ALLCHOICE Insurance :: Blog

Are you looking for health insurance in North Carolina? You have probably looked online for NC Health Insurance Rates.  You might have even spoken to your local insurance agent.  Before you make the decision to purchase a policy, make sure you know exactly what you are paying for.  If you base your choice on Health Insurance Coverage solely on price, you could end up facing serious financial difficulty.

North Carolina Health Insurance is being researched and purchased more and more via the Internet.  The fact is, finding NC Health Insurance Quotes is quick and easy.  North Carolinians simply need to go to the search engine of their choice, perform a search for any number of combinations of “North Carolina Health Insurance” and they will be inundated with site after site offering “Free Quotes”.  If anything, North Carolina Health Insurance Shoppers might face too many web-sites to get “Free Quotes”.

The real problem with this “new” way of shopping for Health Insurance is that far too often, the only research that takes place is with regard to “Monthly Premiums”.  The Health Insurance Shopper visits one or more web-sites he/she came across after doing an Internet Search and chooses the lowest possible premium choice.  So far you might be saying, “Good for you, you are being frugal!”.  The truth is, you might be!  Or, are you being “penny wise and dollar foolish?”

I am a huge fan of the internet.  I am a huge fan of finding and purchasing North Carolina Health Insurance online.  My biggest problem is that most North Carolina Health Insurance Web-Sites are simply “rate quote generators”.  Most of these web-sites, fail miserably when it comes to teaching the North Carolina Health Insurance Consumer about the in’s and out’s of the actual policies and/or carriers that the consumer is choosing.

When it comes to North Carolina Health Insurance, there are really only a handful of insurance carriers that I would personally trust my family’s health insurance needs with.  In the spirit of un-biased journalism, I will not tell you the companies that I find to be worthy.  However, as a good rule of thumb, if you haven’t heard of a particular health insurance carrier, then you might want to stay clear of their policies regardless of price.

Once you have made the important decision of which carriers are actually worthy of your premium dollars, the next choice you must ask yourself is what type of coverage am I getting.  The policy choices are in ample abundance in North Carolina.  Instead of diving into all of the various types of policy choices people have, lets focus instead on a few key components that make a big difference with Health Insurance.

• Major Medical or Co-Pay Plan: Most people have become used to going to the doctor and paying a “co-pay” for the services that are rendered.  However, over the past few years, as Medical Insurance costs have soared, many people have started moving to a High Deductible Major Medical Plan with a Health Savings Account.  Neither plan can be considered “better” than the other, you just need to ask yourself if the cost of having the “co-pay” option is worth the increased premium costs.
• Deductible: Regardless of which decision you make as to the type of policy you choose (see above), the deductible you choose is of great importance.  The fact is, the bigger your deductible, the lower your premiums.  With a major medical plan, you are responsible for ALL health care costs until you reach your deductible.  With a co-pay plan the deductible comes into play for “the bad stuff”.  Remember, with a co-pay plan, most of the everyday medical charges are covered by the co-pay.  As a general rule of thumb, I advise clients to pick a Deductible Amount that is “manageable”.  You don’t want a deductible so high that you could not come up with that amount of money, nor do you want a deductible so low, that you could write check for it without thinking twice.
• Co-Insurance:  This is probably the most mis-understood concept in Health Insurance.  Co-Insurance is the percentage of Health Care Costs the Health Insurance Carrier will be responsible for once you have reached your deductible.  Assume you have a Major Medical Policy with a $1000 Deductible and 80% co-insurance.  Now, assume that you have a heart attack and you are hospitalized.  The total cost of your stay come out to be $100,000.  The first $1,000 is yours.  The remaining $99,000 is split between the Health Insurance Carrier ($99K X 80% = $79,200) and yourself ($99K X 20% = $19,800).  Again, as a general rule of thumb, the lower the co-insurance percentage the lower the premium

Now, there are many other aspects that can and should be taken into account when choosing a Health Insurance Policy.  However, assuming you choose a viable insurance carrier, knowing the three items above will make sure that you will not be left out in the cold once a tragedy hits.

Remember, you get what you pay for!  Just make sure you know what you are paying for!

