Thrifty Spending Issue 73

FEATURE ARTICLE:  Why Purchase Life Insurance? 

We have all heard about the importance of having life insurance, but is it really necessary? Usually, the answer is “yes,” but it depends on your specific situation. If you have a family who relies on your income, then it is imperative to have life insurance protection. If you’re single and have no major assets to protect, then you may not need coverage.

In the event of your untimely death, your beneficiaries can use funds from a life insurance policy for funeral and burial expenses, probate, estate taxes, day care, and any number of everyday expenses. Funds can be used to pay for your children’s education and take care of debts or a mortgage that has not been paid off. Life insurance funds can also be added to your spouse’s retirement savings. 

If your dependents will not require the proceeds from a life insurance policy for these types of expenses, you may wish to name a favorite charity as the beneficiary of your policy. 

Whole life insurance can also be used as a source of cash in the event that you need to access the funds during your lifetime. Many types of permanent life insurance build cash value that can be borrowed from or withdrawn at the policy owner’s request. Of course, withdrawals or loans that are not repaid will reduce the policy’s cash value and death benefit.

When considering what type of insurance to purchase and how much you need, ask yourself what would happen to your family without you and what type of legacy you would like to leave behind. Do you want to ensure that your children’s college expenses will be taken care of in your absence? Would you like to leave a sizable donation to your favorite charity? Do you want to ensure that the funds will be sufficient to pay off the mortgage as well as achieve other goals? Life insurance may be able to help you meet these objectives and give you the peace of mind that your family will be taken care of financially.

The cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance purchased. As with most financial decisions, there are expenses associated with the purchase of life insurance. Policies commonly have mortality and expense charges. In addition, if a policy is surrendered prematurely, there may be surrender charges and income tax implications. Any guarantees are contingent on the claims-paying ability of the issuing insurance company.

If you are considering the purchase of life insurance, consult a professional to explore your options.

MONEY SAVING TIP:  Buying brand names.

People are finally wising up to this one – generics have been gaining market share since 2006. While prescription drugs have the biggest price tags versus generics, the dollars add up at the grocery store too. In many cases, the only difference between generic and brand name is price. Can you really tell the difference between name-brand and generic when it comes to water, cleaning supplies, or spices?

DID YOU KNOW…about the Electronic Transfer Fund Act?

This law caps out-of-pocket expenses for consumers in cases where a thief charges up their debit, ATM or credit card, provided consumers meet time constraints. Consumers also have the right to dispute charges on their bank statement.

      • Limits your liability to $50 if you report your credit card lost or stolen. 
      • Limits your liability to $50 if you report your debit card lost or stolen within two business days. 
      • After two days but within 60 days after you receive your statement, limits liability to $500. After 60 days, you could owe all fraudulent charges. 
      • Fraudulent signature-based purchases will only run you up to $50. If you report the missing or stolen card before someone uses it fraudulently, you shouldn’t be liable for the charges. 
      • Liability periods should stretch if consumer had extreme circumstances that prevented prompt notification. 
      • If state law or issuer’s terms and conditions provide lower liability limits, then the lower limits apply. 
      • Provides for a record of all electronic transfers in the form of receipts at ATMs or point-of-sale terminals and periodic bank statements showing all electronic transfers. 
      • If you find an error in a bank statement you can contact your bank and dispute charges. The bank generally has 10 business days to investigate your claim and report back to you, but may request more time. The consumer has 60 days from the date the statement was sent to report errors to the bank. 
      • ATMs that charge fees to process transactions must disclose the fee amount before the transaction completes.

If a bank is in violation of the ETF Act, try complaining to the bank first. Beyond that, you can file a complaint with the federal agency that regulates that bank.

Cards with predetermined values such as gift cards may not apply to the ETF Act.