’s safety and getting you better rates with the insurance company. You can check the safety ratings on different cars online.

Have your teen take a driver safety program. There are driver safety courses and DVDs. Or they can read a book and take a driver safety test. This will lower their insurance rates.

If your teen goes away to college and doesn’t take the car, let your insurance company know that they will only be driving the car during school breaks and summers. This can lower your rates, too.

Consider companies that offer multiple car discounts. Some companies also offer discounts when you have both your homeowners and auto insurance policies with them.

Last but not least, you can shop around for companies who offer the best rates for adding teen drivers. Rates for car insurance can vary widely, as you can tell from all of the television commercials on the subject. But you will want to weigh the advantages and disadvantages of making a change from the company that has been providing your car insurance. If you are getting a discount from them because you also have your homeowner’s insurance with them, that’s one thing to consider. Also, you will want to make sure that the company you consider changing to is reputable and not one that can offer cheap rates because it never pays its claims.