About The Author:  Jack Wingate is a Professional Insurance Advisor and Founder of ALLCHOICE Insurance in Greensboro, NC. For more information about Jack Wingate, ALLCHOICE Insurance, or North Carolina Health Insurance please visit http://www.allchoiceinsurance.com

The Baby Boomer Generation should be entering the best years of their lives.  Indeed, the Baby Boomers should be preparing to enter the “Golden Age” of Retirement.  Years of sacrifice have been spent working, building, saving, and preparing for this so called Golden Age.  In what seems like a blink of the eye, all of the preparation Baby Boomers have done over their lives has been lost.

The fact is, Baby Boomers are in bad shape financially right now.  Does this mean that every Baby Boomer is facing a life on the street?  No!  However, Baby Boomers face many tough decisions over the next 10-15 years.  Let’s look at what has happened to our economy over the past 18 months.

• Housing Market Collapse ($3 Trillion In Home Equity Lost)
• Stock Market Collapse ($11 Trillion In Stock Market Wealth Lost)
• Job Market Collapse (3.8 Million Workers over 45 Unemployed)

I will refer to the above 3 collapses as the “Unholy Financial Trinity” (UFT).  Let’s examine how each of these has forced the Baby Boomer Generation into their current predicament.

Housing Market Collapse

The Baby Boomer Generation grew up in a period where the importance of homeownership were stressed as the essential building block of the American Dream.  As the Boomers marched their way through the financial minefield of the ’70′s, an even greater importance was placed on Real Estate.  Financial Guru’s exhalted the values of using Real Estate as a foundation for a person or family’s financial plan.  Like good stewards, the Boomers purchased homes, vacation homes, & rental homes.  Not only did they purchase these pieces of real estate, they plowed countless dollars into expanding and remodeling these homes.  All of this was done as a means of value creation.

The theory was great, the actual reality was not!  In theory, a person buys a piece of real estate, pays the mortgage, gets the tax breaks, and when the time came (i.e. retirement) the boomer could turn around a sell the property, at a substantial profit.  This new found windfall was to act as the foundation for the Boomer’s Retirement.  What has actually occurred goes something like this: property purchased, mortgage payments are made, property owner wants to add on an addition (hopefully creating extra value), property owner refinances mortgage and pulls equity out of property for renovations, 2007 Housing Market Collapses dropping Home Prices by 20%+, property owner can not sell property (even at depressed prices).

We will call this “Strike One”!

Stock Market Collapse

During the working career of the Baby Boomer, the Federal Government has enacted several laws to “aid” the American Worker with respect to saving for retirement.  I think we can safely agree that the days of companies providing “Pensions” to their employees has come and gone.  While there may be some Boomers out there that are fortunate enough to still be receiving Pension Checks from their employers, the vast majority of Boomers have been placed in control of their own retirement savings.

Through the introduction and implementation of plans like the Individual Retirement Account, 401K Plans, Roth IRA’s, etc., Boomers have been advised, again, by the Financial Guru’s to put as much money each month as you can into one of these retirement vehicles.  Next, these same Guru’s told stories of purchasing stock in companies, or mutual funds, and holding on to these investments until retirement (basic Buy & Hold Strategy).  Boomers were told and advised ad-nauseum about how the stock market and mutual fund investments were the best performing asset class over a 30 year period.  Again, like the good stewards they are, the Boomers headed the advice placed Trillions of dollars into the stock market.

Once again, the Theory of this type of investment WAS good in principle…30 years ago!  Today’s financial markets are fast paced entities.  Long Term Investments, by today’s standards might mean an investment period of 6 months!  When the Stock Market Crashed, those same Financial Guru’s who “looked out for their clients” were no where to be found.  There are literally hundreds of stories in my small town of people’s retirement accounts losing 50% or more of their value.  If you have an individual who has $500,000 in their retirement account and suddenly they have $250,000, do you not think that a major lifestyle change is sure to follow?  That life change would have to be either delaying retirement or going back to work!

Job Market Collapse

It seems that the Unholy Financial Trinity was, again, one step ahead of you!  In a period where Trillions have been lost in the housing and stock markets, there is still time to regain some of those losses by working!  With the job market collapse, many Boomers do not even have option.  Boomers are being layed off or replaced from jobs they have held for 30+ years.  Now, that the Boomer has lost his/her job they are finding the going increasingly tough to find a new job since there are nearly five (5) people applying for each and every job that is available.

So Where’s The Help?

You might be asking yourself, “Where is the help you told us about in the title?”  Be patient!  The importance of defining the problem and the underlying factors can be understated.  Many of you, I assume, feel no responsibility for the current state of your financial situation.  That lack of responsibility will lead you, or your family, down this same path again.  Please understand, there are forces at work in this current crisis that are out of your control.  However, as a person, as a generation, as a country, we must learn that at the end of the day we are responsible for our own situations.

