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Most Expensive Cars to Insure

David Gelles — Mon, 20 Aug 2007 21:00:00 GMT

Most Expensive Cars to Insure

by David Gelles
Tuesday, August 14, 2007provided by

Eyeing that 2007 Mercedes S Class with all the trimmings? Be prepared to pay through the nose for it.

And for the insurance.

It should come as no surprise that the more expensive the car, the more it will cost to insure it. But just how expensive may come as a shock. For modest coverage ($500 deductibles on collision and comprehensive coverage, $100,000 each for personal and property coverage and $25,000 each for medical and uninsured coverage) on this year's $135,400 Mercedes SL, owners will pay about $22,536 a year.

For pricey cars like this, 20% of the base price is typical. But for those with low monthly payments on high-end cars, that could mean spending more on insurance than on the car itself.

"The cost of the vehicle is primary when setting the price of a policy," says David Wurster, president of Vincentric, a Detroit-based automotive data firm that studies car- insurance costs. Vincentric gets its data from state agencies and averages these figures in compiling its list of most expensive yearly rates. "But there's also the type of vehicle it is. Sports-car owners tend to drive them a little more aggressively."

This, in turn, leads to higher-priced policies. With this in mind, it's no surprise that racy offerings from Mercedes, BMW and Porsche make for some of the most expensive cars to insure.

How It Works
"We start with the manufacturer's suggested retail price (MSRP)," says Kip Diggs, a spokesman for State Farm, the largest insurer of autos in the U.S. Diggs says State Farm then considers how expensive it is to repair each model. The more costly the parts, the higher the policy. For foreign brands with parts from afar, expect to pay more. "From there," Diggs says, "we look at safety features to see if a vehicle qualifies for a safety discount."

Allstate, the second-largest U.S. car insurer, also considers the MSRP, but places more weight on a policyholder's driving record.

"Pricing has more to do with the driver than the car," says spokesman Raleigh Floyd. "If there are two drivers with the same car, the driver with accident histories will have a higher rate. He has shown himself to be a higher risk." Those with a penchant for wrecking Ferrari Enzos on California's Highway 1, for example, can expect to pay more.

Age is also a factor. "A 17-year-old driver is going to be more expensive to insure than a 40-year-old with a family," says Floyd. "Experience counts. It counts a lot."

There are some anomalies in the ranking.

"You would think a Corvette convertible would be hideously expensive to insure," says State Farm's Diggs. "But that car is involved in very few accidents, so it's fairly low." This is because research shows Corvettes typically aren't driven every day.

More utilitarian models, like the Toyota Camry, however, can be more expensive to insure because with more road time, they are more likely to be involved in an accident. Vincentric doesn't collect data on exotics like Ferraris and Lamborghinis because, says Wurster, there are too few owners to make the data useful.

Policy pricing also has to do with where a car is garaged, with urban areas considered higher-risk. "In a more concentrated area, your chances of bumping into something are higher," says Floyd. "Jersey's going to be on one end of the spectrum, and a less populous state is going to be on the exact opposite."

But if you have a hundred grand to spend on a car, you're probably not worrying about insurance.

"For people of that caliber," says a salesman at Mercedes Benz Manhattan, "the cost of insurance really isn't an issue."

20-Aug-07 4:00 PM

What You Need to Know about Health Savings Accounts

Sue Stevens , CFA, CFP, CPA — Thu, 26 Jul 2007 20:00:00 GMT

Morningstar.com
What You Need to Know about Health Savings Accounts
Thursday July 26, 7:00 am ET
By Sue Stevens, CFA, CFP, CPA

Health Savings Accounts are becoming more popular. More companies are offering this type of plan to their employees, and there is a lot of confusion about what these plans are and if they are appropriate for a given situation. I'll discuss the basics of HSAs and help you determine if one is right for you.

What Is an HSA?
Health Savings Accounts were created by a provision in the Medicare Prescription Drug Improvement and Modernization Act and signed into law in December 2003. The purpose was to provide a way for Americans to prepare for future medical costs and lower their health insurance premiums by switching to higher-deductible medical plans.

In 2007, individuals can contribute to an HSA up to the lesser of their deductible or $2,850. (Families can contribute $5,650.) If you're over age 55, you can also make a catch-up contribution of $800 in 2007 (with catch-up contributions for the 55-plus set increasing by $100 per year to a maximum of $1,000 in 2009). If an individual contributes to an HSA, he or she can take an "above-the-line" deduction on his or her tax return (dollar for dollar).

If an employer makes a contribution to an employee's HSA, that contribution is not taxable to the employee. If you change jobs, HSAs are portable--so they can go with you.

Self-employed individuals and employers cannot only deduct their contributions to HSAs, they can also deduct the premiums.

Individuals who are not covered by an employer health insurance plan can set up an account and make tax-deductible contributions (although their premiums are not tax deductible).

You can tap the funds in your HSA to pay medical expenses. Withdrawals are tax-free if used for qualified medical expenses.

If you don't need to tap the funds in your HSA, you can let your contributions grow over time tax-free (similar to IRA accounts). HSA contributions grow on a tax-deferred basis.

Unlike flexible spending accounts you may have used in the past, HSA contributions are not "use it or lose it."

Who's Eligible?
To be eligible, you have to meet four requirements:

You have to be covered by a high-deductible health insurance plan. "High-deductible" is defined as a deductible (where you pay the first dollars for medical service out of your own pocket) of $1,100 or higher for singles, $2,200 or higher for families. The out-of-pocket maximum for singles can't be more than $5,500 ($11,000 for families). The high-deductible plans may have no deductible for preventive care and higher out-of-pocket expenses for non-network services.

You can't be covered by another health insurance plan, such as a spouse's plan.

You can't be age 65 and older.You can't be claimed as a dependent on someone else's tax return.

New Developments Affecting HSAs

There are a couple new developments that affect HSAs. On Dec. 20, 2006, the Health Opportunity Patient Empowerment Act of 2006 was passed. Here are some of the HSA-related provisions per The Department of the Treasury:Employers can transfer funds from Flexible Spending Accounts or Health Reimbursement Arrangements to an HSA for employees switching to an HSA compatible plan.You can make a one-time transfer (once in a lifetime) from an IRA to an HSA. But the amount can't be more than the annual contribution limit. You don't get a tax deduction for doing this. It is not considered an early withdrawal, so you will not be subject to the 10% penalty.

What's Covered?
Traditional medical costs like diagnosis and treatment of disease are covered by an HSA. In addition, many expenses not covered by traditional medical insurance would be covered: eye care, dental care, prescription and some non-prescription drugs, COBRA premiums, acupuncture, Braille books, midwifery, a seeing-eye dog, qualified long-term care services, and more. The same things you can deduct on Schedule A are considered medical expenses for HSAs. For more on exactly what qualifies, see IRS Publication 502: Medical and Dental Expenses.

If you take a distribution for non-medical expenses and you are under age 65 or not disabled, you'll pay a 10% penalty in addition to ordinary income tax.

What Happens Once You Are Age 65 and Older?
Although your contributions must stop when you're enrolled in Medicare, the accumulated dollars can be used tax-free for qualified medical expenses such as Medicare Part A&B premiums, Medicare HMO, and the employee's share of retiree medical insurance premiums. You can't use the money to purchase a Medigap policy. If you use the money for non-medical expenses, you'll pay tax on your withdrawals (but no penalty).

If you die and have money in an HSA, your spouse can use the account just like it was his or her own. If you are not married, the account can pass to a beneficiary, but will no longer be considered an HSA and it will be taxable to the beneficiary. If your estate is the beneficiary, the value of the HSA will be included on your final income tax return.

Where Can You Set Up an HSA?
So far, HSAs are primarily offered by insurance companies or banks. Insurance companies providing HSAs include UniCare, Fortis, Blue Cross Blue Shield, and Golden Rule. You can also try calling some local banks to see if they offer HSAs or check out the insurance locator. Remember, you have to invest in whatever the institution offers--so choices may be limited.

More Resources on HSAsThe Basics of HSAs Department of the Treasury

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http://biz.yahoo.com/ms/070726/199639.html?.v=1&.pf=insurance

26-Jul-07 3:00 PM

Flood Insurance Can Avoid Washout

Donald Jay Korn — Thu, 26 Jul 2007 20:00:00 GMT

Investor's Business Daily
Flood Insurance Can Avoid Washout
Friday July 6, 7:00 pm ET
Donald Jay Korn

Hurricane season is here. And the worst may be yet to come.