In order to move forward and regain some of the financial security that we have lost, the first step must be to take responsibility for our part in the problem.  The second step is to chart the best course to move forward.  The final step is to act!  The best plans most often fail due to lack of action!

There is no way that to provide counsel on resolving the problems you may face with each of the Unholy Financial Trinity.  I will offer you an option for the “Financial Assets” component of the Unholy Financial Trinity.  This option is not exciting.  This option is not a new concept.  This option is not any means to recapture all that your financial investments have lost.  The option that I give you is the Fixed Indexed Annuity!

Fixed Indexed Annuities

There have been numerous reports which talk about all that is wrong with the Fixed Indexed Annuity.  However, if you look closely at those very reports, you will see that the fault portrayed in these reports deals more with those few bad apples who misrepresent what Fixed Indexed Annuity does.  Understanding that the problem(s) lie with person selling the product and not the product itself will allow you to look at the benefits that the product offers and not the “expertise” of the Financial Guru’s (remember the problems these guys have already caused you?).

An annuity in its most simple form is a contract between you and an insurance company.  The contract is the yen, to Life Insurance’s Yang.  Where Life Insurance was designed to protect you from living to little, the annuity was designed to protect you from living too long.  There are basically three types of annuities: fixed, variable, and Fixed Indexed.  While we will not spend much time on each of these individually, lets hit the high spots.

• Fixed Annuities – These annuities are much like your Certificate Of Deposit.  You “deposit” a sum of money with the insurance carrier.  In return the insurance company will pay you a Fixed Rate of Return each year of the contract and guarantee you a fixed amount of annual income from the contract for as long as you are alive. (Please note this is very general and more education is required to understand the contracts fully).
• Variable Annuities – These annuities offer the same “back-end” in that the insurance guarantees you an annual income from the contract for as long as you live.  The difference is in the rate of return the contract pays to your policy each year.  Variable annuities invest the proceeds of your deposit in stocks, bonds, and/or mutual funds.  When the investments within the contract perform good (i.e. the stock market is good) the variable annuity should outperform the fixed annuity.  The greatest fault with this type of contract are that since the investments within the contract are directly linked to the performance of individual stocks, bonds, and/or mutual funds, your contract can lose money.
• Fixed-Indexed Annuities – These annuities are a hybrid annuity that combines the safety of the Fixed Annuity, with some of the performance features of a variable annuity.  The reason I say some of the performance features, is that the Fixed Indexed Annuity is GUARANTEED to not lose money (safety of principle) while allowing you (the contract owner) to participate in some of the gains of a given Index (S&P 500).  When the market is good, you win, when the market is bad, you don’t lose!

Now that we have a general understanding of annuities we can dive deeper into how a Fixed Indexed Annuity can help your retirement!  Fixed Indexed Annuities have come a long way in a short time.  The actual contracts have only been around for around 10 years.  The Fixed Indexed Annuity today offers features to the contract owner that can benefit the Baby Boomer who has seen his/her IRA or 401K lose much of its value over the last 18 months.

Before we go much further, I think an analogy needs to be made.  I am sure that many of you are familiar with the popular game show Deal Or No Deal.  In the game, the player chooses unmarked cases hoping that they do not choose the $1,000,000 case.  After each round of picking cases, the “banker”, offers the player a Deal.  He will purchase the player’s case for a certain amount.  The more cases the player picks that are low numbers, the better the deals get.  However, once the player picks some of the big numbers, the deal gets worse.  This is where most of the players mess up.  Assume after Round 2, the banker offers the player $150,000 for his/her case.  The player declines because the $500K, $750K, and $1 Million cases are still in play.  The next round comes and the player knocks our the $750K case.  The next offer goes down to $80,000.  Most players now think of the offer in terms of the last offer of $150K.  The player needs to remember, the $150K reality is GONE.  The new reality is $80K.

In that analogy, I hope that I portrayed one thing.  What you used to have, has no bearing on what you have now.  I have spoken to so many people that say the same thing.  I have lost X amount of money already.  I really like the Fixed Indexed Annuity and I see the benefits, but just let me hold out a little longer and try to make some of my money back.  Those people, much like the Deal Or No Deal players are living in the wrong reality.

So, you have lost money in your retirement account, or any other market related account.  How can a Fixed Indexed Annuity help me?

Let’s do an exercise!  First clear your mind!  Now, I want you to imagine the PERFECT place to put your Retirement Funds.  First, you would want something that offered you a good rate of return.  Second, you would want something that would never lose money.  Third, you would want something that could provide you with income for your retirement.  Finally, you might want something that could grow outside of Uncle Sam’s reach!

Does that match up fairly well to what you have envisioned?  If you answered yes, then you don’t have to look any further.  If you answered no, your expectations are out of the reach of any financial product currently available, or you have joined La Costra Nostra (The Mob).

For those law abiding citizens that answered yes, the Fixed Indexed Annuity is worth looking into.  As stated earlier, the FIA (Fixed Indexed Annuity) offers the contract owner participation in some of the gains of the chosen Index (S&P 500).  While you do not participate in all of the gains, you do get a portion (for example the S&P 500 increases 10% over a year, you may receive 7%).  Each contract is set up differently, but the concept is the same.  In addition, the FIA guarantees that your principle (amount deposited) will never be less than the amount you initially put in.  Finally, the FIA will guarantee the contract owner a specified amount of income for as long as he/she lives.

Many Insurance Carriers that offer FIA’s have taken these contracts and offered great additional options.  Many FIA’s offer contract owners a Bonus on their initial investment (I have seen as high as 12%).  Yes, you heard me right, the carrier provides you with a Bonus for giving them money!  One FIA contract I have seen offers a rider that Guarantees that upon death, the contract will pay to the owner’s beneficiaries a minimum of your Initial Deposit + 5% compounded annually (less any withdrawls).  For Baby Boomers, the most exciting option some Insurance Carriers offer on their FIA’s is an “Income Rider”.

The Income Rider works independently of the FIA contract value.  In the simplest of terms, by utilizing and Income Rider, the contract owner has a seperate “Income Account” that is guaranteed to grow at a Certain Percentage (The best ones use 7%-8%).  Let’s look at an example:

Mr. X places $100,000 into an FIA.  The FIA’s contract value has grown on average 5% over the last 10 Years (approximately $163,000).  Mr. X decided to purchase the Income Rider on his FIA which guaranteed 8% Growth of his Income Account (approximately $215,000).  After year 10 (in our example), Mr. X has retired and needs an income to live off of.  Mr. X could start drawing his contract value down or he could activate his lifetime income (from the Income Account) which guarantees him $10,750 per year for the rest of his life.  Mr. X is 65 when he starts withdrawls, and according to some census information he will live until age 80.  Which account is larger?

In no way do I want to portray that a Fixed Indexed Annuity is a cure-all.  Nor, do I wish to infer that a Fixed Indexed Annuity is right for everyone.  However, if you are looking for a financial vehicle that offers Guarantees, then the Fixed Indexed Annuity may be something to look in to.

About The Author:  Jack Wingate is a Professional Insurance Advisor and Founder of ALLCHOICE Insurance in Greensboro, NC. For more information about Jack Wingate, ALLCHOICE Insurance, or Fixed Indexed Annuities please visit http://www.allchoiceinsurance.com

Young families, ages 21 – 45, tend to have the greatest need for life insurance. Why? The answer is quite obvious to anyone who actually fits the definition of a “Young Family”. During the “young family” stage, couples are typically just starting in their respective career(s). Young families are also creating the family by having children. Young families are also dealing with a huge amount of debt (home, car, student loans, braces, etc.). While determining the amount of life insurance necessary may vary from advisor to advisor, there are “standard” calculation methodologies present. The problem comes when one of the parents does not “work” outside of the home.

While the “Stay At Home Mom” may be less prevalent than she was twenty years ago, there are still a large number moms who “work at home”. As a husband who is lucky enough to have a “Stay At Home Mom”, I know first hand how valuable the job my wife performs on a daily basis is (as a personal side note, I have the utmost respect for any person who chooses to stay at home versus working out the home, yours is a job that goes without thanks or acknowledgment far too often). The problem that must be dealt with is…how much is the “Stay At Home Mom” worth in terms of dollars and cents? The second (and often hardest to overcome) problem comes in convincing both the husband and wife that the “Stay At Home Mom” NEEDS life insurance. Let’s tackle each problem individually.

Problem One – How Much Life Insurance Does The Stay At Home Mom Need?