The season stretches through October -- and 77% of the storms strike after July, the National Hurricane Center says.

This year, the National Oceanic and Atmospheric Administration predicts 13 to 17 named Atlantic storms. Seven to 10 should become hurricanes. An average season sees 11 named storms.

And active storm seasons can be costly. "Total claims paid by the National Flood Insurance Program during the 2004 and 2005 hurricane seasons totaled nearly $18 billion," said David Maurstad, director of mitigation and federal insurance administrator for the program.

Katrina accounts for 87% of the total, which was $3 billion more than the NFIP paid after the program began in 1978.

You don't have to live in hurricane territory to be concerned. Floods occur in all 50 states. Texas and parts of the central and southern U.S. have already been socked by devastating floods in recent weeks.

A key problem is that most homeowner policies don't cover floods. They usually cover damage from falling rain. Floods are excluded.

A flood occurs when a nearby river or stream overflows. It's also when ground water from a storm seeps into your basement.

To get coverage, you can buy flood insurance. Basic coverage is available through NFIP, which is administered by the Federal Emergency Management Agency.

This program covers more than 5.4 million people.

"Most NFIP policies are sold by private insurance companies," said Maurstad. The agent who sold your homeowner's policy may handle NFIP coverage, too.

NFIP insurance can reimburse you for up to $250,000 of damage to your home. The limit for contents is $100,000. That's for homeowners and renters.

Business property owners can insure a building for as much as $500,000. They can get another $500,000 of coverage for contents.

Cost Vs. Coverage

The cost of an NFIP policy varies with the coverage. All insurers must charge the same.

You'll pay the highest premium if your home is in a high-risk flood zone. That's an area where the odds of a flood are at least 1% yearly.

In these areas, you may need flood insurance to get a mortgage.

You'll pay as much as $5,358 a year to get maximum NFIP coverage if you live in a high-risk coastal area. Go to floodsmart.gov to see if your home is in this category.

That price assumes you insure the house for $250,000 and contents for $100,000. It also assumes you take a $500 deductible. A higher deductible will lower your premium.

You can get the same $250,000 and $100,000 coverage with a $500 deductible for as little as $317 a year. That will be the case if you qualify as a preferred risk.

You must live in an area with low to moderate flood risk. And you can't have a history of generating sizable flood claims for that home.

From the time you buy an NFIP policy, it usually takes 30 days for coverage to take effect. So don't wait until a storm is on its way.

Start the process as soon as you determine you're interested in this coverage. And don't feel you must stop with NFIP insurance.

The cost to rebuild your home could top the NFIP's $250,000 ceiling. And your contents may be worth more than $100,000.

If needed, you can buy coverage beyond the NFIP limits from such companies as American International Group, Chubb and Fireman's Fund.

Some policies start where NFIP coverage ends. Other policies replace NFIP coverage. The latter provide the first dollar of damage compensation, then extend above the NFIP ceilings.

An insurer may require you to have a basic homeowner's policy from that insurer as well. Having one policy can help you avoid a debate with multiple insurers over which ones must pay for various damages.

For example, if you have homeowner's insurance with Fireman's Fund, you might be able to add $1 million of flood insurance for $555 per year. That rate applies to low and moderate risk areas.

At AIG, excess flood coverage may be available if you have homeowner's coverage through its Private Client Group. The company's Lexington Insurance subsidiary offers coverage even if you don't have its homeowner's policy.

Mansion Insurance

At either AIG insurer, prices are on a case-by-case basis, dependent on factors such as building age and construction method.

The same case-by-case approach is reported by Chubb, where coverage up to a total of $15 million is available, for home and contents. Flood insurance policies are available in some states and are being rolled out to others.

Chubb offers flood insurance that picks up where NFIP coverage leaves off.

Or you can buy a policy that pays first-to-last dollar, eliminating the need for NFIP insurance.

You'll pay more for a Chubb policy, in return for broader coverage.

26-Jul-07 3:00 PM