The fundamental problem with life insurance is determining the amount of coverage any individual needs RIGHT NOW! In determining the amount of life insurance someone needs, a Professional Life Insurance Advisor will do what is called a “Needs Analysis”. The Needs Analysis may differ among Advisors and/or Life Insurance Carriers, but the general items stay pretty consistent.

• Final Expenses (Funeral Costs, Burial Plot, etc.)
• Debt Payoff (credit cards, car loans, student loans, etc.)
• Mortgage Payoff (while some may debate this, most advisors use this)
• Adjustment Period (typically one years salary)
• Education Fund ((Private School costs until graduation when applicable and/or total college costs) X # of Children)
• Income Replacement (most people fail to go this far in the analysis, we will discuss this in more detail below)

While most of the needs analysis is pretty straight forward, the final component of Income Replacement tends to be the most overlooked and complicated part.  In determining the Income Replacement component, the Advisor attempts to compute how much money, today, it would take to replace the income lossed due to the death of the insured.  This computation can be difficult since the Advisor is trying to predict how much money that individual would have made over the course of his/her working career.  There is no way to get this portion 100% correct.  In the simplest form, the Advisor takes the amount of money the person is making today.  The Advisor then subtracts any “Passive Income” the family may have (think rental property) that would continue with or without the Insured.  Next the Advisor subtracts the annual income of the spouse.  Finally the Advisor and Insured must choose a conservative rate of return that a lump sum of money could earn today.  Let’s look at an example:

Peyton (our example insured) currently makes an annual salary of $50,000.  The family owns a rental house that makes $5,000 a year after expenses (mortgage, insurance, repairs).  Peyton’s spouse does not work outside of the house.  Peyton and the Life Insurance Advisor believe a conservative interest rate that can be earned in today’s environment is 4%.  Let’s look at our calculation!

$50,000 – $5,000 = $45,000

$45,000 / .04 (4%) = $1,125,000

Therefore, in order to replace Peyton’s Annual Income (less passive income) the family would need to place a lump sum in the amount of $1,125,000 into an account earning 4% a year.  Please note that the calculation above does not take into account the draw down of principle!

As you can see, when calculating the amount of Life Insurance someone needs, there is a huge emphasis placed upon the insured’s annual income.  What happens when the person does not earn income?  This is the problem most advisors face when determining the amount of Life Insurance the Stay At Home Mom needs.  I have researched this topic in depth, and as of right now, most “accepted” assumptions place the annual worth of the Stay At Home Mom somewhere between $35,000 and $45,000.  Is this right?  In all honesty I believe there are three answers to that question.  The three answers are: Yes, No, and Maybe So!  I know personally, that if I had to hire someone to replace everything my wife does for me, my annual bill would probably be more like $60,000.

Problem Two – Convincing The Family The Stay At Home Mom Needs Life Insurance

If we are able to agree on an actual dollar figure to place on everything the Stay At Home Mom does during the year, the next (and biggest) problem that must be dealt with is convincing both the Husband and Wife that the Stay At Home Mom NEEDS life insurance.  You may be asking yourself, “Why must both the husband and wife be convinced that the loss of the Stay At Home Mom would cause financial hardship to the family?”  I actually ask myself that same question!  Stay At Home Moms, how mad would you be if someone said the job you do on a daily basis is not worth anything?  How mad would you be if you heard someone say that since you do not contribute financially to the family, you are less important than your husband?  By now, I would assume that you would probably be ready to rip someone’s head off.  Well, in my dealings with young familes, the WIFE makes the life insurance decisions about 75% of the time.  Yet, atleast 90% of the time, the wives I have dealt with will decline to purchase any life insurance on themselves!

I understand that most families feel like they need to prioritize expenses like life insurance.  I agree, to an extent!  If you are a Stay At Home Mom, your main objective should be to take care of the life insurance needs of the “bread winner” first.  As a Stay At Home Mom, you look out for the well being of the family unit on a daily basis.  Why would you stop looking out for the family at such a crucial time?  If you (the Stay At Home Mom) were to pass away today, would your husband be able to resume his day to day activities of providing an income for your family if you passed away tomorrow?  Would your husband be able to maintain his current work schedule while at the same time getting the kids off to school?  Would your husband be able to maintain his current work schedule and get the kids to soccer practice, swim practice, dance, or gymnastics?  The laundry list of extra jobs your husband faces with your death could lead him to an eventual breakdown.  If he breaks down, would his job performance suffer?  If his job performance suffers, could he lose his job?

This is my call to action for all Stay At Home Moms!  Your job is as important (in my opinion MORE IMPORTANT) as your spouse’s.  It is time for you to take the credit you deserve and realize your true worth.  You work tirelessly each and every day to make sure your family has all it deserves, doesn’t it make sense for you to leave your family in best shape possible when you are no longer here?

About The Author:  Jack Wingate is a Professional Insurance Advisor and Founder of ALLCHOICE Insurance in Greensboro, NC. For more information about Jack Wingate or ALLCHOICE Insurance please visit http://www.allchoiceinsurance.com

Tax Increases on Consumers and Business

CNBC’s Larry Kudlow, 05/14/2009, enumerated the never ending laundry list of tax increases proposed by the Obama Administration.

If you look at the many empirical economic studies of the Great Depression, one reoccurring finding is that tax increases during the Depression reversed/dampened any positive effects of Keynesian Deficit Government Spending.  Its clear in the Theory of Keynesian Deficit Government Spending, that the spending is intended to be temporary until the Private Sector rebounds. The Private Sector needs Private Capital Formation to rebound.  However, the list of tax increases proposed by the Obama Administration is so long, affecting so many sectors, affecting both consumers and business, that the varying and several tax increases are going to create a tax increase multiplier effect cascading within the Private Sector.  Add in State Government tax increases and the multiplier effect is further magnified.  The effect of the Tax Increase Multiplier will be that Capital Formation as well as consumer and business consumption will be decreasing at an increasing rate.

Keynesian Deficit Government Spending and Qualitative Easing

Keynesian Deficit Government Spending during the Depression was in an environment of zero or low current Government Debt. Current Keynesian Deficit Spending is occurring in an environment of high current and future Government Debt.  Moreover, Keynesian Deficit Government Spending as well as Quantitative Easing were theories developed in an environment of zero or low government debt as well as significant deflation.  That Quantitative Easing is occurring in an environment of small, moderate or even zero deflation. Finally, Keynesian Government Spending and Quantitative Easing are being deployed simultaneously.  The only time Quantitative Easing and Keynesian Deficit Government Spending have been simultaneously deployed in a Modern Economy was 2001-2006 in Japan. Japan continues to this day in a 20 year long recession (1989 to present).

Economic Train Wrecks and Unintended Consequences

Countervailing Economic Policies create unintended consequences. Quantitative Easing is creating a less valuable US Dollar hence creating upward pressure on US Government Debt in two areas: the quality of the debt is being downgraded causing the perceived risk to increase, hence causing the interest rate on the debt to increase. Further, Quantitative Easing is causing the specter of inflation to raise its ugly head as the money supply has increased by nearly 700 Billion Dollars since 10/2008 as measured by M2.

Meanwhile, Keynesian Deficit Government Spending has been deployed nearly simultaneously with Quantitative Easing. US Government Debt is increasing at an increasing rate. The current US Government Debt was high before the Enactment of the $800 Billion Dollar Stimulus Package.  Add to the Stimulus Package a massive current Budget Spending Plan, and debt is increasing at an increasing rate.  Hence this second economic phenomena of increasing debt at an increasing rate is affecting the Value of US Government Debt as well as interest rates associated with the debt.

The Unintended Consequences of deploying Quantitative Easing and Keynesian Deficit Government Spending in an environment of high current debt and debt increasing at an increasing rate is that the debt is downgraded and interest rates move upward. Moreover, the proposed laundry list of consumer and business tax increases cause households and business to have less disposable income. Further, business tax increases depress Private Capital Formation.  Hence the deployment of Keynesian Deficit Government Spending to stimulate the economy is counter acted by the laundry list of tax increases.  That is, Demand is increased by Deficit Government Spending and Demand is decreased by tax increases. Also, the tax increases depress Private Capital Formation that in the Theory of Keynesian Economics is suppose to create jobs when the stimulus money runs out. Add to the above countervailing forces and unintended consequences the cost of a Social Engineering agenda on Par with Lyndon Johnson’s Great Society, and you add Government Debt that becomes unsustainable.

Pick and Choose

Basically you have Recession/Credit Crisis or you have Social Engineering Program. The US Economy can barely afford one option but not both options. Attempting to initiate Great Society Entitlement Programs while in the mist of a Recession/Credit Crisis is a recipe for Economic disaster. If you pick the Political Economy of fixing the Recession/Credit Crisis, once the problem is solved you will now be able to initiate the Social Engineering programs as the current entitlements are overbearing as they stand not.  One would need to address the current financing of the current entitlements. If you pick the Political Economy of Social Engineering (expanding entitlements) then you end up with an economy in StagFlation with a debt burden increasing at an increasing rate.

About The Author:  William Heasley is a 30+ Year Veteren of the Insurance Industry.  William graduated from West Virginia University, Cum Laude, with a Bachelor of Science in Economics – Public and Private Sectors.  William Heasley is a contributing author and broker for ALLCHOICE Insurance.  You can visit ALLCHOICE Insurance at http://www.allchoiceinsurance.com or visit the ALLCHOICE Insurance Blog at http://allnews.allchoiceinsurance.com

North Carolina’s insurance climate is getting tough. Due to over utilization of the North Carolina’s Beach Plan, and coastal insurance rates that are under priced, the rest of the state’s insurance consumers are about to pay the price.

The North Carolina Beach Plan was established as a market of last resort for insuring coastal property.  Over the years, the North Carolina Beach Plan has become the market of first resort.  The North Carolina Department of Insurance sets the maximum premium(s) that can be charged for any risk.  The problem is that under the leadership of the former insurance commissioner, North Carolina would not allow private insurance carriers to charge adequate rates for coastal risks.  The result, most insurance carriers that do business in North Carolina refused to write coverage in the coastal counties.  The result was made the market of last resort into the market of only resort.

Fast forward to 2009 and The North Carolina Beach Plan is faced with major problems.  The Beach Plan is under funded and unable to purchase adequate reinsurance.  In order to make sure that the Beach Plan remains solvent and capable of paying claims, in the event of the 100 year storm, the Beach Plan will have to impose assessments on all insurance carriers that write property insurance in the state of North Carolina.  The assessments will be made proportionately according to market share by each carrier.  The net affect, the Top 10 Property Insurance Carriers in the state of North Carolina are looking at the potential of being assessed 10′s of millions of dollars.

Most North Carolina residents do not concern themselves with what takes place at the beach.  That will soon change.  In order to prepare for the possible assessments, insurance carriers are having to increase insurance rates to the non-coastal risks that they insure.  Is this fair?  The answer is no, but unfortunately since the carriers are unable to increase insurance premiums for the coastal exposures, they must find additional ways increasing reserves.  That leaves only two avenues, increasing premiums to the remainder of the state (which they are doing) and reducing their possible assessment by decreasing their market share (which many are doing by tightening underwriting requirements).

If you live at the beach, it is understandable that you do not want to voluntarily ask for an increase in premiums.  However, is your risk not substantially more than someone who lives in Greensboro?  Shouldn’t you pay more to insure your home than someone in the Triad?

The North Carolina Insurance Industry is facing a huge challenge.  Unless some serious resolutions are made, the innocent will again carry the burden.

About The Author:  Jack Wingate is a Professional Insurance Advisor and Founder of ALLCHOICE Insurance in Greensboro, NC.  For more information about Jack Wingate or ALLCHOICE Insurance please visit http://www.allchoiceinsurance.com

In my last Post, I discussed the financial difficulties that some insurers were having.  In that discussion, we looked at a few ways that Insurance Carriers could raise capital.  In my synopsis, the easiest way for Insurance Carriers to raise money was through Rate Increases.  Well, I was partly right!  This morning The Treasury Department announced that six major insurance carriers are accessing the TARP program.

Hartford Financial, Lincoln National (for North Carolinians that is the old Jefferson Pilot), Allstate, Ameriprise Financial, Principal Financial, and Prudential Financial are all about to receive TARP Funding.  It is estimated that, combined, the companies will receive a little under $22 BILLION!  While this will strengthen the capital positions of these institutions in the short term, I think the jury is still out about the long term consequences.

While I don’t want to throw about random musings about the future of these companies, I do know that I would not place any insurance business with any of these companies until they can prove that they can stand-alone without being bailed out.  With Insurance, companies ask a question of every policy they write, “Is this risk worth insuring?”, my question now becomes are these institutions worth bailing out?  The management of these companies apparently have not performed their jobs well, so why should we think that they are going to act any differently now.  They just have more money (your money) that they can “gamble” with.

Jack Wingate

There was interesting article published on TheStreet.com on 5/13/2009, title “AIG, MetLife, Allstate Fail Our ‘Stress Test’.

We all know that the economy is not in great shape, regardless of recent stock market performance.  You have are also probably aware of the difficulties many banks and lending institutions are having.  While I hate to make “blanket statements”, it is safe to say that a company has anything to do in Financial Services (Banks, Mortage Companies, Brokerages, and yes Insurance Companies) then those companies have had to take a hard look at the state of their businesses.

What does this mean to you?  Most people will sweep this under the rug along with the other “white noise” that comes each day with regard to the economy.  While I don’t believe we are facing a financial armageddon, I do think you should pay close attention to any news that offers negative views with respect to Insurance Carriers!  Think about it, the three main Insurance Carriers mentioned in this article are household names!  There is a good chance that you or someone you know has some form of insurance coverage with one of these companies.  While I am not saying that these carriers are at a point where your personal coverage is in jeoporady, but would you take that chance?  What is more likely to happen is that these companies are going to need to find capital from somewhere.  Now, let’s think about this…what are the possible sources of capital?

• Increase Investment Gains (good luck with that)
• Decrease Insurance Losses (that is there job, but people have wrecks, houses burn down, life insurance claims pay out)
• Issue Debt / Borrow Money (we have all seen how good the use of debt works out for people / corporations / and Governments)
• Increase Revenue (that means your insurance premiums are going up)

Of that list of capital sources, which one is the easiest to pull off?  That’s right, raising your premiums.  In my years as an Insurance Professional, I have found that insurance consumers are loyal (the good customers).  Many people just say, I have been at XYZ Insurance Company for 15 years, why should I switch?  That is what most insurance carriers (and agents) like to hear.  They pour the dirty water down and you drink it like it was Kool-Aid!

Jack Wingate

After nearly two years of hard work…the new web-site is finally here!

When we first started ALLCHOICE, merely having a web-site seemed to be good.  To that end, we had a great Marketing Company design our site.  The look and feel of the site was good enough, the problem was that the web-site was merely a series of “pictures”.  As we matured as business, we realized that, much like a business, if all you have are “fancy pictures” and “glitz” you will not last.  We have always taken a great deal of pride in the care and service we provide to each and everyone of our customers.  Why should we not offer the same type of quality with our web presence, since that typically is the most frequently viewed portion of any business.

When we first started looking to web-design firms, I personally looked at about twenty different firms.  Each firm had its own set of specialities and strengths.  The problem I had was that Insurance is just a different animal when it comes to marketing.  We don’t offer things that can be found in stores!  We offer and provide services!  ALLCHOICE needed a firm that understood the complexities of the Insurance Industry.  I feel very fortunate that I stumbled upon Venuecom Communications (Based right here in North Carolina)!

Venuecom had designed insurance related sites in the past, mostly for monoline agencies offering Blue Cross & Blue Shield of NC Insurance.  After spending a little time with Zach Dotsey at Venuecom, I knew they were the firm for ALLCHOICE.  If you need a GREAT Web-Design Firm, please check them out (www.venuecom.com).

The design of the site was fairly simple once they Venucom showed me some things they could do.  The hard part was trying to define what I wanted the site to be!  I think many small businesses do not take the time to define what they want to accomplish with their site.  I searched for and looked at hundreds of Insurance Agency Web-Sites as well as Insurance Carrier Web-Sites.  After looking in depth at all of these sites, I figured out that there were really two kind of Insurance Sites.  The first is the “here is who we are & this is what we offer” site.  Most Insurance Agencies and Insurance Carriers fall into this category.  The second is what I call the “Insurance Quote Super-Stores”.  These sites are just just focused on getting you to request a quote from their site.  They then turn around and sell the lead to Insurance Agencies!

Neither one of these two site types were sufficient for me, or ALLCHOICE.  Of course, I would hope that our site will eventually rank well within the search engines for the services that we provide, and ultimately attract new customers to ALLCHOICE.  However, the main objective for allchoiceinsurance.com was to provide our customers and the average North Carolina Insurance Consumer a resource for Insurance.  If you go through our site, you will see that a great deal of time was spent on defining coverages!  Think about it, you have probably had insurance for quite some time now (health insurance, auto insurance, home insurance, life insurance, etc), but do you actually understand what it is that you are paying for?  Most people have no idea!  I am an insurance professional and I had a hard time finding online resources that discussed insurance coverage in a manner that the average person could understand.  That just will not do!

Please check our site out!  I know the site isn’t perfect, so if you have suggestions or questions, let me know.

Jack Wingate

President